Melbourne Becomes Australia's Most Affordable Big City

Melbourne just flipped the script on Australia's housing affordability crisis, and first home buyers are finally catching a break.

Once the country's second most expensive city, Melbourne has become Australia's most affordable major capital after housing prices grew a modest 15.5% over five years. Compare that to Brisbane, Adelaide, and Perth, where prices skyrocketed by 80 to 90 percent during the same period.

The numbers tell a hopeful story. Melbourne's median house price now sits around $980,000, a full $600,000 lower than Sydney. The gap between these two cities hasn't been this wide since 1999.

First home buyers are seizing the moment. They now make up 27% of all property demand across Victoria, well above the national average. While investors pulled back due to tax changes and tighter regulations, younger buyers stepped in to fill the gap.

Renters are benefiting too. Melbourne's rents increased just 2.5% in 2025, compared to a national average of 5.2%. Some cities like Darwin saw rent hikes as high as 7.6%, making Melbourne's modest growth feel like a win.

Tim Lawless from property analytics firm Cotality says multiple factors created this opportunity. Years of strong housing construction, combined with slower population growth from interstate migration, helped keep prices in check. When investors began leaving the market in 2023, it opened doors that had been locked for years.

The state government's 2023 budget introduced higher land taxes and greater surcharges for absentee owners. Data shows Victoria lost about 16,500 rental properties in the first year alone. While some property groups worry about reduced investment, the immediate effect has been increased affordability for people trying to buy their first home.

The Bright Side

Melbourne's slower price growth isn't a sign of economic weakness. It's proof that deliberate policy choices and steady housing supply can create breathing room in markets that elsewhere feel impossible to enter. The city is showing Australia that runaway price growth isn't inevitable.

Property experts expect Melbourne's housing market to remain stable through 2026. Interest rates may hold steady or rise slightly, but the gap between Melbourne and other capitals will likely persist.

For thousands of first home buyers, Melbourne's transformation from unaffordable to accessible represents more than market statistics. It's the difference between renting forever and building equity, between watching from the sidelines and finally getting in the game.