Why Melbourne
    Represents Australia’s
    Clearest Property
    Value Case

REAL INSIGHTS

Melbourne is now Australia’s most mispriced major property market

After several years of underperformance, Melbourne has become Australia’s most mispriced major residential market when compared with other states. Purchase prices have lagged materially, rental costs remain the lowest of any mainland capital, and yet population growth, infrastructure investment and employment depth remain intact.

This combination is not normal, and it is unlikely to persist.

A pricing gap that fundamentals no longer justify

Melbourne’s median dwelling values now sit at a significant discount to Sydney and Brisbane, despite offering comparable economic scale, deeper labour markets and superior infrastructure density. On most objective measures, income diversity, transport connectivity, education concentration, Melbourne should not be priced where it is today.

The divergence is no longer cyclical noise. It reflects sentiment fatigue rather than structural weakness. Markets do not remain misaligned with fundamentals indefinitely, particularly when supply is constrained and demand is compounding.

Rentals at national lows, an unsustainable position

Rental pricing in Melbourne is now the lowest among Australia’s major capital cities. This is an abnormal outcome for a city absorbing strong population inflows and experiencing historically tight vacancy rates. In comparable global cities, such conditions typically result in rapid rental repricing.

The implication is straightforward: rental growth pressure is not speculative, it is mathematically embedded. Investors entering at current yields are doing so before that adjustment has occurred.

 

 

Selectivity is increasing, not demand evaporating

Demand has not disappeared; it has become more discriminating. Tenants and buyers are prioritising access to transport, employment nodes and education precincts. Locations connected to the Metro Tunnel, inner-CBD fringe corridors and major universities are absorbing demand faster than new supply can be delivered.

Construction pipelines remain restricted, particularly for high-quality, well-located dwellings. This supply constraint amplifies both rental tension and future capital re-rating.

 

 

Where capital is moving first

The inner-city fringe remains the clearest expression of this imbalance. North Melbourne, West Melbourne and Southbank combine discounted entry pricing with infrastructure scale and long-term demand resilience. These areas consistently retain tenants through downturns and benefit disproportionately when capital flows return.

Their advantages are structural, not cyclical — and difficult to replicate elsewhere.

 

 

The reversion trade

Melbourne’s investment case into 2026 is not driven by momentum or narrative optimism. It is driven by relative value. Prices and rents are out of alignment with population growth, infrastructure delivery and national comparables.

History shows that when such gaps emerge, they eventually close. Investors who move before that reversion occurs are positioned for both capital uplift and outsized rental growth.

Melbourne is approaching that phase now, while pricing still reflects caution rather than competition.

 

 

The opportunity is not whether Melbourne will reprice, it is whether investors position before it does. The window is open, but it will not remain so indefinitely.

 

 

 

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