Every investor and their dog has been piling into Brisbane, Perth, and Adelaide for the past three years. Fair enough - those markets have delivered 15-25% annual growth in some suburbs. But that’s exactly why Melbourne deserves a closer look right now.
Melbourne’s median dwelling value sits at $826,132 (Cotality, March 2026). That’s still 1.3% below the March 2022 peak. Meanwhile, Brisbane’s median house price has pushed past $1.01 million, Perth has hit $1.03 million, and Adelaide is at $981,000.
Melbourne is now the cheapest of those four capitals. That’s a sentence that would have sounded absurd five years ago.
The cycle position argument
Property markets don’t move in sync. They rotate. Brisbane, Perth, and Adelaide have had five to six years of strong runs. Many suburbs in those cities have doubled. The growth rate is moderating - Perth gained 2.3% in February 2026, Brisbane 1.6%, Adelaide 1.3%. Still solid, but the acceleration phase is behind them.
Melbourne recorded -0.6% over the March 2026 quarter (Cotality). Annual growth sits at 4.7%. On the surface, that looks weak compared to the mid-sized capitals. But this is what the early phase of a recovery looks like - flat to slightly negative quarters before momentum builds.
The bank forecasts reflect this divergence:
- Westpac: +7% for Melbourne in 2026
- NAB: +3.9%
- ANZ: +2.1%
- CBA: +2%
Westpac is the most bullish. CBA and ANZ are cautious. But even the conservative forecasts are calling for positive growth from a market that’s been flat for two years. The spread between forecasts tells you this is a turning point where the direction is agreed but the speed isn’t.
Supply is the story nobody’s talking about
Victoria set a target of 800,000 new homes over ten years - roughly 80,000 per year. In 2024, the state delivered just 60,220. That’s a 25% shortfall against target in a single year.
It’s getting worse, not better. Victoria’s dwelling approvals are running 13% below the 10-year average. Housing completions are 9% below the 10-year average. Development approval wait times have blown out to 144 days - the slowest of any state in Australia.
Melbourne’s apartment approvals have dropped to a near 20-year low, with just 567 units approved in the latest quarter. Construction costs have risen roughly 40% since the pandemic, and labour shortages persist as government infrastructure projects absorb much of the available workforce.
This is the kind of structural supply constraint that puts a floor under prices. You can’t build your way out of a housing shortage when it takes 144 days just to get an approval.
Rental market data
Melbourne’s vacancy rate has tightened to around 1.5-1.6% (SQM Research). That’s well below the 3% level considered balanced.
Gross rental yields across the metro area:
- Houses: approximately 3.5%
- Units: approximately 4.7%
Median weekly rent across metropolitan Melbourne reached $580 in the September quarter 2025, with annual rent growth of 3.5%. That’s down from the 8% annual growth recorded to September 2024, but it’s still positive growth on top of the 39% surge from 2021 to 2023.
The rental market tells the same story as the sales market: tight conditions, structural undersupply, and prices that haven’t yet caught up to the fundamentals. For investors who need both growth and yield, Melbourne’s unit market at 4.7% gross is worth a close look, particularly in the middle ring where rents have been growing fastest.
Population: the demand engine
Melbourne’s population grew by approximately 143,000 people in 2023-24, driven overwhelmingly by net overseas migration of 121,200 - the largest intake of any Australian city. Natural increase added another 29,000.
There’s a common objection: “But people are leaving Victoria.” It’s partly true. Melbourne had net negative internal migration of -7,600 people. But that’s a rounding error against 121,200 overseas arrivals. And even the internal migration outflow is forecast to reverse, with Victoria expected to return to positive net interstate migration from 2026-27 onwards.
The international student pipeline adds another layer. Victoria has more than 141,000 student visa holders onshore - a number that has doubled since borders reopened in late 2021. With Australia’s student intake target rising from 270,000 to 295,000 nationally in 2026, Melbourne will continue absorbing a significant share of that demand.
More people, fewer homes being built. That’s the equation.
Infrastructure beyond the Metro Tunnel
The Metro Tunnel gets most of the attention, but the broader infrastructure pipeline is what changes Melbourne’s long-term growth corridors.
Suburban Rail Loop (SRL East): This is a $34 billion project connecting Cheltenham to Box Hill via six new underground stations. Eight tunnel boring machines have arrived on site, and boring is set to begin in 2026. Over 3,000 workers are already on site across all six station locations. Completion is expected around 2035. The suburbs along this corridor - Clayton, Monash, Glen Waverley, Burwood, Box Hill - will see significant transport accessibility uplift.
Melbourne Airport Rail: Construction on the first stage around Sunshine station kicked off in 2026, with the rebuild covering a 6km rail corridor, two new regional platforms, three new rail bridges, and upgraded signalling. Sunshine station becomes a genuine transport hub connecting airport, regional, and metropolitan lines.
Western Rail upgrades: Metropolitan-style train frequencies are coming to Wyndham Vale and Melton in 2026, turning what were previously semi-rural stations into genuine commuter corridors.
Each of these projects creates a new set of suburbs worth watching. That’s a different growth profile to Brisbane and Perth, where infrastructure spending is concentrated in fewer corridors.
Where the risk sits
Melbourne isn’t a sure thing. No market is. Here’s what could go wrong:
State government debt and taxation. Victoria carries more debt than any other state, and the land tax changes introduced in 2024-25 spooked some investors. Further tax changes could dampen sentiment again. This is a real headwind that you need to price in.
Economic softness. Melbourne’s economy has been weaker than Brisbane and Perth through 2024-25, partly due to softer retail and hospitality sectors. If the broader economy doesn’t pick up, the property market will be slow to respond.
Rate sensitivity. Melbourne has a higher proportion of mortgaged households than some capitals. If interest rates stay elevated for longer than expected, that bites harder in Melbourne than in markets with more outright ownership.
Slow recovery, not a boom. Even the bullish forecasts aren’t calling for Perth-style 12% growth. Melbourne’s recovery is likely to be gradual - 4-7% per year rather than double digits. Investors expecting a quick turnaround may be disappointed.
The contrarian case
The best time to buy into a market is usually when everyone else is looking elsewhere. That’s Melbourne right now.
The median dwelling value is below its 2022 peak. Dwelling approvals are running 13% below the decade average. Vacancy rates are half of what’s considered balanced. Population growth is the strongest of any city in the country. And the infrastructure pipeline is creating new growth corridors that didn’t exist three years ago.
None of this guarantees short-term growth. But for investors who are building a portfolio over 10-15 years, buying into Australia’s second-largest city at below-peak prices while everyone else chases Brisbane and Perth is exactly the kind of contrarian move that tends to pay off.
If you’re looking at Melbourne and want to understand which corridors and price points make sense for your situation, check out our best suburbs to invest in Melbourne guide or our Melbourne buyers agent page. For investors buying interstate into Victoria, having local expertise matters more in a market this nuanced.
This is general information only and not financial advice. Speak to a qualified professional before making investment decisions.
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