Latest / The Follio Property Podcast / Melbourne Property Market Update | September 2025 (Data & Insights)

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Melbourne Property Market Update | September 2025 (Data & Insights) · The Follio Property Podcast

• 0:06
  You called it, Lachlan? Melbourne is back. It is back. And it's no surprise. We've seen this on the ground three to six months ago. And anyone who listens to the podcast have followed us through the Melbourne journey. And it does take a while for the data to catch up. And people don't understand that because it's a big market, right? So for 0.5% of the market to increase in value, it's massive.
• 0:27
  Yeah. So did 1% for the quarter, which is more than half of what it's done for the year. And then it did half of that in the most recent months. So it's clearly showing we're on an upward trend here. What's been the significant factor? Is it purely catching up, the data catching up, or has the first homeowner cap increase really driven that market as well?
• 0:47
  It's the data catching up. When a market's at the early phases of a cycle coming out of a downturn, it takes a lot for the market to start spinning its wheels. There's a lot of D-grade, E-grade stock. And remember, Melbourne's coming from a market where there was an abundance of supply post-COVID. So it takes a lot for that to wash through. And some of those forced sales that have been sitting around for a while to...
• 1:11
  to get, I guess, exit the market. And that's taken place in the first two quarters of 2025. So now we're at a place where demands clearly outweigh supply. And that's why I think we'll start to see consistently those sorts of results in Melbourne. Lachlan, let's talk through auction reports and clearance rates.
• 1:30
  Yeah, so this is a demand indicator. We're always going to talk about supply demand, supply demand, you're going to get sick of it. But we've been tracking auction clearance rates and for Melbourne or any market really, anything above 65% rates is a market where demand outweighs supply. And as you can see, that hasn't been the case for Melbourne over the last few years. It was tracking sort of,
• 1:49
  50, 55, fluctuations of 60%. We've now seen it consistently produce about 70% for the last two quarters. Just showing me there's clear demand in the market, which is what we want to see in a market that's rebounding. Yeah. And if anyone sees the severe drop-off of auctions on the latest week, it's the biggest week in Melbourne for the year with the grand final. So naturally, there's not too many houses that go under the hammer.
• 2:13
  No, that's it. In school holidays, you'll typically see low transaction data and public holiday over there would have been a vacation for most real estate agents. Lachlan, let's move on to the dwelling approvals. So just 3,800 approvals for the month of August, the latest data that we have, which is the lowest figure we've seen since April 23.
• 2:31
  Yeah, this is a positive for the market, Rhys. Obviously, this is on the supply side of the equation, and they're currently not building enough properties to keep up with the demand that's coming into Melbourne, and this is a leading forecast. This gives us a look into what's coming in the next 12 to 18 months, and the fact that it's the lowest it's been since 2023 means we're going to have a shortage of properties in 12 to 18 months. If you look at this historically for Melbourne, what's interesting here, and this is the building approval data on a monthly level for Melbourne over the last...
• 3:00
  10 years, but let's just give a 25-year context. As you can see, historically, we're almost the lowest building approval activity we've seen over 25 years, obviously with the exception of 2014 there. But it's a sign that clearly there's not enough builders in Melbourne, which is consistent around the country. Obviously, post-COVID, a lot went bust.
• 3:25
  and potentially some lamb capping is starting to occur. So not enough lamb for builders to commence construction. So a really positive data set for Melbourne and it supports sort of the case that's mounting for this market. Lachlan, you mentioned there supply is ticking down. Another major indicator that goes with supply is the demand. Let's talk through the interstate migration and overseas migration. Looking at the most recent data, there's been a tick up in both.
• 3:53
  It has. And this is exciting for Melbourne who lost so many people through COVID and that was the real catalyst for the downturn. Everyone exited. Now they're coming back, which is good. So it's positive for the first time essentially in a couple of years, albeit positive for 500 people for the month doesn't sound like a big impact.
• 4:12
  It is. It's because Melbourne's actually, for the first time, getting more people from interstate than they're losing. So a huge win, I would say, for Victoria there. But when we look at the overseas migration, this is significant, right? We've got, on a quarterly basis, 35,000 to 40,000 people.
• 4:30
  move into Melbourne or Victoria as a whole on a quarterly basis. So that's significant. We know people historically have come to Victoria over other states from overseas. And to give you context, everyone's like, okay, what does that actually mean? We look at the two major population centres in Australia, and let's go to PropStack data. We've got Melbourne here in the blue. We've got Sydney in the green.
• 4:53
  population growth now currently and has been for the last two years is significantly higher in Melbourne than it is in Sydney. And there's reasons for that. Melbourne's now significantly more affordable to buy or to rent. And those overseas migration numbers, we're seeing the bulk of the population that enters Australia either go to Melbourne or Sydney. And clearly, looking at this graph, they're going to Melbourne.
• 5:17
  Just a reminder for those that are listening, if anyone wants access to these market and economic reports we got, click Melbourne report in the comments and we'll send you a link to get those reports out to you. Next up, we've got the affordability index, which we've spoken about. If anyone's listened to the podcast before, we speak about this all the time, which helps indicate if a market is affordable. Lachlan, do you want to talk through where Melbourne is at the moment from an affordability index standpoint?
• 5:41
  Yeah, absolutely. Obviously, we've got Sydney on the screen at the moment, so it's a great one to sort of check against. Affordability for houses for Melbourne, obviously tracking the average wage and tuned by the average mortgage. You can see here a great divide between the two. Obviously, you've got Sydney there in the green, which is becoming increasingly unaffordable. And I'll track this back. This is 10 years. I'll track it back 25 years to give you context.
• 6:11
  well above its historical high in terms of affordability. So what does that mean? Well, the runway's actually in the negative because it's in uncharted territory. Where Melbourne, you know, you can see it's become extremely affordable in the last 12 months. There has been...
• 6:28
  a slight uptick in terms of it's become slightly more unaffordable because we're seeing some really good growth in the last in the last quarter so that how does the market become more affordable wages grow or interest rates come off or house prices come off we don't expect the ladder for melbourne we expect house prices can you continue to rise um so we could see this affordability shrink but you know again comparing it to sydney when people are moving either interstate or overseas to australia
• 6:54
  where they're going to go. And clearly here, you move to Sydney, that's going to become a very unaffordable lifestyle where Melbourne, either to rent or to buy, certainly becomes a compelling case.
• 7:05
  So Lachlan, where do you see Melbourne going for the rest of the year? We've spoken about on previous podcasts, it is a patchy market. There are sub-markets within that are going to do double-digit growth this year. We've already seen that. We've seen markets that have already done double-digit growth. Already done double-digit growth. Now, we've seen 0.5%, which is huge for Melbourne in September. Where do you see that going in the next three months before we close out the year?
• 7:28
  Yeah, look, if I think we could get 2% across the board in Melbourne between now and Christmas, I think it'd be a real positive result. But that's trending sort of that 0.5, 0.5 and potentially finish the year with a full percent. That would be ambitious. I think it would be somewhere between that sort of 1 and 1.5. And it's not to say that...
• 7:47
  And that would be a really positive result. Like we've always said, Melbourne's going to take a bit to warm up. It's coming out of a rebound. If you look at, for instance, Perth in 2019, 2018, 2019, it took 12 to 18 months to really start to warm up and kick. So 2026 will be the year of Melbourne. 2025 is a time to potentially take a strong position.