---
title: "Melbourne's Market Is Falling — Except in the Suburbs That Are Quietly Rising"
description: "Melbourne's overall market is down, but select southeast suburbs are posting 8-10% annual growth. Why the split is happening and where the money is moving."
author: Joey Don
date: 2025-03-20
category: Market Analysis
url: https://premiumrea.com.au/blog/melbourne-property-market-two-speed-divergence
tags: ["Melbourne", "market analysis", "property market", "southeast suburbs", "capital growth", "two-speed market", "investment strategy"]
---

# Melbourne's Market Is Falling — Except in the Suburbs That Are Quietly Rising

*By Joey Don, Co-Founder & CEO at PremiumRea — 2025-03-20*

> The headline says Melbourne property is falling. The data says something more interesting: it depends entirely on which suburb you bought in.

If you only read the headlines, Melbourne's property market is a disaster. Median prices down. Auction clearance rates dropping. Inventory piling up. The doom cycle narrative writes itself, and the media is more than happy to keep running it.

But here's what those headlines miss: Melbourne isn't one market. It never was. And right now, the gap between the suburbs that are falling and the suburbs that are rising is wider than I've seen in a decade of buying property in this city.

I'm going to show you the data. Not the aggregate data that gets quoted on the news — the suburb-level, street-level data that actually determines whether your investment makes or loses money. Because the investor who buys in the right Melbourne pocket in mid-2023 is going to look very smart in 2026. And the investor who bought in the wrong pocket is going to spend three years wondering why their house isn't doing what their neighbour's did.

## The aggregate numbers (and why they're misleading)

Melbourne's median house price fell approximately 3.5% from its peak in early 2022 to mid-2023 [1]. That's the number every headline uses. And it's technically accurate.

But a median is just a midpoint. It tells you nothing about what's happening at the extremes. When apartments (which represent a growing share of Melbourne transactions) are falling 5-8% while houses in supply-constrained suburbs are rising 5-10%, the median averages them out to a mild decline. The median says "down 3.5%." The reality says "it depends entirely on what you bought."

The aggregate is further distorted by the enormous oversupply in Melbourne's western greenfield corridors. Point Cook, Tarneit, Melton, Werribee, Clyde North — these suburbs are collectively dumping thousands of new house-and-land packages onto the market every year. When 2,000 brand-new $650K cookie-cutter houses hit the market in a year, they pull the median down mechanically, even though an established house in Cranbourne on a 650-square-metre block has absolutely nothing in common with a new build on a 300-square-metre lot in Tarneit [2].

Comparing these two types of property is like comparing a blue-chip stock with a speculative mining penny stock because they're both listed on the ASX. The fact that they're both called "Melbourne houses" is where the similarity ends.

## Where prices are actually rising: the southeast corridor

Let me be specific. Over the 12 months to June 2023, the following suburbs posted positive house price growth despite the broader market decline:

- **Cranbourne**: approximately +7% (median $620K to $665K)
- **Hampton Park**: approximately +6% (median $580K to $615K)
- **Narre Warren**: approximately +8% (median $700K to $755K)
- **Frankston**: approximately +5% (median $680K to $715K)
- **Berwick**: approximately +4% (median $780K to $810K)

These aren't cherry-picked outliers. They represent a geographic corridor running from Frankston through to Narre Warren — Melbourne's far southeast — that is behaving as a completely separate market from the rest of the city [3].

Why? Three structural reasons.

**First, zero new supply.** Unlike the western growth corridors, established suburbs in the southeast have no greenfield land release. Every block is already occupied. The only way to add supply is through subdivision of existing lots or infill development, which is slow and expensive. Supply constraint is the single most important driver of price growth in Australian residential property, and these suburbs have it in spades.

**Second, affordability sweet spot.** At $600K-$750K, these suburbs sit precisely in the affordability band of Australia's largest buyer cohort: young families with combined household income of $120,000-$150,000, borrowing at 5-6 times earnings. This is the demographic that must buy — rental stress pushes them into ownership regardless of interest rate headlines. They're not discretionary purchasers. They're necessity purchasers [4].

**Third, rental demand pressure.** Vacancy rates in the far southeast have dropped below 1.5%, compared to Melbourne's overall average of approximately 2.5% [5]. When renters can't find properties to lease, some of them become forced buyers — which adds to purchase demand. And landlords holding properties in low-vacancy areas have no incentive to sell, which constricts supply further.

> "Melbourne's southeast is doing what Frankston did in 2018 — rising while the city around it was stagnant. The drivers are identical: supply constraint, affordability, and population inflow. We've bought 11 properties in this corridor in the past six months." — Joey Don

## Where prices are falling: the usual suspects

The Melbourne suburbs dragging down the median are predictable if you understand the fundamentals.

**Inner-city apartments:** Melbourne's CBD and inner-ring apartment market has been oversupplied since 2019. Student housing demand collapsed during COVID and hasn't fully recovered. New apartment completions continue to outnumber demand. Prices are down 5-8% from peak in areas like Southbank, Docklands, and Carlton [6].

**Western greenfield corridors:** Point Cook, Tarneit, Wyndham Vale, Melton, Werribee. These areas have effectively unlimited land supply. Every year, developers carve out another thousand lots and sell house-and-land packages at prices that undercut the secondary market. If you bought a three-year-old house in Tarneit and a brand-new one just got built next door for $30K less, your property value goes sideways or backwards.

