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

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

• 0:08
  Lachlan, Melbourne, August property market update, 0.4% growth across the board, both on houses and units, which is, you know, since February, month-on-month growth every month off the back of a negative year last year. What's your thoughts on that at the moment?
• 0:26
  exactly the sort of levels of growth you see in a market that's still very early in the cycle. And this is what people fail to understand. They're trying to compare Melbourne to an established growth market like a Queensland, Brisbane or a Perth that's now very much more mature in the cycle and that's where we're seeing that month on month, you know, one to 2% growth.
• 0:47
  Early in the cycle, that's what we want to see. Week to week or month to month growth around that 0.2% to 0.4%. Very consistent of a market early in the cycle. So although minimal, still really good achievement, 0.4%, but minimal compared to other capital cities for the month,
• 1:04
  You see that because it's at the start of the cycle, that's still super positive signs for the market. Absolutely. Because typically early in the cycle, you see markets that are more oversupplied. Typically the yields are more suppressed. So it takes, you know, typically a couple of years for a market really to mature. So really positive signs. And for those that have listened to the podcast, probably better signs than we forecasted to see in terms of that data. And the data is very skewed. And there's different segments in Melbourne. We're seeing areas that are doing a couple of percent a month.
• 1:34
  Typically that's sub a million in sort of high growth areas and the ones that we've been targeting. But the top end of markets in Melbourne and some sub markets are still underperforming. And there's evidence suggests that the real high end in Melbourne is still plateauing, if not slightly declining. Yeah. And how do you see the first homeowner's scheme impacting the Melbourne market specifically as well?
• 1:57
  Yeah, so for Melbourne, it's increased from 800 to 950. So that sub a million space is going to have a huge fuel under it. And we're going to see that play out over the next six months. So I think we'll start to see that monthly meeting house price start to shift, albeit data is delayed. So what does that mean? Settlements.
• 2:17
  that took place in August, probably occurred in June or July. So you're always looking at data that's three to four months old. So we're looking at the real time, you know, auction rates, clearance rates, what are the figures, what are the actual sales happening on a weekly basis? It's certainly suggesting more growth than what the median's reporting.
• 2:35
  And the feedback from our team on the ground there in Melbourne, each week when we do our weekly catch-ups with them, it sounds like it's getting busier and busier. Prices are going a lot higher than the price guides at auctions, and it's filled with owner occupiers at the moment as well as the feedback we're getting. Yeah, that sort of sub a million, you're seeing a lot of investment activity. That's sort of 800 to 1.5, again, dominated by owner occupiers. And you're right, and this is where the problem for those trying to invest in Melbourne is,
• 3:01
  anything that's going to the market's typically selling anywhere from 20 to 30 percent above advertised price which is illegal to under quote in in melbourne but you're seeing a lot of that at the moment so if something goes online from from a million or 990 you're seeing it sell in the vicinity of one two to one three
• 3:17
  Lachlan, let's talk about the key indicators there, which is affordability, demand and supply. Just give us a bit of feedback on where you see the Melbourne market at the moment on these three. Yep, so affordability is improving and even though the market's going up, what does that mean? We've seen a cash rate come off 50 basis points recently, which is making the market more affordable. We're also seeing wages start to tick up as well so that affordability play is improving. On the demand side,
• 3:44
  transaction volumes, auction clearance rates, all showing signs of improvement. Hence, we're starting to see an increase on that demand play. And supply, there still is some level of oversupply in certain pockets of Victoria. This is not new to us. We've spoken about that a lot. So we will continue to monitor this, but we are seeing that supply be absorbed more frequently, although there's some areas, particularly in the West, that are still currently oversupplied.
• 4:10
  Let's do a bit of a breakdown on the price growth of the year. So we mentioned earlier last year there was Melbourne experienced, I think, 10 months consecutive of negative price growth. This year, post-February, every week, bar a couple here, but the weekly data can be a bit choppy at times, we've seen consistent growth. So it shows we are definitely entering the, well, we're moving past the recovery phase now. Any thoughts and commentary on the price growth this year? Yeah, consistently.
