Melbourne Property Market Outlook 2023

Key takeaways

After booming through 2020 and 2021 with prices rising by 15.8%, Melbourne housing values fell -7.9% from their peak in March 2022 through to the recent trough in January 2023.

While the Melbourne housing market clearly turned the corner in early 2023 with prices rising consistently – they have been rising much more slowly than some of our other capital cities.

There are firm indications that Melbourne property values and rents will keep rising in 2024.

This new property cycle creates a window of opportunity for home buyers and investors to get into the property market as the Melbourne market picks up again.

Melbourne could be one of the most lucrative markets for property investors looking to capitalise on the impending price rebound if interest rates are cut later this year.

Currently, there are around 5.8 million people in Melbourne which has now overtaken Sydney as Australia’s largest capital city.

Melbourne has a unique lifestyle and economic benefits that will attract overseas migrants as well as plentiful jobs for highly paid knowledge workers.

Rather than trying to time your next property purchase based on where we are in the cycle, take a long view and if your income is secure and the time is right for you, this may be an ideal time to get a foothold in the Melbourne property market while others are sitting on the sidelines.

Are you wondering what will happen to the Melbourne property market in 2024?

It’s no secret that the Melbourne housing market has faced its fair share of challenges over the past couple of years.

From the economic fallout of the COVID-19 pandemic and being locked down for longer than any other city in the world, to 13 interest rate rises, the lowest level of consumer confidence in decades and a continuous conveyor belt of negative messages in the media, tightening of lending restrictions, the Melbourne property markets have faced considerable headwinds.

After booming through 2020 and 2021 with prices rising by 15.8%, Melbourne housing values fell -7.9% from their peak in March 2022 through to the recent trough in January 2023.

While the Melbourne housing market turned the corner in early 2023, property price growth has been slower than in some other capital cities:

Sure each research house has slightly different stats, but any way you look at it Melbourne has now clearly passed the bottom of the downturn, and while Melbourne has not seen as sharp a recovery in prices this year as Sydney has, it also did not see as large a decline in 2022.

And there are firm indications that Melbourne property values and rents will keep rising in 2024.

Of course there are many sub-markets in Melbourne, and some will outperform others over the next year.

This creates a window of opportunity for home buyers and investors to get into the Melbourne property market as it picks up again.

Melbourne could be one of the most lucrative markets for property investors looking to capitalise on the impending price rebound if interest rates are cut later this year.

In contrast to Sydney’s quick recovery, Melbourne has seen a slower, more steady price growth trajectory.

Having said that the Melbourne housing markets have been fragmented in 2023  and more than 50 Victorian suburbs saw house princes exceed the average national house price growth in 2023.

Increase in migration particularly from China and India were a key factor behind this growth according to a report by Proptrack who reported seven Melbourne suburbs even posted average house price gains above $100,000.

Moving forward Melbourne could deliver one of the strongest capital gains in the medium to long term because house price growth has been subdued for the past few years, and demand is likely to rise due to international migration,”

And remember… even though the Melbourne property market has underperformed in the last year, it has been one of the strongest and most consistent performers over the last four decades.

Melbourne Property Price Upturn

Across sub–regions, Melbourne’s Inner and Outer East are outperforming marginally while the North West and West are seeing prices stabilise rather than rise.

Conditions are notably softer outside the capital, with property prices in most regional centres in Victoria falling or at best only stabilising.

However at Metropole Melbourne we’re finding that strategic investors and homebuyers are back actively looking to upgrade, picking the eyes out of the market.

Like all our capital cities there is not one Melbourne property market, and A-grade homes and investment-grade properties remain in strong demand and are likely to outperform, many holding their values well.

Another pointer to the strength and depth of the market is that Melbourne’s auction clearance rates have held up well this year.

Melbourne Auction Results 2023


Melbourne’s property prices trend

According to CoreLogic, Melbourne property prices

  • rose 15.8% from the onset of Covid to their cyclical peak in March 2022
  • fell -7.9% from their previous cyclical peak to their recent trough in January 2023
  • have risen 11% from the onset of Covid to December 2023.

However, while Melbourne’s property market have moved to the next phase of the property cycle, there is not “one” Melbourne housing market and it’s a bit like having one hand in a bucket of hot water and the other in a bucket of cold water and saying: On average I’m feeling comfortable.

There is a clear flight to quality with A-grade homes and investment-grade properties still in short supply for the prevailing strong demand, but B-grade properties are taking longer to sell and informed buyers are avoiding C-grade properties.

This is creating a window of opportunity for homebuyers and property investors with a long-term perspective.

Sure, many discretionary buyers and sellers have left the market at present, but life will go on in the Victorian capital – people will get married, people will get divorced, families will have babies and many Melbournians are going to need to move house.

When they realise interest rate rises have stopped (and we’re possibly there already) and that inflation is under control (and we’re past the peak already) they will come back into the market with a vengeance.

In fact buyers are back in the market however seller sentiment is still lagging.

And with the recent opening of international borders, Melbourne has become a major recipient of new residents putting extra pressure on our property markets, particularly the rental markets.


Source: CoreLogic, 2nd January 2024

Melbourne’s values have risen 3.5% since bottoming out in January 2023.

However the Melbourne housing markets are fragmented and more than 50 Victorian suburbs saw house price growth exceed the average national average house price growth in 2023.

