Melbourne's property market in 2024: the year in five numbers

The close of 2024 sees Melbourne’s overall dwelling values having receded by about 2.1% against the year’s opening figures, placing us as the second-to-last performer among the nation’s capital cities. That headline number, while accurate on paper, really only tells half the story, or perhaps a fifth of it. What we’ve seen unfold across our diverse city are vastly different property narratives, each influenced by a unique cocktail of economic pressures, demographic shifts, and evolving buyer appetites. For anyone looking to buy or sell in Melbourne, understanding these nuanced sub-markets is far more critical than simply glancing at the aggregated data.

Let us start with the inner-city apartment market, that oft-maligned segment which many considered to be perpetually treading water. Suburbs like Docklands, Southbank, the CBD proper, West Melbourne, and Carlton experienced a median value increase of approximately 1.4% this year. This might not sound like a huge leap, but for this specific segment, it represents a definitive turning point, a clear bottoming out after a sustained period of stagnation stretching back to 2018. The driving forces here are quite clear. We’ve seen rental growth surge by over 11% in these precincts, making the yield proposition significantly more attractive to investors. The return of international students, a critical demographic for inner-city rentals, has certainly played its part, not just filling vacancies but creating competition which drives up rents. This, in turn, has re-energized investor confidence, shifting the focus from capital growth to strong, consistent yields. The days of struggling to find tenants in these areas appear to be firmly in the rearview mirror for now, and that fundamental demand has translated into modest but meaningful price recovery.

Moving outwards, the inner-east, encompassing established and desirable municipalities such as Boroondara, Stonnington, and Yarra, presented a somewhat softer picture than many anticipated. Here, median values dipped by around 0.8%. Traditionally, these areas, with their prestigious schools and leafy streets, display remarkable resilience, often insulated from broader market downturns. However, the underperformance we observed was largely concentrated within the premium segment - properties north of the $4 million mark. We saw a noticeable thinning in the ranks of executive buyers for these upper-echelon homes. While demand for family homes in school catchment zones remains robust, the very top end of this market felt the pinch of tightened lending conditions and perhaps a hesitant high-net-worth cohort, choosing to hold back on significant discretionary purchases amidst economic uncertainties. The aspirational buyer for a $2.5-$3.5 million family home in Hawthorn or Armadale was still very much present, but the buyer prepared to commit $5 million plus to a Toorak mansion was a rarer sight.

The bayside corridor, including the Bayside LGA itself, along with Glen Eira and Port Phillip, was unfortunately home to the year’s most challenging premium segment performance. Median values here fell by approximately 4.2%. This area comprises some of Melbourne’s most aspirational addresses, from Brighton to Albert Park, and typically commands a premium for its coastal lifestyle and amenities. The significant decline was largely influenced by twin anxieties: the fear of builder insolvencies and a considerably thinned-out project-home buyer pool. News reports of various building company collapses throughout 2024 understandably made prospective buyers of newly-built or off-the-plan homes extremely cautious. This anxiety, coupled with rising construction costs and a general tightening of the purse strings for those embarking on new builds or major renovations, meant that the demographic keen on premium new-builds or significantly renovated homes found themselves in a more conservative position. This sector, which relies heavily on discretionary spending and confidence in the construction industry, was hit harder than most.

Shift your gaze to the middle north, encompassing the vibrant and increasingly gentrified areas of Moreland and Darebin. Here, we recorded a median value decrease of around 3.1%. The most pronounced drops, in absolute price terms, were observed in the $1.4 million to $2.2 million band, primarily affecting Victorian terraces and semi-detached homes in sought-after pockets of Brunswick, Northcote, and Fitzroy North. This segment is typically the stomping ground of the inner-north dual-income professional cohort - often young families or couples trading up from apartments, seeking character homes with a bit of space. Their financial capacity, however, saw the most significant compression this year. With interest rate hikes directly impacting borrowing power and the rising cost of living eating into discretionary income, their ability to take on larger mortgages was significantly hampered. This demographic, arguably the backbone of the inner-city and middle-ring market for the past decade, found their serviceability limits tested, leading to a noticeable softening in demand and, consequently, price falls within this specific property type and price point. Their affordability ceiling shifted downwards, creating a vacuum for properties in that once-hot price range.

Finally, we turn our attention to the outer east, an area that defied broader market trends and emerged as Melbourne’s star performer of 2024. Municipalities like Yarra Ranges, Knox, and Maroondah saw median values climb by an impressive 5.6%. This robust growth wasn’t accidental; it was a direct consequence of affordability pressures pushing family buyers further out from the city. As prices in the middle ring became increasingly out of reach for a growing number of families, the outer east presented a compelling alternative. Here, they found they could still secure renovated four-bedroom homes within their borrowing capacity, offering the space, backyard, and community feel they yearned for, without the punishing price tag of their inner-ring counterparts. The demand for family-friendly homes in these areas, often equipped with good local schools and easy access to nature, intensified considerably. This segment became the beneficiary of the affordability squeeze elsewhere, demonstrating that fundamental demand for family homes, when paired with the right price point, can still drive significant market growth even in a challenging environment.

So, as we look towards 2025, armed with this granular understanding, the setup appears quite clear. We anticipate the strongest momentum to persist at both the cheapest and the most expensive ends of the market. Inner-city apartments, driven by robust yields and renewed investor interest, will likely continue their steady upward trajectory. Simultaneously, the very top end of the lifestyle-led market - perhaps those premium properties in the inner east or bayside that felt the pinch this year - could see a resurgence as sentiment improves and high-net-worth individuals regain confidence in larger investments, especially those offering unique lifestyle propositions. The middle bands, however, those $1.2 million to $2.5 million homes in the middle ring suburbs, will likely continue to face headwinds. Their fate, and indeed their ability to see significant price recovery, largely hinges on the prospect of meaningful interest rate relief, which would alleviate serviceability pressures for the dual-income professional and family buyer cohorts. Without such relief, these segments may continue to drift, waiting for more favourable borrowing conditions to re-ignite demand.