The long-anticipated rise in Melbourne apartment values is finally showing up in the market. There is also research to show the party is only just getting started.
For the past few years, the high cost of living and rising interest rates kept a lid on apartment prices. But now, as cost-of-living pressures stabilise, and interest rates fall, the forces that drive prices up are beginning to assert themselves.
We’ve outlined in recent posts the various value growth drivers that exist in Melbourne’s apartment market. They include:
- Three interest rate cuts so far this year and one (or maybe two) more on the way.
- Under supply of new housing stock. (low supply)
- Strong immigration into Australia and Melbourne. (high demand)
- Melbourne values being relatively cheap compared to other capital cities.
- The uncapped Federal Government First Homebuyers Guarantee Fund. (extra demand)
- Climbing rental rates making buying a more attractive option. (extra demand)
- Rising cost of building new homes. (less supply)
- Wages growth is slowing but positive at 3% by mid 26 and 2.9% by 2027
These fundamental property value drivers have been bubbling away for some years and are now being transformed from supposition to reality. Market values are on the rise.
In their just-released Residential Property Market Outlook, KPMG forecasts that Melbourne apartment values will grow by 7.1% in 2026, which is the strongest forecast of any capital city apart from Darwin (7.3%). Melbourne house prices are also expected to rise by 6.6% over the same period. Again one of the highest in the country second only to Darwin.
The report authors and KPMG economists Brendan Rynne and Brian Tran, said “As a key destination for overseas arrivals, demand for Melbourne remains solid, though growth driven by investors is still likely to be moderated by Victoria’s land tax regime,”
KPMG used Cotality (formerly CoreLogic) data, which coupled with their analysis, forecasts a rise in Melbourne’s median apartment value by $66,545 between January 2025 and December 2026.
Obviously different apartments will rise at different rates but a rising tide lifts all boats.
Real signs of renewed buyer activity are already appearing. Last weekend, Melbourne recorded a 78.6% auction clearance rate — the highest in a long time and a clear signal of a strengthening market.
On the supply side, a recent CBRE report forecasts that Melbourne will add just 9,000 new apartments per year between 2025 and 2030. That’s 25% fewer than Sydney over the same period. At the same time, CBRE expects Melbourne’s demand for all new housing to average 38,000 dwellings per year. This is a significant shortfall.
We have been highlighting the imbalance between supply and demand for some time and why it will drive up values. Finally it looks like the party has started. Not before time for some owners who have ridden the last 5 plus years patiently.
For apartment buyers it is the perfect time to buy with a value upswing looming and a competitive lending environment.
