Has Melbourne Seen An Early Spring Revival?

It is well known that “spring time” in real estate marks an increase in activity and demand, whilst during the winter months we see lower sales volumes and buyer interest. However, what we are seeing currently in Melbourne, is the market beginning to show signs that the spring buying season has started when looking at the results from late June 2025.

What has sparked activity?

Let’s start with the benefits Melbourne has seen from the two official Reserve Bank rate cuts- 0.25 percentage points in February and again in May. This has significantly improved borrowing capacity for both buyers and investors and has sparked renewed confidence in the markets. It is expected that when mortgage rates edge down toward the mid5% region by early 2026, demand will have really ramped up.

We have seen Auction clearance rates have climbed to 72% (61% this same time last year), signalling a competitive environment typically seen later in the cycle and in Spring. (source: Domain Auction Results).

Why are investors interested?

For the past few years, Melbourne has lagged behind Brisbane, Adelaide, and Perth (with Sydney always the front runner). However, since we’ve seen the rates easing in early 2025, investors are pivoting back to Melbourne’s inner and middle suburbs where rental markets are tightening, vacancy rates have fallen to around 1%, and supply is limited.

Nationwide, there is a lot of interest in property investment as Australians just seem to love property, but the numbers also tell this story, with lenders reporting investment lending growth currently outpacing owneroccupier borrowing across the country. This reinforces that investors appreciate the resilience of the Australian property markets, and are flexible with their home ownership with more and more young Australians turning to rent vesting, or buying their first property as an investment rather than a home, in order to get a foothold on the property ladder.

Seasonal Trends in Melbourne’s Market

Typically, Springtime sparks buyer activity with prices peaking between September to November, as families aim to settle before summer, Christmas and the new school year. Spring will bring a higher number of listings, auctions become more frequent, and clearance rates climb steadily. In 2025, we are starting to see all these typical “spring time” markers come early for Melbourne and this is potentially an insight into what is to come for Melbourne’s Spring selling season.

Why 2025 Is Different

• Ratecuts- Have driven a borrowing rebound. With increased borrowing power post interest rate cuts, buyers who were previously sidelined have returned early in the year, determine to get into the market whether it be a home or investment property.
• Tight rental conditions: With Melbourne’s vacancy rates tightening, this is prompting investor urgency in inner/middle rings where rental demand is strongest. The National vacancy rate sits at around 1.3% at end of June 2025 making renting conditions tough across all states. Melbourne is around 1.8% as at June 2025 which is still considered very low.
• Stock shortages: New listings are down by around 7% yearonyear, keeping pressure on prices despite restrained supply.

Invest with Caution. Not All Melbourne Suburbs Are Equal

Inner vs Outer:

• Inner and middle suburbssuch as Yarra, Carlton, Fitzroy, Richmond, and Brimbank are currently attracting the most buyer demand for both Investors and owner occupiers. Investors are brought in for the strong rental yields and owner occupiers enjoy the various amenities, and transport connectivity making them highly desirable to young families.
• Outer growth corridors(e.g., Melton, Wallan, Officer, Clyde North, Clyde) remain valueoriented and attractive to some firsthome buyers and investors, but they come with tradeoffs: longer commute times, less established infrastructure, and potential oversupply risk in some new estates. These suburbs provide a risky investment opportunity, but if you’re looking for a home you might find some good value for your money.

Oversupply

Invest with caution. Melbourne has been renowned for the oversupplied apartment towers, especially the offtheplan developments that have been in abundance. If there is an oversupply, this means your investment will take quite some time to increase in value. If you’re buying an apartment it is best to seek quality, boutique buildings that have a smaller amount of apartments and are in welllocated precincts (e.g., Elsternwick, Glen Eira, Carlton) because these types of properties are more likely to perform. Steer clear of apartment towers with high body corporate fees, poor designs, or lack of owneroccupier appeal because this will hamper the growth of your investment.

Buyer Beware
If you’re an investor looking to buy in Melbourne, it is important that you understand the significant change in the tax free threshold for land tax (note, your home is excluded).

The annual levy based on the site value of all taxable Victorian land held as at 31 December, excluding your home, charitable land or farming land is:

• For 2025 assessments, the tax-free threshold has dropped dramatically:
  • Individuals: $50,000
  • Trusts: $25,000
    
• Land Tax Progressive tax ratesnow apply. For instance:
  • $50K–$100K → $500; up to $3M+ → up to 2.65% above higher bands
• New absentee owner surcharge: Higher taxes apply to foreign or overseas-based owners—starting from 4% and climbing toward over 6% for high-value properties

  Also, this is reviewed on your combined holdings. This is important especially if you own multiple properties that will push you over the threshold. You can mitigate this by diversifying your investments across states, or you might consider ownership structuring options (e.g. holding via trusts or companies).

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