Melbourne’s residential property market hit a record high of $1.125 million in Q4 2021, following a rapid 36% price rise over the preceding two years. Many expected a soft landing, with growth slowing and prices leveling out. But that outlook quickly faded.

Between May 2022 and November 2023, the RBA progressively raised interest rates to a 4.35% peak in an effort to control inflation. The result was a significant market correction. Over the following two years, median house prices fell 19.1%, reversing much of the earlier gains.

Confidence began to return in 2024

By early 2024, interest rates appeared to have peaked, and Victoria’s strong population growth helped underpin demand. Prices edged up 1.6% in the first few months of the year. However, persistent cost of living pressures and ongoing inflation concerns soon weighed on sentiment. By year’s end, the median house price had dropped below $900,000, reaching its lowest level in over four years.

Interest rate cuts spark new momentum

The February 2025 rate cut marked a potential turning point. Prices lifted to $920,500 in Q1 2025, recovering to match levels seen a year earlier and ending a 12-month decline.

Another cut in May, and growing expectations of one more in June, helped boost confidence again. Q2 2025 recorded the first rolling annual increase in values since mid-2022, marking a modest but meaningful shift.

Median Property Prices – Q2 2025

  • Houses: $924,000
    +0.4% quarterly | +1.0% yearly
  • Units: $635,000
    +1.3% quarterly | +1.4% yearly

Land market growth plateaus

Unlike the established home market, Melbourne’s greenfield land sector has seen rolling annual growth since Q1 2021. But that momentum is now softening in 2025.

A clear price ceiling appears to be forming, with developers shifting strategies. Buyer incentives that were once offered privately are now increasingly being priced in from the outset, signalling more structured pricing and moderated expectations in this segment.

This article references findings from our Q2 2025 Economic and Residential Market Report. Read the full report here.