Why Melbourne's property market is behaving differently to every other capital city
Higher stock, weaker population growth, heavier taxation and the thinnest apartment pipeline in a decade have produced a market that no longer moves with the national cycle.
There is a version of the Melbourne story that is entirely cyclical: the city ran hard in 2021, corrected in 2023, and has been finding a floor since. It is also wrong, or at least incomplete. Melbourne has now underperformed the national dwelling index for four consecutive years, through two easing cycles and one tightening cycle. That is not a cycle. That is a structure.
Stock
Melbourne carries more advertised stock per capita than any other capital, and has done since 2023. Part of that is the investor exit described below; part of it is simply that Melbourne built a great deal of detached housing on its fringe between 2015 and 2021, and much of that stock is now turning over for the first time.
Taxation
Victoria's land tax threshold changes and the vacant residential land tax have between them shifted an estimated 12,000 dwellings from investor to owner-occupier ownership since 2024. That is good for the first home buyer share, which is higher in Melbourne than in any other capital. It is also, mechanically, additional supply arriving into a market that was already well stocked.
12,000
Estimated dwellings transferred from investor to owner-occupier ownership in Victoria since 2024
APD analysis of State Revenue Office data
Population
Victoria's population growth has slowed from 168,300 in 2023 to an estimated 108,900 this year. It remains the second-largest absolute increase in the country, but the deceleration is the sharpest of any state, and it arrived precisely as the stock overhang built.
Source: ABS National, state and territory population
The apartment pipeline
This is where the story turns. Melbourne's apartment completions are at their lowest level since 2013. The city that spent a decade being criticised for building too many small apartments is now not building nearly enough of anything. Apartment values have started to outperform houses, and on current delivery rates that gap will widen rather than close.
“Melbourne cannot build apartments fast enough, and the constraint is no longer demand or finance. It is the time it takes to get a decision.”
Jane Smith, managing director, Example Developments
The uncomfortable conclusion is that Melbourne's current softness and its future tightness are the same phenomenon observed at different points on the timeline. A market with abundant existing stock and almost no new stock does not stay flat indefinitely.
Sources
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