Seven Melbourne suburbs even posted gains above $100,000 to trump the state’s $91,500 average income.

There is currently a clear flight to quality properties in Melbourne, with A-grade homes and “investment grade” properties still in short supply for the prevailing demand, but B Grade properties are taking longer to sell and informed buyers are avoiding C Grade properties.

Moving forward strong immigration and a lack of supply of properties will help keep pushing Melbourne property prices up.

Melbourne’s population is forecast to rise by roughly 500,000 over the five years to 2026-27, after increasing by an astounding 1.7 million people (52%) so far this century.

That’s the equivalent of two Hobarts’ worth of population growth in only five years.

In fact Melbourne’s population is expected to grow by one million people over the next ten years.

According to the Federal Treasury’s Centre for Population, Melbourne will have 6.1 million residents by 2033, with net overseas migrants accounting for nearly three-quarters of these new residents.

It would also mean that Melbourne’s population had nearly doubled since the turn of the century, from roughly 3.3 million people at the 2001 Census, owing mostly to high net overseas migration.

Considering it has taken about 188 years for Greater Melbourne to grow to its current size of about 2.1 million dwellings in Greater Melbourne, this means Melbourne will require roughly one new dwelling for every two existing homes within the city’s boundaries.

Accommodating 50% more houses within existing boundaries in the next decade or two will require major policy changes and the construction of a significant amount of infrastructure.

Not just “hard” infrastructure, but schools hospitals aged care facilities etc..

Melbourne population growth

Melbourne housing prices charts

pencil icon

Note: Over the last 4 decades, Melbourne property values have risen at the fastest pace of all capital cities.

Housing Cycle Melbourne

Source: Corelogic

At Metropole, we’re finding that on-the-ground sentiment has changed and strategic investors and homebuyers are accepting that inflation has probably peaked and that interest rates are likely to peak in the next few months, so they are getting on with property decisions.

While more buyers are active in the market, there is currently a shortage of good quality stock on the market.

However, while house prices have been resilient, Melbourne rental rates are experiencing weaker conditions due to a higher supply of rental properties, and less demand.

Melbourne’s apartment market outlook

CBRE estimates Melbourne’s apartment delivery will average 10,000 pa over 2024-28, nearly 40% below Sydney.

Melbourne Apartment Supply Over 2023 28

Demand for apartment stock is likely to average 38,000 pa over the next five years.

Melbourne Rental Demand Vs Supply

This should continue to drive down city-wide vacancy rates and underpin rental and house price growth.

The current rental market in Melbourne

Melbourne is experiencing a rental crisis with historically low vacancy rates.

Melbourne apartment rents have soared 23.1 per cent in the past year, leaving tenants struggling to find and afford somewhere to live.

Melbourne Rents January 2024


Source: SQM Research January 2024

Traditionally in Melbourne, vacancy rates have been tight hovering well below the level of 2.5% vacancies which represents a balanced rental market.

However, Melbourne’s vacancy rates are now at historic lows and this is pushing up rental rates.


Vacancy Rate Melbourne January 2024

And at Metropole Property Management our vacancy rate is less than half the industry rate, in part because our clients have chosen investment-grade properties, but we’d like to think it also has a bit to do with our proactive property management policies.

Melbourne’s decline in vacancy rates can be attributed to several factors.

  1. One major factor is the city’s strong economy and job market. Melbourne is home to a number of major industries, including finance, technology, and healthcare, which are driving the demand for housing.
  2. Another factor is the city’s growing population.  Melbourne’s population has been growing steadily in recent years, with more people moving to the city to take advantage of its job opportunities and quality of life.

This increased demand for housing has led to competition among renters, driving down vacancy rates.

Overall, the decline in vacancy rates in Melbourne is a sign of the city’s strong economy and growing population.

While it may be more difficult for renters to find a property, the city remains an attractive place to live and work.

Rent Listing Melbourne January 2024


Source: SQM Research January 2024

The lower yield investors have been achieving is a reflection of higher capital growth and the value of Melbourne properties.

As a consequence, overall yields have declined over the past few years, but more recently as rents have skyrocketed investment yields have improved for investors in Melbourne as can be seen from the following chart from SQM Research.

Residential Yields Mebourne January 2024


Melbourne’s school zones for house price growth

Education influences home buyers and property investors across a broad range of demographics and data show that it is now influencing property prices in greater Melbourne’s popular education catchments.

School Melbourne

Education is a long-term consideration and, whether you are planning a family, have children already enrolled in school, or are an investor looking to attract long-term, quality tenants, it may be beneficial to consider school catchment zones when you are determining suburbs of interest.

A well-rated school can do wonders for property value, and recent data shows that school catchment zones can actually have a significant influence over how quickly property prices grow.

In fact, Domain Group’s latest 2021 School Zones Report shows that house prices in some of Melbourne’s school zones have outperformed and skyrocketed by close to 40% over the past 12 months as fierce competition to get into preferred school catchment areas continues to drive property price growth.

The report confirmed how public school zones can influence property decisions and impact house price movement.

READ MORE: Which Melbourne suburbs have the best primary & high schools?

Melbourne’s property prices growth over the last 10 years

Over the last decade, Melbourne’s house price growth was stronger than unit growth, but that wasn’t always the case…

Looking back the Melbourne property market has been one of the strongest and most consistent performers over the last four decades and over the last 40 years:

  • The median Melbourne house has increased by 7.9% per annum
  • The median Melbourne unit/apartment price has increased by 7.73%per annum

Obviously, this wasn’t the same each and every year, as the Melbourne property market worked its way through the typical property cycles.

