Melbourne’s Property Market Booms: Population Surge, Soaring Prices!

Did you know that Melbourne now boasts a population of 5.8 million, with the entire state of Victoria reaching 6.8 million? In the year leading up to June 2023, Victoria experienced significant population growth.

Why? On one hand, interstate and international migrants have been flocking here, while on the other hand, fewer people are leaving Victoria compared to other states. In other regions, although many arrive, many also leave. However, in Victoria, more people are coming than leaving, leading to a rapid population increase. Let’s take a look at the annual population changes across the states.

来源：ABS 数据

Opportunities and Challenges Amid Population Surge

The Victorian government has outlined a business plan aiming to increase Melbourne’s population to 8 million by 2050, with the state’s total population reaching approximately 10 million. This means that over the next 30 years, Melbourne will need an additional 1.5 million homes, including 530,000 detached houses, 480,000 apartments, and 560,000 townhouses. While this demand growth may translate into sustained strong price increases—good news for investors—infrastructure will struggle to keep up.

Most notably, Melbourne’s public transport system is struggling to meet the growing demand, leading to overcrowding, delays, and other issues. City roads are also becoming increasingly congested, making travel more difficult.

To address these challenges, the Victorian government has committed to significant investments in public transport infrastructure. For example, the Metro Tunnel project will create a new underground rail line through the central business district, while the Suburban Rail Loop project will establish a new orbital rail line connecting Melbourne’s suburbs. These projects will help alleviate congestion on Melbourne’s roads and public transport systems, providing much-needed convenience for commuters.

Local governments also plan to invest in the city’s sustainable infrastructure and practices, and are seeking to develop new areas in surrounding suburbs to accommodate the impending population growth.

Despite the Victorian government’s Housing Statement, which sets an ambitious target of building 800,000 homes in Victoria over the next decade, the number of homes under construction in the state has declined over the past 12 months. According to the Australian Bureau of Statistics, there are currently 68,100 homes under construction in Victoria, a 6% decrease from the record set 12 months ago, primarily due to a slowdown in high-density apartment developments. The number of new homes completed in Victoria in 2024 may reach a 10-year low. Since the COVID-19 pandemic, construction costs have risen by 40%, and financing costs have also increased. The supply of new homes is likely to continue declining in the coming years, with starts dropping to the lowest level since 2014.

House Price Increases Outpace Average Wages

Overall, Melbourne’s house prices have risen by only 1.33% over the past year, a relatively modest increase. However, in inner-city suburbs like Toorak and South Yarra, price increases have still outpaced average wages, rising by $237,486 and $136,311, respectively. Meanwhile, in the eastern suburbs of Canterbury, Balwyn, and Surrey Hills, prices have increased by $160,638, $156,400, and $125,312, respectively. In Wheelers Hill, Park Orchards, Lysterfield, and Doncaster East, prices have risen by $115,706, $103,194, $101,332, and $99,385 over the past year, all exceeding the average Australian wage.

Melbourne Property Market - 2025 Forecast

A deeper dive into the data reveals that some properties in Melbourne are performing far better than others. It is indeed a city of contrasts—some properties excel, while others underperform. However, the expert consensus is that strong population growth and tight supply will continue to drive price increases as the property cycle enters its next phase.

Here are the latest forecasts from Dr. Andrew Wilson, Chief Economist at My Housing Market:

From the forecasts, it is evident that while Melbourne’s property market lags behind Sydney and Brisbane, there are clear signs that it will continue its upward trend.

In summary, Melbourne’s property market is set to be driven by population growth and housing demand in the coming years, showcasing strong growth potential. For investors, this is undoubtedly an era full of opportunities. However, when making investment decisions, it is essential to consider market segmentation and infrastructure pressures, choosing property projects that align with your risk tolerance and investment goals. Additionally, government initiatives in infrastructure development and housing supply will significantly impact the market and are worth ongoing attention.