Weak Aussie hotspot presents ‘rare opportunity’: John McGrath
One of Australia’s most popular places shapes as a hot buy right now, but you will need to get in before it’s too late.
Australia has a two-speed property market at the moment, with some capital cities and regions recording fast home price growth and others seeing only sluggish growth, or even falls.
Melbourne is one of the markets that has shifted into low gear, as changes to land tax and better housing supply than other capitals have kept prices relatively flat.
As discussed in the McGrath Report 2025, Melbourne’s median dwelling prices saw a modest uptick of 1.3 per cent in FY24, according to CoreLogic data. This made Melbourne the second-weakest capital city market next to Hobart.
Home prices in regional Victoria declined by 0.5 per cent over the same period.
A key reason for this weakness is higher housing supply.
RELATED: ‘Pray’: Expert’s horror advice for Aussies
Melbourne is enduring sluggish home price growth. (Photo by Robert Cianflone/Getty Images)
Over the past decade, 733,000 new homes have been delivered in Victoria, which is the best result in Australia and significantly more than NSW’s 650,000 completions over the same period.
Another likely contributor to weaker market conditions was the Victorian Government’s decision, in January 2024, to lower the land tax-free threshold for investment properties from $300,000 to $50,000. This led to Victoria ranking towards the bottom of the pack for investor activity this year.
New investor lending made up 30.7 per cent of the state’s total housing finance commitments in April 2024, according to CoreLogic and the Australian Bureau of Statistics data. This was well below the national average of 37 per cent and significantly lower than in NSW (42.2 per cent), Queensland (38.2 per cent) and South Australia (36.6 per cent).
The tax, along with higher interest rates, may have also encouraged existing investors to sell up. This is evidenced by CoreLogic data showing Melbourne had a 39.4 per cent surge in new sale listings in May 2024 compared with May 2023 – by far the largest increase in the country.
MORE: Stubborn Aussie neighbours back in the spotlight
Real estate guru John McGrath says the weak Melbourne market presents a rare opportunity.
Regional Victoria also saw a significant 42.6 per cent increase in listings for the year to May 2024.
Coming at the same time as Victoria’s population rose by a national-high 186,500 in the year to December 2023, the increased sales of investment properties likely contributed to a strong rise in weekly rents.
Median weekly rents for houses increased by 9.2 per cent in FY24 – the second highest increase among the capital cities – and by 7.5 per cent for apartments.
Stable home values in FY24 provided a great opportunity for first home buyers to secure a foothold in one of the world’s best cities during a rare period of market weakness.
Many took advantage of the higher housing supply, less competition from investors and stamp duty concessions on purchases up to $750,000 to secure their first homes this year.
First home buyers made up 32.1 per cent of owner occupier loan commitments in Victoria in June 2024 compared to a national average of 29.2 per cent, according to CoreLogic and ABS figures.
MORE: Countries that will pay you $140k to move there
The controversial SRL is expected to be finished in 2035. Picture: Alex Coppel.
Looking forward, as Melbourne’s population continues to outpace other cities, and with interest rates expected to fall in 2025, it is more than likely that property prices will see gains in the medium term.
The Department of Planning projects Victoria’s population to increase by an average of about 125,000 people per year over the next decade. This will occur amid continuing constraints on the building sector, including labour shortages and high materials costs.
The combination of extremely strong population growth, infrastructure improvements and short-term housing supply limitations will no doubt see Melbourne’s housing market bounce back.
The Metro Tunnel rail line project is set to be completed next year, and will benefit people living near the Cranbourne, Sunbury and Pakenham train lines. Other projects include the Suburban Rail Loop (to be completed by 2035) and the North East Link freeway project (to be completed by 2028).
MORE: Wild reason these homes cost as little as $35k
The fact that Economist Intelligence has named Melbourne one of the top five most liveable cities in the world for the past two years (after dropping to 10th place after the pandemic) shows it is a vibrant and desirable place to live, attracting new residents from around the country and the world.
* John McGrath is the founder, Managing Director and Chief Executive Officer of McGrath Estate Agents