City-Level Data Doesn’t Tell the Whole Story: The Rising Demand in Melbourne’s Affordable Market
When looking at Melbourne’s property market through broad data points, the picture can seem discouraging. According to the CoreLogic Home Value Index (February 2025), Melbourne recorded the sharpest decline in home values in January 2025, dropping 0.6% for the month, 2.0% over the quarter, and 3.3% annually. Median home values remain 6.9% below their peak, translating to a $57,500 drop. Rental growth has also softened, with Melbourne’s rents declining 0.6% over six months.
However, these top-level figures don’t capture the full reality on the ground. While some parts of the market continue to struggle, affordable price segments between $500,000 and $750,000 are experiencing increased competition, with properties attracting strong buyer interest and multiple bidders. Prices in many areas have been declining for the past couple of years, meaning that even these increases still represent value, as few suburbs are breaking records—rather, they are slowly returning to 2021 price levels.
Rising Competition in Melbourne’s Mid-Range Market
Despite the broader market downturn, demand remains strong for well-located, well-priced homes. One recent auction illustrates this trend perfectly. A house, originally quoted at $600,000 - $660,000, was declared on the market at $660,000. Yet, bidding continued well past this price point, with six bidders competing aggressively, ultimately driving the final sale price up to $747,500.
This type of result reflects what many buyers and agents are seeing firsthand—genuine competition in the lower-to-mid price brackets, particularly for quality homes in desirable suburbs.
Why the Affordable Market is Holding Strong
Several factors are driving this segment’s resilience:
Increasing Borrowing Power – With interest rate cuts on the horizon, buyers are factoring in future affordability and securing property now.
Limited Quality Supply – While listings are high overall, well-priced homes in good locations are still relatively scarce, leading to competitive bidding.
First-Home Buyer and Investor Activity – Many first-home buyers and investors are targeting this price range, further boosting demand.
Price Point Stability – Properties in the sub-$750,000 range remain within reach for many buyers, unlike higher-priced markets that are more sensitive to affordability constraints.
The Market Within the Market
Melbourne’s broader data might suggest a cooling market, but the reality is more nuanced. The top end may be struggling, but properties in the affordable and middle tiers are seeing significant activity. These price gains don’t necessarily signal a new boom, but rather a correction after years of decline, bringing values closer to where they were in 2021.
For buyers, this means they need to be prepared for competition in sought-after price segments, even in what’s reported as a "soft" market.
For sellers, positioning a property at the right price point can still generate strong interest and competitive bidding—especially in well-connected and desirable suburbs.
City-level statistics only tell part of the story. While Melbourne’s overall market is seeing price declines, sub-markets within the city are performing differently, particularly in the more affordable price brackets. Buyers who rely solely on general data risk underestimating competition, while sellers might overlook opportunities to position their property strategically for the best outcome.
With market shifts happening at different speeds, it’s more important than ever to look beyond the headlines and understand the dynamics at play in specific price segments.
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