Melbourne gains a competitive advantage

June 21, 2023


Melbourne house values have increased a mere 1.6% between the onset of COVID in March 2020 and the end of May 2023. Every other capital city has seen double-digit growth, ranging from a 16.5% gain in Sydney to a 45.2% surge in Adelaide house values during that period.


Melbourne home owners might be disappointed at the city’s substantially lower growth rate but for home buyers the sluggish conditions could give Melbourne an attractive affordability advantage.

Capital city price rivalry

The legendary rivalry between Melbourne and Sydney goes well beyond friendly barbecue banter dating back to the 1850s but when it comes to house prices, Sydney has always had the upper hand. In March 2020, at the onset of COVID, Melbourne house values were 19.2% cheaper than Sydney’s. By April 2022 the gap between Sydney and Melbourne house values had blown out to 30.3% – the biggest divergence since May 2006. The gap has closed a little since then however Melbourne’s median house value was 29.6% behind Sydney’s in May 2023, or the dollar equivalent of roughly $382,500.

Every capital city other than Canberra – the country’s second most expensive capital for houses – has significantly closed the house value gap to Melbourne. At the onset of COVID, Brisbane houses were 47% cheaper than Melbourne. That affordability gap has closed to just 15%.

Melbourne was 85% more expensive than Adelaide at the start of COVID but the gap has narrowed to just 29% and in Perth, where the gap was 88%, Melbourne house values are now 50% higher.


Less substantial swings and roundabouts

The under-performance of Melbourne house values relative to other capital cities is due to a combination of factors. The city experienced a more substantial drop in value than other capitals through the early stages of COVID, it recorded a softer increase through the upswing and there’s been a significant decline in values through the rate hiking cycle to-date.

Melbourne house values fell by -6.7% between March 2020 and October 2020, before surging 20.6% through the growth cycle. House values subsequently fell by -11.2%, finding a floor in February this year. Since February, Melbourne house values have risen by 1.7% to the end of May 2023.

Melbourne’s road to recovery

Melbourne’s softer housing market conditions through the pandemic cycle coincided with a sharp drop off in demographic trends. Both net overseas and interstate migration rates fell sharply through the pandemic, reaching record lows, detracting from housing demand amid a series of lockdowns associated with the pandemic.

Demographic data to September 2022 shows Victoria’s interstate migration is normalising and was almost back in positive territory (-484 net interstate migrants). With demographic data for Q4 2022 to be released later this week, it’s likely Victoria will be once again have reached a positive interstate migration position, putting an end to 10 consecutive quarters of decline.

With Australia’s annual net overseas migration surging to new record highs and Victoria’s first possible rise in interstate migration since Q1 2020, housing demand across Melbourne has begun to strengthen substantially.

Melbourne’s competitive edge

With housing affordability remaining stretched, this improvement in Melbourne’s value proposition could place Australia’s second largest city in a more competitive position to attract a greater share of housing market participants.

The city’s advertised supply level is trending lower and is -13.4% below levels at the same time last year and -7.0% below the previous five-year average.

Melbourne’s rental vacancy rate of 0.8% in May is also one of the lowest in the country and yet another potential factor supporting purchasing demand for those with the financial capacity to enter the market.

Melbourne blinder not guaranteed

Whether Melbourne’s strong demand, low supply and a relative affordability advantage can completely offset the impact of high interest rates remains uncertain. Demand from overseas migration is likely to remain a feature of the market for the next few years, however borrower’s access to credit will be challenging while interest rates are high.

Additionally, it’s possible more home owners choose, or need, to sell due to the substantial increase in mortgage repayments over the past 13 months alongside persistently high cost of living pressures.  Any marked rise in new listings could add downwards pressure to housing prices.