But now the price gap between apartments and houses is the biggest it has ever been, and with affordability constraints kicking in, it’s likely that potential buyers will turn their attention to more affordable “family-friendly” apartments, vill units, and townhouses which will outperform.

Over the last few decades, Melbourne won the mantle of the world’s “most liveable city” more times than any other city in the world.

Needless to say, the Covid-related lockdowns endured by Melbourne led to some challenging times, and other cities have topped the charts…but watch this space.

Aus Population

Prior to the coronavirus Melbourne‘s population grew by around 120,000 people each year and migrants are going to come pouring back into Australia.

Melbourne has a unique lifestyle and economic benefits that will attract overseas migrants.

Sure many Australians see Melbourne as the poor cousin that caught coronavirus and was locked down for 260 days, but overseas people see Melbourne as the only World City of 5 million people that contained coronavirus.

So this creates a window of opportunity to get into the property market before Melbourne property takes off again later this year.

Auction clearance rates give a great “in time” indication of the mood of Melbourne property buyers and sellers and as the chart below shows, Melbourne’s auction markets have recovered their “mojo.”

Melbourne Auction results

Long-term Melbourne’s property market trends

Historically, the city’s property market has gone from strength to strength.

In 1966, the median house price in Melbourne was just $9,400.

Values have doubled more than six times since then, with the median crashing through the $100,000 barrier in 1988, and pushing through the half-million-dollar mark in 2010.

Today one in three Melbourne suburbs has a median house price of at least $1 million, with 90% of suburbs within 10km of the CBD having a million-dollar median house price and almost 50% of suburbs in the middle ring also in the million-dollar club.

And changing demographics are playing a big role in driving shifting market trends.


The big house on a big block is no longer a surefire strategy for success, as single-person homes and households without children are increasingly favouring living in medium-density inner-city and waterfront apartment properties.

Meanwhile, families are trending towards locations that offer effective transport infrastructure, with access to amenities and quality education.

Upgrades to major highways and new rail links may close the gap between suburbs that were previously closed off by poor infrastructure.

Currently, there are 5.8 million people living in Melbourne.

The Victorian government has a business plan to increase Melbourne’s population by 2050 to 8 million people, and at that time Victoria will have a population of 10 million people.

Over the next 30 years Melbourne is likely to require:

  • 1.5 million more dwellings which will be made up of
  • 530,000 detached houses
  • 480,000 apartments and
  • 560,000 townhouses

Currently, the number of property sales in Melbourne is growing week by week, and asking prices are lifting, meaning subsequent sales prices will be higher:


House Asking Prices Melbourne

Melbourne’s infrastructure struggles to keep up with growing population

Melbourne’s significant population growth is presenting a number of challenges for city planners and residents alike.

Melbourne is already “bursting at the seams,” and city officials are now looking to develop new cities in outer suburbs to accommodate the growing population.

in 2023 Melbourne has officially overtaken Sydney to become Australia’s largest city by population — thanks to a technicality when the city’s borders were redrawn to include the district of Melton.

In its 2022 population statement, Australia’s federal government said Melbourne was projected to overtake Sydney as Australia’s largest city by 2031-32.

But the newly recast Melbourne has a total of about 5.8 million residents, almost 19,000 more people than Sydney.

One of the biggest challenges posed by Melbourne’s population growth is the strain it is placing on the city’s infrastructure.

Melbourne’s public transport system, in particular, is struggling to keep up with the increased demand, leading to overcrowding, delays, and other issues.

The city’s roads are also becoming increasingly congested, making it difficult for people to get around.

To address these challenges, the Victorian government has committed to investing heavily in public transport infrastructure.

The Metro Tunnel project, for example, will create a new underground rail line through the CBD, while the Suburban Rail Loop project will create a new orbital rail line connecting Melbourne’s suburbs.

These projects will help to relieve congestion on Melbourne’s roads and public transport system, providing much-needed relief to commuters.

Melbourne Train

Another challenge posed by Melbourne’s population growth is the cost of living in the city.

As more people move to Melbourne, demand for housing and other goods and services is driving up prices, making it difficult for many residents to afford a decent standard of living.

The city’s housing affordability crisis has become a major issue, with many residents struggling to find affordable accommodation in the areas they want to live in.

To address this challenge, the Victorian government has introduced a number of measures aimed at increasing the supply of affordable housing in the city.

These measures include the introduction of the HomesVic scheme, which helps first-time buyers get onto the property ladder, and the establishment of the Victorian Property Fund, which provides financing for affordable housing developments.

A further challenge posed by Melbourne’s population growth is the impact it is having on the city’s natural environment.

The city’s air and water quality are both being affected, as are its green spaces and wildlife habitats.

This has led to calls for better environmental protections and greater efforts to reduce the city’s carbon footprint.

To address these challenges, the Victorian government has committed to investing in sustainable infrastructure and practices.

The state’s Renewable Energy Target aims to generate 50% of Victoria’s electricity from renewable sources by 2030, while the Greener Government Buildings program aims to reduce the energy use and emissions of government buildings by 25% by 2020.