• 4:40
  For a majority, I'm going to say majority, more than 70% of the weekly data is showing a 0.1% or more growth week. And everyone's like, do you really dial into the weekly data? It's really important to understand the consistency of the market. And what does that mean? So net that out of the year, you're looking somewhere between 5% and 6% growth for the year, which is a very consistent long-term runway for any capital city. So we're starting to return to its long-term growth.
• 5:06
  average, which is 6.5% for Melbourne. So it's showing that the market is maturing from what was a negative market in 2014 to more of a neutral market 2015 to what we think is going to be very much a positive market for 2016.
• 5:22
  Let's look at the auction clearance rates and reported auctions for 2025. So you can see we are seeing an increase, what we have this year, especially when we looked at the Q4 data from 2024. We're seeing a steady increase on the clearance rates. Would you talk us through some of the figures we saw in August?
• 5:39
  Yeah, last week of August in particular, 86% clearance rate, which is significant. Anything above 80% is a very much high demand, low supply market. So that's a huge tick. Consistently for August, we saw the auction clearance rate above 70. So that's massive. If you compare that Q3 last year...
• 5:58
  auction clearance rates were typically below 60%. So we've seen a huge improvement from that year on year data set. And I think we'll see that consistently above 75% for the remainder of the year. Yep, and a steady up crease from July's as well. So we saw over a one and a half percent over the last four weeks from July as well when you're comparing those clearance rates.
• 6:17
  So demand in the market is clearly there for Melbourne at the moment. Lachlan, let's dive into Folio's prop stack data on the Melbourne market. Let's look at the Melbourne house price versus unit price here. Yep. So echoing the value in that unit space, when we talk about units, typically units, townhouses and villas, the gap between houses and units has never been as great as it is currently in the Melbourne market. So we're...
• 6:45
  Keeping an eye on that market. All right, Lachlan, let's talk through the Melbourne Affordability Index. Medium household income consumed by the medium average mortgage repayment per month. Talk us through the graph and look from a historical standpoint as well. Like where are we kind of at this cycle? Again, the importance of this is to look at Melbourne in isolation with its historical ceiling. So previously it's capped out at 44%, 45%. Mm-hmm.
• 7:09
  affordability within the market currently sitting at 36% which shows there is runway in the Melbourne market that's what we want to see particularly for houses and that's improved off the back of you know a couple of rate cuts as well as you know as you can see there when you look at the median house price for Melbourne over the last three four years we've seen a steady decline so that means the affordability in the markets really improved
• 7:33
  August there's been obviously improvement in terms of the affordability because of the 25 basic points cut that we saw in August has made the market more affordable which is great means more insurance participants in the market that can can afford to buy
• 7:47
  Let's look at the affordability index comparing to the least affordable market in the country, which is Sydney. It's fascinating data when you actually look and when you do a comparison of Melbourne and Sydney. I'll let you sort of give your commentary on it, but it looks over the years, it was very similar. And then all of a sudden, post-COVID, they've gone in different directions. Yeah, exactly. When you compare it long-term, you look at the correlation with Melbourne and Sydney. It's almost identical. Yeah.
• 8:16
  up until you know pretty well covered and then you've seen a massive gap in terms of sydney's prices have gone on a run but the affordability in that market has diminished we're almost trending close to 60 percent you know when you when you when you're 60 of your wage or close to it's going to your mortgage
• 8:32
  Doesn't leave a lot for anything else, you know, holidays, school fees, those sorts of things. So comparing to Melbourne, you can see the gap there in the data. The affordability gap has never, not just by a little bit, never been this far apart. So this is a huge opportunity because why is Melbourne and Sydney so important to compare? They're both our only two international cities, right? So when people are going to move to Australia, unfortunately, people don't really know where Perth is. Never heard of Adelaide and Brisbane's an afterthought.
• 9:01
  they think Melbourne or Sydney, where are we going to go to? And when you can go to Melbourne and only 36% or 37% of your wage is going to go to your mortgage, or you go to Sydney where you nearly need 60% of your wage, well, that's why we're seeing such a surge in migration activity. So that's why this data set's really important to track because this is our overseas migration numbers will typically target the most affordable international city. And that's what we're seeing play out at the moment. So do you see Melbourne, you know,
• 9:30
  Getting back to historical levels in terms of the similarity between affordability between Sydney and Melbourne. We look at data long term. Everything has its natural place in terms of where it sits. So yes, we'll see this gap close significantly over the next few years. Lachlan, let's talk through the vacancy rates for houses and units because looking at the data where we sit now compared to a comparable level, it looks pretty strong.
• 9:52
  Yeah, this is the data from 2007 until now. You know, that's a significant decline. Like it peaked in 2007 at 7%, which is insane. And that's a market that is clearly oversupplied. Again, there was a peak in 2021, end of 2021, where vacancy rates were fat.
• 10:09
  Units there, as you can see, got close to 6%. That must have been the off-the-plan apartments that all tanked, I think, as well. Yeah. So the concern historically for Melbourne is yields are too low to invest in. Yeah. You know, yields typically sub 4%. What increases yields is higher rents. What increases higher rents is low vacancy rates. So this decline from, you know, 6% down to well-beloved 3%. We're looking at housing units now sort of 2.5% in the suburbs. We're buying it's 2%. Yeah.
• 10:38
  That has an immediate impact on rents. We see rents rise and rise quite quickly. We saw this in the Western Australian market, same in Queensland. And then it becomes much cheaper to buy a home than it is to rent a home. So you see those first-time buyers enter the market, throw the first-time buyer scheme over that. It's exactly what we want to see in a market. And rents is typically the first lead indicator because it's a show of vacancy in the market, it's a show of supply in the market. So this is a really strong indicator for Melbourne.
• 11:06
  Looking at that first homeowner scheme for Melbourne, where's the biggest opportunity and where do you see the biggest growth, say from October 1 when the increased caps come in play? Is it houses or units?
• 11:17
  We're going to see, as you can see with the vacancy rate data for units, I think we're going to see almost an outperformance in that space. But equally in the new build space, I think in the greenfields, albeit there's some areas there that we would advise to invest with caution, I think there's going to be a lot of movement because the story is going to be easy to sell. You only need 5% up front and you can invest out in the Wild West, we talk about in Melbourne, for as little as $650,000, $700,000.
• 11:43
  So I think there's going to be a big push, although we don't encourage that, there's going to be a big push and you're going to see a huge surge in activity in those areas. Yeah. So stick to, similar to what we've probably seen with the trends this year from a micro level, stick to suburbs with the- Landlocked. Landlocked. And own-occupied. Lachlan, let's talk through the folio property cycle. We've got Melbourne here. Talking through the data we said previously about the strong growth we've had since February, we've now got Melbourne in the opportunity phase. Where do you see that in the property cycle and where do you see it going?
• 12:12
  Yeah, so the data we've discussed, the monthly data for August is indicating a market that's still very early in the cycle. And that's what I said. Don't expect, you know, year on year double digit growth. We're not there. It's not a mature market. It's very much early in the cycle, arguably still in the bottom. And that's where we see Melbourne currently. That's where the prop stock data is indicating where the Melbourne market's at.
• 12:35
  All the lead indicators that we've discussed, decline in vacancy rate, increase in rents, strong population growth, all pointing towards very early in the property cycle. And why would someone invest in Melbourne over Darwin? You can see there, Darwin probably a little bit more mature in that opportunity phase on the property cycle. What would be your advice to someone looking at both markets from an investment standpoint?
• 12:57
  Yep, you look at Darwin very much almost like a large regional centre. What does that represent? It means high volatility and you've seen that in the downturns in Darwin. Very, you very rarely see Melbourne see negative growth. We've only seen modest negative growth over the last five years. You may see periods of stagnation where if you look at the data set long term for Darwin, it's almost like a yo-yoing growth.
• 13:23
  quick 30 40 percent upswing followed by a negative 30 40 percent downswing so if you're looking for long term which we typically advise when we're building a portfolio you will you want to look at stable markets melbourne is certainly that darwin's going to be rife with speculation and volatility albeit you might see a quick win in the next 12 to 18 months i think we're going to see you know quite significant growth it's again a hot potato if you don't time it and when you look at entry and exit costs it's a market that you may lose money