• Melbourne’s house prices continue to recover, having increased for a third consecutive quarter, recording their highest quarterly growth rate since 2021;
• The vacancy rate for Melbourne residential property increased to 2.5% with all precincts’ current vacancy rates below their respective 10-year averages, with the exception of the Outer region;
• Total Victorian housing finance commitments continue to gather momentum having trended upwards since 2023 and now sit 18% above the 10-year average.

Residential Market Summary

Melbourne’s house prices continue to recover, having increased for a third consecutive quarter, recording their highest quarterly growth rate since 2021. Melbourne house and unit prices have now reached their highest levels since mid-2022. Despite population growth close to all-time highs, the number of dwellings currently under construction in Victoria is 17% below its peak. With the construction pipeline still constrained the vacancy rate for Melbourne residential property remains below the decade average and sits at 2.5%. Reflecting the low vacancy environment, metropolitan residential rents across the precincts increased over the past year and now sit just short of the all-time high levels.

Prices

Melbourne’s median house prices continue to recover, having increased for a third consecutive quarter according to the REIV. As at September 2025, Melbourne’s median house price increased to $954,500 up 2.7% over the quarter – the highest quarterly growth since 2021 and is now 4.5% higher than prices recorded 12 months ago according to the REIV. Melbourne median unit prices also increased over the quarter and year with Melbourne unit prices having increased over the September quarter of 2025 by 2.1%, up to $645,500. Like the detached housing market, as at September 2025, the Melbourne median unit prices grew over the past 12 months up 3.0% with current levels at their highest levels since mid-2022. Despite the growth, median prices of both Melbourne houses and units however remain below their peak levels with median house prices 16% lower and median unit prices 7% below their peak. Outside of Melbourne, the median Victorian Regional house price increased over the September 2025 quarter, increasing to $636,500, reaching an all-time high. The median Victorian Regional unit price also increased over the quarter, rising to $434,000, but remains 1% off their peak recorded in 2022.

Melbourne Dwelling Prices

Supply

There are currently 61,900 dwellings under construction across Victoria according to the ABS, 2% lower than the activity recorded 12 months ago. Interestingly high-density apartment development up 4% than levels recorded last year whereas the detached housing market development levels are 12% lower than the preceding year. The level of detached housing currently under construction in Victoria is at its lowest level since 2020. Despite population growth close to all-time highs, the number of dwellings currently under construction in Victoria is 17% below its peak. The level of new dwellings completed in Victoria continues to decline, with housing completions now 9% lower than its 10-year average. Looking forward, supply levels are projected to continue to remain subdued with commencements also below their long-term levels with current commencements 12% lower than the 10-year average. The decline in the pipeline of housing stock is further evidenced by decreasing level of approved dwellings in Victoria with current levels 13% lower than the 10-year average. To encourage supply, the Victorian state government has recently announced two policies that aim to give developers an incentive to build. Firstly, stamp duty was reduced from October 2024 and be in place for 12 months and available for off-the-plan units, townhouses and apartments for properties at any price point. Secondly, to encourage more density around railway and tram lines, the government has nominated 60 train and tram zones across Melbourne where the planning process for multi-storey residential dwellings will be streamlined to fast-track development, which could deliver approximately 300,000 new homes by 2051.

Victorian Housing Loan Finance

Demand

Total quarterly Victorian housing finance commitments continue to gather momentum having trended upwards since 2023 and now sit 18% above the 10-year average as at June 2025 with $86 billion financed. Dwelling finance commitments have increased across all categories over the past 12 months. Non-first home buyer owner occupier finance levels have increased by 10% compared to the preceding year; with first home buyers also active with their levels 8% higher than last year. Investors now account for 32% of total housing finance commitments in Victoria, in line with the long-term average share of 31%. Despite down on record high levels, Victoria’s population continues to grow by the highest level of any Australian state with Victoria’s population having increased by 124,500 people over the year to March 2025, driven by overseas migrants relocating to the state. Looking ahead, with strong rental growth and a shortage of housing, Urban Property Australia expects that first home owners will grow their share of housing loans encouraged by new government incentives.

Vacancy

As at September 2025, the vacancy rate for Melbourne residential property increased to 2.5% compared to its rate of 2.4% a year earlier but remains below the 10-year average of 2.9% according to the REIV. All precincts’ current vacancy rates now sit below their respective 10-year averages; with the exception of the Outer region. Over the past 12 months, only the Middle region recorded a decline in vacancy while the Inner region remained steady and the Outer region’s vacancy rate increasing. The vacancy rate of the Inner (4-10km) region recorded the tightest rate at 2.4%, however is up from 1.3%, 12 months earlier. The Middle Melbourne region holds the highest vacancy rate at 2.6% while the vacancy rate of the Outer region sits at 2.4% and the overall Inner (0-10km) region sits at 2.5%. Looking ahead, Urban Property Australia projects that the vacancy rate for the metropolitan Melbourne area will remain low with supply levels remaining constrained while Victoria’s population is growing faster than in any other Australian state.

Rents

Metropolitan residential rents across the precincts increased (or remained steady) over the past year, reflecting the low vacancy environment, according to the REIV. Over the year to September 2025, the weekly median rent for houses in metropolitan Melbourne decreased slightly, falling to $580 per week, just short of the all-time high of $590 per week achieved 12 months ago. Across Melbourne, rents for houses located in the Inner region increased the most, increasing by 6.7%, with rents in the Middle and Outer regions both remaining steady. Melbourne units recorded stronger rental growth with an annual rise of median rents increasing by 4.5% over the year with all precincts recording rental growth for units. Looking forward, Urban Property projects that residential rental rates will continue to increase; however, the pace of growth is anticipated to slow. This moderation reflects the effects of affordability constraints on renters’ capacity to accommodate the substantial rent increases experienced in recent years.

Regional

The median Victorian Regional house price increased over the September 2025 quarter, rising to $636,500 – an all-time high, surpassing the previous record set in 2022. The median Victorian Regional unit price also rose over the quarter, increasing to $434,000, and now only marginally below its peak level recorded in 2022. Boosted by a low vacancy environment and an underlying shortage of new supply, residential rental levels in the Regional markets have remained resilient with the average weekly rental levels for both houses and units sitting at all-time highs as at September 2025. The vacancy rate for Regional Victoria remains very tight at 1.9%, below the metropolitan average of 2.5%.

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