Melbourne population growth over the next decade

To accommodate the city’s growing population, city officials are now looking to develop new cities in the surrounding suburbs.

These new cities will be designed to provide residents with the amenities and services they need to thrive, while also promoting sustainable development practices.

One of the proposed new cities is located in Melbourne’s west, in the suburb of Werribee.

This area is currently home to a number of industrial sites and other developments, but city officials believe it has the potential to become a major new urban centre, complete with housing, commercial and retail spaces, and public services.

The Werribee City Centre Framework Plan outlines a vision for a vibrant, mixed-use urban centre that will be connected to Melbourne’s CBD via a new rail line.

Another proposed new city is located in Melbourne’s southeast, in the suburb of Cranbourne.

This area is currently home to a number of green spaces and other natural areas, but city officials believe it has the potential to become a major new residential and commercial hub, providing much-needed housing and services to the growing population.

The Cranbourne East Development Plan outlines a vision for a sustainable, mixed-use development that will create jobs, housing, and amenities for local residents.

Despite the challenges posed by its population growth, Melbourne remains a city of great promise and potential.

With careful planning and smart investments, it can continue to thrive and grow, while also maintaining its unique character and quality of life for all residents.

Is it the right time to get into the Melbourne property market?

As I explained the Melbourne property market has passed the bottom  and is now in the upturn stage of the property cycle.

Of course, the Melbourne housing market won’t boom again any time soon, but anyone who buys an A-grade home or investment-grade property in Melbourne will look back in a couple of years’ time and recognise they bought a bargain.

Of course, I know some potential buyers are asking:

What about all those headlines that the Melbourne property market crash in 2024?

They must be listening to those permabears who have been telling anyone who is prepared to listen that the property markets are going to crash, but they have said the same year after year and have been wrong in the past and will be wrong again this time.

The following chart from Shane Oliver chief economist of AMP Capital shows that over the last century residential real estate has returned 11% per annum, and that doesn’t take into account the benefits of gearing and compounding.

Sure the property markets move up and down cyclically – while the short-term trends may be flat or downwards, the long-term trend has always been up.

And with Australia’s population likely to grow to 40 million people by the middle of this century and with Melbourne’s population likely to grow to 8,000,000 people, the long-term capital growth of Melbourne property is assured.

So rather than time trying to time your next property purchase based on where we are in the cycle, take a long to view and if your income is secure and the time is right for you, this may be an ideal time to get a foothold in the Melbourne property market while others are sitting on the sidelines.

compound growth

6 reasons to consider investing in Melbourne’s real estate

1. Melbourne’s demographics 

More than 70% of Victorians live in Melbourne, making it a much more urban state than Sydney and Brisbane

Melbourne had been ranked the world’s most liveable city more times than any other city and is a major and relatively young city with a growing population of 4.9 million people.

With the borders of the city having been redrawn to include the district of Melton, Melbourne has now overtaken Sydney to become Australia’s largest city by population.

Melbourne is currently home to over 2.5 million households, up from 2.2 million households in 2016, most of which (68.3%) are homeowners, either with or without a mortgage.


Melbourne has a relatively young population for a major city within a developed country with a median age of 37.

One of the key demographics of Melbourne is its diverse ethnic makeup.

Melbourne is home to people from a wide range of cultural backgrounds, including Indigenous Australians, Anglo-Australians, and people from a variety of Asian, European, and Middle Eastern countries.

This diversity is reflected in the city’s vibrant and multicultural arts, food, and cultural scene.

Another important demographic of Melbourne is its gender makeup.

The city has a fairly even split between men and women, with women making up 50.7% of the population.

Melbourne is also a city of young professionals, with a high proportion of people in the 25-34 age group.

The city is home to a number of universities and colleges, and this, combined with its strong job market, has attracted a large number of students and young professionals.

Finally, Melbourne is a city of homeowners, with a high proportion of people living in houses rather than apartments or other types of dwelling.

The city has a relatively high median house price, reflecting its strong economy and high quality of life.

Overall, Melbourne is a diverse, dynamic, and youthful city, with a population that reflects its vibrant and multicultural character.

Melbourne demographics

 Age of Melbourne Residents

In general, Melbourne is a well-educated and multicultural society, living in single-family households in houses.

27.5% of the current labour force is degree qualified or higher and 73% have a post-school qualification (which includes a bachelor’s degree or higher, diploma, and certificate).

Melbourne has a culturally diverse population, where 58% of the population have either both or one parent born overseas.

Approximately one-third of all households speak two or more languages, with the top languages (outside of English) being Greek, Italian, Mandarin, Vietnamese and Cantonese.

Households are getting smaller in Victoria – in 2021, the average number of people who lived in each household in Victoria was 2.5, a decrease from 3.3 people in 1971.

In 2021, 70.1% of households were family households.

This was a slight decrease from 70.8% in 2016.


2. Melbourne’s Layout

A well-planned city that is amply serviced by a range of public transport options, Melbourne is laid out under the Hoddle Grid’, so named after its designer Robert Hoddle, which runs roughly parallel to the Yarra River.

As with most large cities, greater Melbourne is divided into ‘east’ and ‘west’ neighbourhoods; those in the east are more established and generally considered more affluent, while those in the west are more affordable, newer suburbs with less established reputations.