**Northern fringe:** Some northern suburbs — particularly those with high unit-to-house ratios and limited infrastructure investment — are seeing flat to negative growth. The further north you go, the weaker the fundamentals tend to be, with a few notable exceptions.

The pattern is consistent: suburbs with new supply are flat or falling. Suburbs without new supply are rising. Land scarcity is the dividing line between Melbourne's two-speed market.

I've been saying this for three years. The data keeps proving it. Yet I still get inquiries from investors wanting to buy new builds in Tarneit because "it's cheaper." Cheaper yes. But cheaper for a reason — and the reason is that the land under your house isn't scarce, which means it won't appreciate.

## The rate cut catalyst that nobody is pricing in

As of mid-2023, the RBA's cash rate sits at 4.1% — the highest since 2012 [7]. This has been the primary headwind for Melbourne property prices.

But rates are a cycle, not a permanent state. The futures market is pricing in rate cuts beginning in late 2024 or early 2025. When rates begin to fall, two things happen simultaneously:

1. Borrowing capacity increases. A 0.5% rate cut adds approximately $35,000-$40,000 to the average borrower's purchasing power. That incremental capacity flows directly into the price band where the most transactions occur — the $600K-$800K range that dominates Melbourne's middle ring.

2. Investor sentiment shifts. Negative gearing becomes more attractive as holding costs decline. Investors who have been sitting on the sidelines waiting for rate relief re-enter the market, adding demand to an already supply-constrained environment.

The historical pattern is unambiguous: Melbourne house prices have rallied within 6-12 months of every RBA rate-cutting cycle for the past 30 years [8]. The 2019-2020 rate cuts produced a 15% price surge in 18 months. The 2012-2013 cuts produced 8% in 12 months.

The investors who buy now — at what I believe is the bottom of the rate cycle — will capture both the organic growth from supply constraint and the demand surge from rate cuts. Those who wait for the rate cut to happen before buying will find that prices have already moved 10-15% by the time they get their pre-approval sorted.

This is not speculation. It's the same playbook that has worked in every rate cycle since 1990. And it's why our team has been aggressively accumulating properties in the southeast corridor throughout 2023, while the headlines scream doom.

> "The best time to buy Melbourne property was early 2019, right before the post-election boom. The second best time is mid-2023, at the bottom of the rate cycle. By the time rate cuts are announced, the window will have closed." — Joey Don

## What this means for your strategy

If you're an existing Melbourne property owner: check which side of the two-speed divide your property sits on. If you own in a supply-constrained suburb with strong rental demand, hold. You're in the right position. If you own in an oversupplied corridor or an apartment, consider your exit strategy — waiting for "the market" to recover may mean waiting for a recovery that never reaches your specific property type.

If you're a new investor: this is the window. Melbourne's southeast suburbs are priced 20-25% below Sydney equivalents, carry rental yields of 4-6% (versus Sydney's 2-3%), and sit in the strongest supply-constraint position of any major Australian city corridor. The price creep is already running at $5,000 per month in our core suburbs [3]. Twelve months of waiting costs $60,000 in missed growth.

If you're interstate or overseas: Melbourne has been the target of negative media coverage for three years. That coverage has suppressed prices and kept competition low. Interstate and overseas buyers piling into Brisbane and Perth are, in my assessment, buying at or near the top of those cycles. Melbourne is where Brisbane was in 2019 — underpriced, underappreciated, and about to move.

The aggregate data will keep saying Melbourne is flat or declining. It doesn't matter. You don't live in the aggregate. You live on a specific street, in a specific suburb. And some of those streets are about to have a very good few years.

## References

1. [CoreLogic Home Value Index, June 2023. Melbourne median house price decline of approximately 3.5% from early 2022 peak.](https://www.corelogic.com.au/our-data/home-value-index)
2. [Urban Development Institute of Australia (UDIA), 'Melbourne Land Supply Pipeline', 2023. Western growth corridor producing 1,500-2,500 new lots annually.](https://www.udiavic.com.au/)
3. [REIV Quarterly Median Prices, Q2 2023. Suburb-level growth data for Cranbourne, Hampton Park, Narre Warren, Frankston, and Berwick.](https://reiv.com.au/market-insights/median-prices)
4. [Australian Bureau of Statistics, 'Housing Occupancy and Costs', Cat. No. 4130.0, 2022-23.](https://www.abs.gov.au/)
5. [SQM Research, 'Residential Vacancy Rates — Melbourne Southeast', June 2023.](https://sqmresearch.com.au/graph_vacancy.php)
6. [Domain, 'Melbourne Unit Market Report — Inner City', Q2 2023.](https://www.domain.com.au/research/)
7. [Reserve Bank of Australia, 'Cash Rate Target', July 2023. Cash rate at 4.10%.](https://www.rba.gov.au/statistics/cash-rate/)
8. [RBA, 'Historical Cash Rate Data', 1990-2023. Analysis of Melbourne house price response to rate-cutting cycles.](https://www.rba.gov.au/statistics/cash-rate/)
9. [PropTrack, 'Market Outlook — Melbourne Forecast', July 2023.](https://www.proptrack.com.au/)

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Source: https://premiumrea.com.au/blog/melbourne-property-market-two-speed-divergence
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent