Melbourne mid-2024: where the cycle stands

Half-way through 2024 the Melbourne market is more divided than the headline figures suggest. Amidst the persistent drumbeat of rising interest rates and inflation, a deeper look reveals a city in varying states of play, a patchwork rather than a monolith. We’re hearing a lot of talk about a universal market downturn, but that's simply not what our clients, or our data, are telling us on the ground.

Mid-2024 Melbourne median dwelling values are indeed showing a slight softness, a contraction of approximately 1.8% year-to-date according to the latest figures. However, to interpret this as a blanket fall across the entire metropolitan area would be a significant misinterpretation. This headline figure, often the only one reported by broader media, masks a highly nuanced reality where the contraction is heavily concentrated in a few specific segments, while others remain surprisingly resilient, or even show modest growth. It's a tale of two or, more accurately, several cities, depending on where you cast your gaze and at what price point.

Let's unpack where this contraction is actually taking hold. We’ve identified three key segments experiencing notable headwinds. First, the bayside premium market for homes in the $3 million to $5 million range, particularly those requiring renovation, has seen a noticeable cooling. Think older, unrenovated brick homes in locales like Black Rock or Brighton, sitting on substantial blocks, but needing a significant capital injection to bring them to contemporary standards. The anxiety around builder insolvencies, a very real concern gripping the construction industry since late 2023, is a major contributing factor here. Buyers in this bracket, who historically might have purchased with plans for an immediate high-end renovation, are now facing increased uncertainty regarding project completion times, escalating material costs, and the very real risk of their chosen builder going under. This has led to a reduction in buyer pools, extended selling periods, and, ultimately, price adjustments. Conversations with agents in these areas suggest vendors are increasingly meeting the market rather than holding out.

Secondly, the inner north terraces and semi-detached homes, typically priced between $1.4 million and $2.2 million, have also felt the squeeze. Suburbs like Fitzroy North, Carlton North, and Brunswick East, once hotbeds of fierce competition, are seeing a less frenzied pace. Here, the primary driver is serviceability compression. This demographic, often comprising young professionals or growing families looking for that inner-city lifestyle, is acutely sensitive to interest rate hikes. The cumulative impact of twelve rate rises since May 2022 means borrowing capacity has significantly diminished. A family who pre-rate hikes might have comfortably qualified for a loan enabling a $1.8 million purchase is now finding their maximum borrowing capacity reduced by hundreds of thousands, forcing them to either compromise on location, property size, or simply wait it out. We’re observing more price reductions before auction, and an increase in properties passing in, followed by more protracted private treaty negotiations.

The third contracting segment is the Geelong outer growth corridor, encompassing new-build estate properties typically priced from $550,000 to $800,000. Areas like Armstrong Creek, Charlemont, and Corio, which experienced a pandemic-driven boom as Melburnians sought more space and affordability, are now seeing demand normalisation. The frenetic pace of sales and speculative buying that characterised 2020-2022 has subsided. With the return to office mandates, less flexible work arrangements, and the initial wave of tree-changers having already made their move, the urgency has dissipated. Developers are now facing higher stock levels and are having to work harder to attract buyers, sometimes offering incentives or slower price growth. The low-interest rate environment that supercharged these areas pre-2022 is a distant memory, and affordability, while still better than inner Melbourne, is not the same draw when borrowing costs have risen so sharply.

But it’s not all downward momentum. Crucially, a number of segments are either holding firm or even experiencing modest price growth, defying the broader narrative of a retreating market. These are typically supported by structural, rather than purely cyclical, buyer cohorts, which gives them a degree of insulation from the wider economic shifts.

Inner-city apartments, particularly those offering strong rental yields in established, well-serviced suburbs like Southbank, Docklands, and parts of the CBD fringe, are performing robustly. This is a yield-led market. With rents soaring and vacancy rates at historic lows, investors are re-entering this segment, drawn by the prospect of solid returns that can help offset higher interest rates. Compared to the volatility of other asset classes, a well-located, tenanted apartment generating a 4.5% to 5.5% gross yield is increasingly attractive. Interstate and overseas investors, who often have different leverage considerations, are also contributing to this demand, particularly as Melbourne’s international student population continues to rebound.

Then there are the inner-east family homes located squarely inside premium school catchments. Think five-bedroom properties in Canterbury, Balwyn North and Kew, particularly those within the coveted catchment zones for schools like Camberwell Grammar, MLC, or Melbourne Girls Grammar. This is a fundamentally catchment-protected market. Parents are willing to pay a significant premium to secure a place for their children in these highly-regarded institutions, and this demand remains virtually inelastic regardless of general market conditions. The drive for educational advantage transcends many economic cycles, creating a consistently competitive environment for these specific properties. We often see families making significant financial sacrifices, or leveraging cross-generational wealth, to secure these homes, ensuring strong bidding and robust prices even when other segments falter.

Finally, the outer east family homes are also demonstrating resilience. Suburbs like Croydon Hills, Wantirna South, and Chirnside Park, offering detached houses on decent block sizes, are benefiting from a segment of buyers who have been priced out of Melbourne’s middle ring. These buyers, often growing families looking for their first or second home, simply cannot afford the increasing entry price points in core middle-ring suburbs like Box Hill or Glen Waverley. As such, they are "pushed" further out, creating sustained demand in these outer eastern pockets. While the average commute might be longer, the prospect of a four-bedroom house with a backyard for under $1.2 million - increasingly difficult to find closer in - remains highly appealing. This structural shift in affordability is creating a strong floor for prices in these areas, even as interest rates pinch.

The mid-year takeaway for discerning buyers and sellers is crystal clear: the question "what is Melbourne doing right now" does not have a single, universal answer. It’s a dangerously simplistic framing that risks misguiding property decisions. Anyone who tells you the Melbourne market is uniformly up, or uniformly down, in mid-2024 is either misinformed or oversimplifying for effect.

The right question, and the one we consistently guide our BuyerHQ clients through, is far more granular: "Which sub-market does my specific brief sit within, and what are the unique dynamics of that particular segment likely to look like over the next 12 to 18 months?" A buyer hunting for a immaculately renovated four-bedroom family home on a 650 square metre block in Surrey Hills, for example, is operating in a very different competitive landscape from a buyer looking for an unrenovated four-bedroom period home on a similar block in Hampton. Both might be looking at similar headline price guides, say in the $2.5 million to $3.5 million range, but the competitive heat, the negotiation leverage available, and the potential for future capital growth will differ dramatically. The Surrey Hills buyer, particularly if in a good school catchment, will likely find themselves in a fairly tight contest with multiple bidders, facing limited stock. The Hampton buyer, especially for a property needing extensive work, might find more room to negotiate, benefit from vendor fatigue, and potentially secure a better deal, given the current anxieties around renovation costs and builder availability in that specific premium unrenovated segment.

Understanding these micro-markets, rather than relying on broad-brush statistics, is the key to navigating Melbourne’s complex property landscape effectively in the latter half of 2024. This requires deep, on-the-ground knowledge of specific suburbs, property types, and buyer profiles, a level of detail that generic market reports simply cannot provide. The days of a rising tide lifting all boats are, for now, behind us. Success in this market is about precision, insight, and strategic targeting.