3. Melbourne’s Infrastructure

Melbourne residents enjoy the use of some of Australia’s most advanced and well-connected systems of road, rail, and tram infrastructure, which give locals plentiful options when deciding how to get around the city and its surrounding suburbs.

Melbourne’s Infrastructure

The city received a perfect score of 100 for its world-class infrastructure in the 2021 EIU Liveability Report, where ongoing investment in Melbourne’s infrastructure was highlighted as being one of the factors that keep Melbourne at the top of the index.

And the State government is spending a lot on infrastructure recognising that good infrastructure is not an end in itself, but an enabler of better social, economic, and environmental outcomes.

Melbourne’s new Suburban Rail Loop is a city-shaping project that will transform Victoria’s public transport system, revitalise Melbourne’s middle suburbs and create a long pipeline of jobs.

The 90-kilometer Suburban Rail Loop will link every major rail line from the Frankston line to the Werribee line, via the airport, better connecting Victorians to jobs, retail, education, health services, and each other.

The $54 billion costs of this project arguably make it Australia’s largest infrastructure project and are likely to be a game-changer as it will open up Melbourne’s employment hubs and middle ring suburbs with better transport – much like London’s Tube provide to ring around that city.

Meanwhile, Melbourne Airport, which is Australia’s largest curfew-free airport, handles more than 30 million passengers annually along with 350,000 tonnes of air freight, making it Australia’s largest air freight hub.

And Melbourne Seaport – The Port of Melbourne– is the largest port for containerised and general cargo in Australia.

The city is also home to a number of world-renowned universities.

However, as Melbourne suburbs sprawl further and further out from the CBD, the difference in the level of amenities between the inner suburbs and the poorly serviced outer suburbs is becoming more glaring, causing people to pay a premium to leave closer to the CBD and the better serviced inner suburbs.

Victorian residents can look forward to these major infrastructure projects:

  • The 15.8 Billion North East Link road project which will transform how people move around the city.
  • The $ 11 billion Melbourne Metro Tunnel which will allow more than half a million additional people per week to use Melbourne’s railway system during peak periods.
  • The $10 billion Westgate Tunnel
  • The $10 Billion Melbourne Airport Rail Link is a game-changing public transportation project that, for the first time, connects Melbourne Airport to Victoria’s rural and metropolitan train network.
  • The M80 Ring Road upgrade ($2,25 billion) and the Monash Freeway Upgrade ($1.37 billion)
  • Plus the Monash rail line ($475 million) and Frankston to Baxter rail line ($225million) upgrades

4. Melbourne’s Economy

Victoria Economy

As a cosmopolitan, creative city that is served by a number of industries, Melbourne residents enjoy employment in diverse industries, from tourism, hospitality, and entertainment to commerce, industry, and trade.

Almost half the jobs created in Australia over the last decade have been created in Melbourne and Sydney.

Over the last 10 years, more than 500,000 new jobs were created in Melbourne as Victoria is transitioning from a manufacturing state to one driven by service industries, which is creating strong job growth and resultant overseas and interstate migration.

At the same time, the momentum of the Melbourne property market is creating a “wealth effect” for many of its residents have higher-paying jobs at a time when they are feeling wealthier as the value of their homes keeps increasing.

pencil icon

Note: The Victorian economy is holding up well.

Victoria represents only 3% of Australia’s total landmass, yet accounts for 23% of the national GDP, competing with some of the largest economies in Southeast Asia.

For more than two decades, Victoria’s economy has delivered strong and consistent growth supported by a diverse economy and a long history of prosperity across many industries.

Around 3.2 million people are employed in Victoria, which is 26% of all employed workers in Australia and the state economy will continue to benefit from ongoing population growth.


The Australian Bureau of Statistics forecasts Victoria’s population to reach between 10 million and 12 million people by 2060.

Melbourne is predicted to be Australia’s largest city as early as 2030 with a population of 6.1 million.

Moving forward Melbourne‘s new rail loop which is estimated to cost $54 billion will arguably be the biggest infrastructure project in Australia and will enhance accessibility to many suburbs.

In many ways, this will be a game-changer as the loop railway line will open up access to employment hubs in Melbourne’s middle-ring suburbs.

At the same time, Melbourne Airport is Australia’s biggest curfew-free airport carrying a lot of freight and Melbourne has the biggest and busiest seaport in Australia.

5. Melbourne’s population growth

Melbourne’s population stands at over 5.3 million which accounts for 19.05% of the national population.

In 1950, the population of Melbourne was just 1,331,966.

And, as mentioned  above, Melbourne is now Australia’s largest capital city, and the city’s population is projected to grow almost 8 million – with Victoria’s total population set to top 10 million. by 2051.

Melbourne population


There are several factors contributing to Melbourne’s population growth.

One major factor is immigration.

Melbourne has a long history of attracting immigrants from around the world, and this has continued in recent years.

Many people come to Melbourne for its strong economy, diverse cultural scene, and high quality of life.

Another factor contributing to Melbourne’s population growth is natural increase, or the excess of births over deaths.

Melbourne has a relatively young population, with a median age of 37, which helps to drive natural population growth.

The population of Melbourne has also been boosted by its strong job market.

Melbourne is a major economic hub in Australia, with a diverse range of industries including finance, healthcare, education, and technology.

This has attracted a large number of workers to the city, helping to drive population growth.

Overall, Melbourne’s population growth is a reflection of the city’s strong economy, diverse culture, and high quality of life.

