Melbourne Market Correction: Is the Worst Behind Us?
Melbourne property market 2025: is the correction over? The data on prices, rents and why contrarian investors are starting to look hard at Victoria.
Melbourne was the weakest major capital in 2024, with values falling 0.7% in December alone. After years of underperformance, it now sits well off its peak while every other large city has moved on. That weakness is the story. It is also, for contrarian investors, starting to look like opportunity.
Why Melbourne is lagging
Melbourne has underperformed the other big capitals for years, and the gap widened through 2024.
Three forces are dragging on it. Higher holding costs, heavier state tax settings, and soft buyer demand have combined to push investors elsewhere.
Victoria's land tax changes hit investors directly. Many responded by selling, which added stock to the market and capped price growth.
The result is a capital that has gone sideways to down while Perth, Brisbane, and Adelaide surged. Melbourne is the clear value gap among the majors.
The number: Melbourne home values fell 0.7% in December 2024, the weakest result among the major capitals, CoreLogic reported. Years of underperformance have left Melbourne trading at a discount to its peers on price growth.
The case that the worst is passing
The bear case is well known. The bull case is quieter, and worth hearing.
Melbourne's population is growing fast. Victoria remains a top destination for overseas migration, which feeds long-run housing demand.
Affordability is now a relative strength. Melbourne has become cheaper than Sydney and, on some measures, is being chased down by Brisbane.
A rate cut would help here too. Melbourne is rate-sensitive, and easier borrowing conditions could steady a market that has already done much of its correcting.
Prices versus rents in Victoria
| Metric | Melbourne position |
|---|---|
| Capital growth (2024) | Weakest of the major capitals |
| Median price vs Sydney | Materially cheaper |
| Rental vacancy | Tight, below long-run average |
| Investor sentiment | Soft, but stabilising |
The takeaway: Melbourne's price weakness sits alongside a tight rental market, which means yields have quietly improved as values fell.
What this means for investors
Melbourne is now a value question, not a momentum one. You are not buying a market that is running. You are weighing whether a long-underperforming one is near its floor.
The yield maths has improved. Falling prices plus a tight rental market lift gross yields, narrowing Melbourne's long-standing cashflow disadvantage.
Patience is the cost of entry. Melbourne may not snap back the way Sydney could, so this is a hold for buyers with a longer horizon and conviction in the fundamentals.
What investors should ask
Has Melbourne actually bottomed? It has done more correcting than any major capital, but a definitive bottom is only clear in hindsight. A rate cut and steady migration could mark the turn through 2025.
Do Victoria's tax settings still make it uninvestable? They raise holding costs and have pushed some investors out. But lower entry prices and improved yields can offset higher taxes, depending on the specific property. Model it carefully.
Is Melbourne better value than Brisbane now? On price, Melbourne is cheaper and has more catch-up potential. Brisbane has stronger momentum. The choice depends on whether you want value or growth.
What yield can I realistically get? Better than a year ago. Falling values against tight vacancies have lifted Melbourne's gross yields, though it remains a growth-oriented market overall.
The bottom line
Melbourne ended 2024 as the major-capital laggard, and that underperformance is precisely what makes it interesting now. The downside has largely played out, migration is strong, and improved yields are narrowing the gap with its peers. This is a contrarian, longer-horizon play, not a quick flip. Run the numbers on specific suburbs rather than the citywide average, because Melbourne's recovery, when it comes, will not be uniform. Clear Yield helps you spot the pockets where price weakness and rental strength are already lining up.