Melbourne’s Comeback as Buyers Come Back

Welcome to Autumn! The real estate market continues to navigate a dynamic and complex landscape. With global trade and economic uncertainties looming large, particularly in China and the U.S., domestic housing show signs of recovery.

The global economy remains in flux due to the lingering effects of trade wars and policy shifts. President Trump’s trade agenda has heightened fears of stagflation, a mix of low growth and elevated inflation. While Australia is somewhat insulated from direct U.S. tariffs, the impact on China, our largest trading partner, is a critical variable. If China implements stimulus measures in response to U.S. policies, it could stabilise trade but faces constraints like high debt and oversupplied housing markets.

Interestingly, this global uncertainty has made Australia more attractive to investors. The RBA projects only a slight dip in economic activity, supported by a softer Aussie dollar. Meanwhile, consumer confidence has surged to a 3-year high, signalling optimism despite broader market concerns, especially in younger buyers. This renewed confidence could bolster activity, especially in Melbourne, where home values recently ended a 10-month decline.

Inflation management remains a top priority for the RBA, balancing employment growth and price stability. Australia’s inflation rate has eased, with trimmed mean inflation within the 2-3% target range. Jobs have also reached a record high, suggesting a robust labour market.

The RBA’s decision to cut interest rates has spurred optimism, particularly among first-home buyers and investors. Mortgage pre-approvals in Melbourne increased by 30% in the first 2 months. Lower borrowing costs are expected to keep buyer sentiment strong, even as overall economic growth remains subdued. This has already started in the first home buyer sector, and will lead into second and third home owners and investors.

Melbourne’s housing market is staging a recovery, buoyed by increased competition. Auction clearance rates remain above 70%, and home values in the city rose 0.4% last month. The modest interest rate cut has been pivotal, with rising buyer confidence and improved affordability driving activity.

The general consensus is house prices will rise nationally by 3.3% this year before accelerating to 6% in 2026. We expect a return to an 8% average within 2-3 years. Investors are taking note of strong rental growth and considering opportunities like build-to-rent.

For property owners, now is an opportune moment to expand portfolios, particularly in the regional sector where growth was stagnate. The recovery in Melbourne has also underpinned a national increase in home values, further encouraging investment. Established owners are leveraging equity to secure new purchases before increased competition heats up the market post-election.

While global uncertainties remain a headwind, the Melbourne property market’s recovery is slowly becoming evident. Consumer confidence, easing inflation, and supportive monetary policies are aligning to create favourable conditions for buyers and sellers alike.

As the housing market transitions toward a new growth phase, opportunities abound for those ready to act. Whether it’s securing a first home, upgrading, or investing in emerging sectors, the season ahead promises momentum and renewed optimism for the real estate sector.