While this has presented some challenges, it has also brought many benefits and contributed to Melbourne’s status as one of Australia’s most vibrant and dynamic cities.

Of course, we know that Melbourne’s population growth went into negative territory, falling by 1.6 per cent in 2020–21 as overseas migration ground to a halt and thousands of residents moved interstate.

While the pandemic saw Melbourne’s population go backwards, the Centre for Population noted Victoria’s regions enjoyed a “much stronger” period of population growth through the pandemic.

The regions only dipped slightly from 1.6 per cent population growth in 2018–19 to 1.3 per cent in 2020–21.

“Growth was supported by strong internal migration in the early stages of the pandemic, which helped offset the decline in overseas migration,” the centre noted.

Melbourne population growth

In 2020-21, Australia recorded a net loss of 89,000 people from the national population due to overseas migration and the impact of COVID-19 – with Victoria losing 56,100 people over the period.

But Melbourne is the fastest growing city in Australia.

Melbourne typically attracts many overseas migrants, and while international migration halted over the peak of the pandemic lockdown when Australia shut its borders in 2020-2022, since reopening in early 2022, net overseas migration has increased.

Census data shows that Victoria had net overseas migration of 33,691 people.

And both natural population growth (more births and deaths) and overseas migration are expected to surge as we move through to 2023.

The below table shows that the majority of net overseas migration has been into NSW and Victoria.


And the following chart also shows how most of the incoming migration is from China and India.

Most of these permanent migrants are coming for jobs and are of household formation age.


Many initially rent the homes, but many want to eventually buy a home as part of their “status” of being an Australian.

A large chunk of this population growth is happening in Melbourne’s Inner city, which had the largest net gain across the country of 12,100 people, followed by Melbourne’s South East with 11,300 people.

The ripple effect of house price growth caused significant house price growth in Melbourne’s outer suburbs over the last few years.

Similarly, some regional centres including Geelong have performed well, but moving forward it is likely that the more affluent middle-ring suburbs which are going through gentrification are likely to exhibit the best property price growth.


By the way…

Just because there is significant population growth in these areas doesn’t mean there is strong capital growth in property values in these areas.

In fact, there isn’t!

That’s why I would avoid investing in these new outer suburbs as they lack the demographic and economic drivers to push up property values as opposed to the inner and middle-ring suburbs where there is more “old money.”


As I explained, Melbourne is set to overtake Sydney and becomes Australia’s largest city by the 2030s, and that’s not really that far away, is it?

If these forecasts pan out, and they are likely to be correct, they will underpin the strength of the Melbourne property market and deliver surety to investors who own property in the right locations.

Why is Melbourne attracting more growth than Sydney?

Melbourne offers what Sydney cannot or will not offer: access to affordable housing on the urban fringe.

Melbourne planned for growth from the Kennett years resulting in the formation of a plan for five million residents in 2030 and announced in 2002.

Either way, Sydney’s lead is now closer to 350,000 but is narrowing at a rate of 20,000 a year.

If the present rates were to continue Melbourne would replace Sydney as Australia’s largest city at some point in the 2030s.

6. Melbourne’s culture

The city of Melbourne is nothing if not multicultural, with dozens of different cultures and nationalities 140 to be exact living side-by-side.

The city’s Multicultural Hub was launched as a friendly, supportive environment for Melburnians of all cultures to get together and work, share and learn, while the city’s diverse and awarded restaurant scene is highly influenced by immigrants from diverse backgrounds including Chinese, Italian, Greek, and Lebanese.

5 types of well-performing properties in Melbourne

Melbourne House

1. Melbourne Houses

Decades ago, the Australian property market was dominated by demand for freestanding houses.

The appetite for ‘the Australian dream’, complete with a comfortable home on a big block with a picket fence and a pet dog, was insatiable, and home buyers, as well as investors, flocked to houses as a preferred investment type.

Today, the concept that land goes up in value is still well recognised, but not all land is created equal.

What’s more, changing demographics and evolving family situations have shifted dynamics to the point where more Melbournians are trading backyards for courtyards and balconies meaning apartments, units, and townhouses can be just as highly sought as freestanding homes.

With median house values in Melbourne virtually doubling in the last decade, many people can’t afford freestanding homes, so they smartly start their home-buying or investment journey with apartments instead.

2. Melbourne Townhouses

The term townhouse originally referred in British usage to the city residence of a member of the nobility, as opposed to their country estate.

Today the term refers to medium-density (often multi-story) dwellings that may be, but are not necessarily, terraced (row housing) or semi-detached.

In fact, the 2021 Census showed a 13% increase in the number of people living in townhouses – a popular style of Melbourne accommodation where people live in modern accommodations on compact blocks of land close to amenities in the middle ring suburbs.

Yes, Melburnians are trading their backyards for courtyards and balconies.

3. Melbourne UnitsMelbourne Units

Units (sometimes called villa units) are the name given to single-story, older-style dwellings, mainly built in the 1960s and 70s.

Today, developers rarely build in this style because it’s not as profitable as building ‘up’.

This style of property makes an attractive investment, as they are increasingly popular with small families and young tenants, who enjoy privacy with no one above or below and the small yard.

4. Melbourne Flats / Apartments

If an overseas visitor returns to Melbourne for the first time today after a decade, they wouldn’t recognise the skyline which is now listed with mini high-rise apartment towers.