You might be also interested in

Article Banner
If housing is so undersupplied, why are some markets falling in value?
The current state of the Australian housing market is often characterised as undersupplied. Supply is at the centre of government policy approaches to housing, and the latest reporting from Housing
Gettyimages 1922023181
Here we go again: Shipping disruptions could pose major risk to interest rate cuts
‘Left of field’ shocks to global supply chains such as the tensions playing out in the Red Sea are the biggest risk to inflation and interest rates, the Reserve Bank
Construction cost growth ‘returns to trend’
A reacceleration in the quarterly pace of growth for national construction costs is suggested to be a return to trend rather than a new surge, according to CoreLogic. The Cordell Construction
Rental market to reach ‘tipping point’ in 2024: Domain
Domain’s Dr Nicola Powell told the Savings Tip Jar podcast the rental market will likely ease some time next year as more renters buy property or move into share houses,
Monthly Housing Chart Pack – January 2024
Here are the must know stats, facts and figures on Australia’s residential property market. Annual growth in home values have seen ups-and-downs while rent values have increased at more than
6 strategies to help you renegotiate your home loan and save money
Home loans are at their most expensive in 11 years, prompting a mad scramble among heavily mortgaged homeowners to either switch lenders or negotiate a better deal with their existing
Richmond: Where you’ll find everything from cheap street food to luxury furniture
Richmond’s Barkly Gardens are popular with locals. Photo: Greg Briggs Bridge Road is back. The news from Richmond has the ailing retail strip shucking off the doldrums and getting a
Home prices set to break new records in 2024, with three cities tipped to outperform all others
Stage three tax cuts, soaring population growth and lagging housing supply could see national property prices rise up to 4% over 2024, and as much as 8% in some capital
Monthly Housing Chart Pack – December 2023
Each month the CoreLogic Research team puts together a Housing Chart Pack, with all the latest stats, facts and figures on the residential property market, such as the combined value
Aussies amp up energy efficiency in homes as cost of living soars
With the cost of living higher than it has been in decades, homeowners and renters are looking for ways to reduce bills and save some money. Those living in homes

Get your Free Property Guide.

Here goes your text ... Select any part of your text to access the formatting toolbar.

Get your free Sales Report for Melbourne gains a competitive advantage

Get your free Sales Report for Melbourne gains a competitive advantage

Subscribe to hear the latest

Start The Conversation Today.

Call us on:

1300 850 730

Request a Callback:

Send us a Message:

Privacy Policy

Get your Free Property Guide

Get your free Suburb Report for Melbourne gains a competitive advantage

Privacy Policy

Who we are

Suggested text: Our website address is:


Suggested text: When visitors leave comments on the site we collect the data shown in the comments form, and also the visitor’s IP address and browser user agent string to help spam detection.

An anonymized string created from your email address (also called a hash) may be provided to the Gravatar service to see if you are using it. The Gravatar service privacy policy is available here: After approval of your comment, your profile picture is visible to the public in the context of your comment.


Suggested text: If you upload images to the website, you should avoid uploading images with embedded location data (EXIF GPS) included. Visitors to the website can download and extract any location data from images on the website.


Suggested text: If you leave a comment on our site you may opt-in to saving your name, email address and website in cookies. These are for your convenience so that you do not have to fill in your details again when you leave another comment. These cookies will last for one year.

If you visit our login page, we will set a temporary cookie to determine if your browser accepts cookies. This cookie contains no personal data and is discarded when you close your browser.

When you log in, we will also set up several cookies to save your login information and your screen display choices. Login cookies last for two days, and screen options cookies last for a year. If you select “Remember Me”, your login will persist for two weeks. If you log out of your account, the login cookies will be removed.

If you edit or publish an article, an additional cookie will be saved in your browser. This cookie includes no personal data and simply indicates the post ID of the article you just edited. It expires after 1 day.

Embedded content from other websites

Suggested text: Articles on this site may include embedded content (e.g. videos, images, articles, etc.). Embedded content from other websites behaves in the exact same way as if the visitor has visited the other website.

These websites may collect data about you, use cookies, embed additional third-party tracking, and monitor your interaction with that embedded content, including tracking your interaction with the embedded content if you have an account and are logged in to that website.

Who we share your data with

Suggested text: If you request a password reset, your IP address will be included in the reset email.

How long we retain your data

Suggested text: If you leave a comment, the comment and its metadata are retained indefinitely. This is so we can recognize and approve any follow-up comments automatically instead of holding them in a moderation queue.

For users that register on our website (if any), we also store the personal information they provide in their user profile. All users can see, edit, or delete their personal information at any time (except they cannot change their username). Website administrators can also see and edit that information.

What rights you have over your data

Suggested text: If you have an account on this site, or have left comments, you can request to receive an exported file of the personal data we hold about you, including any data you have provided to us. You can also request that we erase any personal data we hold about you. This does not include any data we are obliged to keep for administrative, legal, or security purposes.

Where your data is sent

Suggested text: Visitor comments may be checked through an automated spam detection service.

Get your Free PDF copy of Make Money Simple Again