Many were built for investors, particularly overseas investors, but they have proven to be poor investments with no capital growth for many years, and more recently falling prices and high vacancy rates.

Demand for off-the-plan apartments is now very weak, and as the graphic below from Charter Keck Kramer shows there is poor demand for new apartments and few new developments in the pipeline.

On the other hand, family-friendly apartments in low-rise developments located in lifestyle suburbs are proving very popular with young families and downsize and make great investments.

Melbourne Commercial

5. Commercial, Retail, and Industrial properties

Commercial properties, (retail shops, factories, warehouses, and office spaces) are in a very different league from residential properties and out of the domain of the everyday investor.

Whilst there are many benefits of investing in commercial properties, they are more suitable for the sophisticated and experienced investor, particularly as they are more yield-driven than capital growth-driven.

Consider it this way: for most advanced investors, your job is to build your asset base.

Once your portfolio is big and robust enough, you begin transferring into a cash flow strategy, and at this point, a commercial property can be a good investment.

Overview of Melbourne’s areas

Want to know Melbourne’s wealthiest suburbs?

Well… Melbourne’s money is spreading from the traditionally well-heeled suburbs to regional and coastal areas just beyond the suburban fringe.

Toorak remains the city’s wealthiest suburb, with an average annual income of almost $201,926.

Portsea on the Mornington Peninsula was next on the list thanks to its residents’ average annual income of $175,356, according to figures from the Australian Tax Office.

While only 2 Melbourne suburbs made the ATO’s list of Australia’s richest postcodes, we’ve looked closer at the data (with the help of and Domain Group) and identified some other sought-after areas where the paycheques are high and the money is flowing.

Gambler's Help Services In Melbourne Metropolitan Area Map Lockdown

With an abundance of stunning Victorian-era terrace houses, glamorous apartments, European-style cafes, gorgeous gardens, and high-profile amenities, East Melbourne also continues to draw attraction from Australia’s wealthiest people. The median price for houses is $3.3 million while the median unit price in East Melbourne last year was much more affordable at around $758,000.

One of the most expensive suburbs in Melbourne, Brighton, is situated 11km away from the CBD – the area, known for its beaches and luxury real estate from the Victorian and Georgian eras has a median house price of $3.31 million or a median unit price of $1.14 million.

Canterbury is also a highly regarded expensive suburb in our southern state – median property prices over the last year ranged from $3.3 million for houses to $934,000 for units, according to data.

Middle Park is a bayside suburb that’s located right outside of the CBD, about 3km away.

There have been development restrictions in the area, driving up the cost of the property.

Houses come in at a median of $3.23 million whereas units would cost significantly less at a median of $1.2 million.

Melbourne's most expensive suburbs

Source: ABS, The Age

READ MORE: Top 10 most expensive suburbs in Melbourne

1. Inner City

Melbourne’s inner city core has a population of around 49,991 people, a figure that is expected to jump to 62,077 by 2031.

As a result, there is much more property development activity in Melbourne CBD than anywhere else in the larger metropolitan area, with the majority of these developments comprising high-density high-rise apartment buildings.

Melbourne Inner City

The area of Southbank, just south of Melbourne’s CBD, currently boasts over 9,000 distinct dwellings, the majority of which are family households (45%).

The number of residential properties is set to rise to more than 26,000 over the next 20 years.

Currently, I’m worried about a large number of poorly built inner-city apartments on the market or planned for completion.

Many, in fact, of these are being bought by overseas investors, and these are likely to become the slums of the future.

Just to make things clear – I would avoid this segment of the Melbourne property market.

2. Bayside and South-Eastern Suburbs

Melbourne’s south-eastern suburbs boast distinct communities, neighbourhood attributes, and differing property growth cycles.

However while intricate, they’re considered by many to be the best Melbourne property investment suburbs.

The inner south-eastern and bayside suburbs of Melbourne make great locations to invest in.

3. Eastern Suburbs

Eastern Suburb

These include some of the most affluent areas of Melbourne – the residents of the eastern suburbs earning up to $1,532 per week, according to ABS figures.

Around 45% of properties are owned outright or mortgaged here, with 20% of the housing comprising townhouses or semi-detached homes, and only 33% of residential properties being high-rise apartments.

This is a dramatic difference from the inner city, where apartments are the dominant dwelling type.

The inner eastern suburbs of Melbourne also boast some great investment locations.

4. Western & Northern Suburbs

While the outskirts of Melbourne’s west and north are home to several of the city’s fastest-growing outer-suburban areas including Truganina, which increased by 18%, Tarneit (16%), Point Cook (12%), Melton South (11%), and Wyndham Vale (10%).

However, these more blue-collar areas have lower average wage growth and therefore lower ability to sustain capital growth.

While these areas are experiencing strong population growth and they have enjoyed strong capital growth over the last few years as the rising tide of the strong Melbourne property market lifted all ships, now that the cycle has reached its mature stage, many of these locations, especially the blue-collar suburbs will struggle.

In general, there are better investment opportunities in Melbourne’s inner eastern and south-eastern suburbs.

pencil icon

Note: Melbourne has high standards!

melbourne city park happy peace victoria garden

Melbourne has been named the world’s most liveable city by the Economist Intelligence Unit’s liveability survey for 7 years in a row and for very good reason!

Boasting excellent healthcare services, premium education facilities (including world-class universities), a stable and diverse economy, a solid investment in infrastructure, and a thriving, creative culture, it’s easy to see why Melbourne received an overall score of 97.5 out of 100.

With such a high standard of living and ready access to good quality facilities and amenities, it comes as no surprise that people continue to choose to call Melbourne home.

In addition, with over 120 suburbs with a median house price of over $ 1 million, Melbourne has the second-highest median price in the country (behind Sydney).

READ MORE: The best suburbs to invest in Melbourne

Key tips for buying investment property in Melbourne

1. Avoid Melbourne’s poor-quality apartments

Just because Melbourne has a well-deserved reputation for quality, that doesn’t mean the city is flawless – far from it.

In fact, the Melbourne CBD (Central Business District) is riddled with poor-quality apartments, with one report stating that an estimated 55% of the city’s tallest apartment buildings are of “poor” quality, with common design flaws.

No one wants to live in a substandard apartment, regardless of how affordable it is, and there are only so many people who would find a hotel-sized apartment appropriate for full-time living.

The fact that an estimated 40% of apartments in Melbourne are smaller than 50 square meters, according to the Melbourne City Council’s planning department, shows just how big this issue has become, – particularly when you consider that the minimum size of a single bedroom apartment can be in Sydney, London and Adelaide are 50m2 or above.

Not only are the apartments lacking in breathing room – literally – they’re also flawed in a number of other ways, with kitchens placed in hallways, a lack of ventilation and natural light, and poor storage.

All of these design faults make these types of developments less attractive to potential tenants, which reduces the desirability of these properties.

Investors would be well advised to steer clear of apartments that don’t tick all the boxes.

Shoebox-sized living spaces, alongside common design flaws in the building itself, should raise some serious red flags for buyers.

The problem is that many overseas buyers are purchasing these properties which will become the slums of the future.


2. Look for Melbourne’s best properties in the inner and middle-ring suburbs

Studies – and time – have shown that properties close to the city’s CBD (but not in it) and in bayside suburbs close to the water will increase in value more quickly than other properties and suburbs.

The demand for property is higher in these regions, as there is no land available for release, but the areas remain close to employment or desired locations.

Not only are properties closer to the CBD closer have better access to amenities and more employment opportunities, but transport costs are often lower and, as a result, people are willing to pay a premium to live there.

The end result for property investors in Melbourne is that the inner and middle-ring suburbs will (generally) outperform the averages for suburbs located further from the city.

3. Be mindful of a Melbourne inner-city apartment oversupply

Melbourne’s property market has been typified by strong population growth and to keep up with surging housing demand, there have been a huge number of new developments – mostly in the form of high-rise apartment buildings, in and around the CBD – that have been approved.

While the population growth, mainly from overseas migrants, was soaking up much of this new dwelling stock, the CBD is was over-supplied with too many new apartments until the recent surge of overseas students returned.

Now much of this supply has been taken up by students, but this is a volatile market I would be wary of.

4. Make the most of Melbourne properties through negative gearing

While most investors understand the concept of negative gearing, just in case you’re not up to speed, here’s a quick refresher:


A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs, and depreciation – exceed the income it produces.

Since the costs of producing an income are generally deductible against the taxpayer’s other income, property investors can effectively offset some of the interest expense against their wages.

Why would anyone go into a business deal to make a loss?

Generally, it’s because property investors in Melbourne hope that their income losses will be more than offset by their capital gains when they eventually sell (or refinance) their property.

And in Australia capital gain is not taxed unless you sell your property, and then it is concessionally taxed; again evoking the argument that it favours wealthy landlords.

Of course, negative gearing is more favourable for taxpayers who earn high incomes, and just to make things clear…

Negative gearing is not an investment strategy – it’s just the way a property is financed at a particular point in time.

How to choose a strong investment property in Melbourne

We believe that 80% of your property’s performance is related to its location (one that outperforms the averages ) and 20% or so is related to buying the right property in that location.

Here are some of the factors to look for when selecting an investment-grade property:

1. Buy a property below its intrinsic value

I’m a big believer in buying property below its intrinsic value – that’s why I avoid new and off-the-plan properties, which generally attract a premium price tag.

I also look for properties with a high Land to Asset ratio – but remember apartments have an attributable land value underneath them

2. Buy a property in a location that outperforms the averages

house property

In other words in an area that has a long, proven history of strong capital growth and one that is likely to continue to outperform the averages, this is largely because of the demographics in the area and the future economic prospects for the area.

These suburbs tend to be those where a large number of owner-occupiers desire to live in the area, because of the lifestyle choices they offer.

I look for suburbs where wages (and therefore disposable income) are increasing above average.

This translates to being an area where locals are able to and prepared to pay a premium price to live there, putting a financial floor under your investment property.

3. Buy a property with a twist

An investment must have something unique, special, different, or scarce – some ‘X-factor’ that makes it stand out from its neighbours – in order to land on my shortlist.

4. Buy a property where you can manufacture capital growth

An ideal investment is one in which you can manufacture capital growth through refurbishment, renovations, or redevelopment.

READ MORE: 6 tips for choosing the right investment property

About Michael Yardney
Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He’s once again been voted Australia’s leading property investment adviser and one of Australia’s 50 most influential Thought Leaders. His opinions are regularly featured in the media.

Leave a Reply

Your email address will not be published. Required fields are marked *