Is Melbourne poised to see an early spring revival?

It is well known that spring marks an increase in real estate activity and demand, while during the winter months we see lower sales volumes and buyer interest.

But what we are currently seeing in Melbourne is the market beginning to show signs that the spring buying season has started when looking at the results from late June 2025.

What has sparked Melbourne property activity?

Let’s start with the benefits Melbourne has seen from the two official Reserve Bank rate cuts - 0.25 percentage points in February and again in May.

This has significantly improved borrowing capacity for buyers and investors and has sparked renewed confidence in the markets.

It is expected that when mortgage rates edge down toward the mid‑5 per cent region by early 2026, demand will have really ramped up.

Auction clearance rates in Melbourne have climbed to 72 per cent (61 per cent this same time last year), signalling a competitive environment typically seen later in the cycle and in spring.

Why are property investors interested?

For the past few years, Melbourne has lagged behind the other major capitals.

However, since we’ve seen the rates easing in early 2025, investors are pivoting back to Melbourne’s inner and middle suburbs where rental markets are tightening, vacancy rates have fallen to around 1 per cent, and supply is limited.

Lenders are reporting investment lending growth currently is outpacing owner‑occupier borrowing across the country.

This reinforces that investors appreciate the resilience of Australian property markets and are flexible with their home ownership, with more and more young Australians turning to rentvesting, or buying their first property as an investment rather than a home.

Seasonal trends in Melbourne’s market

Typically, spring sparks buyer activity with prices peaking from September to November, as families aim to settle before summer, Christmas and the new school year.

Spring will bring a higher number of listings, auctions become more frequent, and clearance rates climb steadily.

In 2025, we are starting to see all these typical springtime markers come early for Melbourne and this is potentially an insight into what is to come for Melbourne’s spring selling season.

Why 2025 is different

Rate cuts: Falling interest rates have driven a borrowing rebound. With increased borrowing power post interest rate cuts, buyers who were previously sidelined have returned early in the year, determined to get into the market whether it be a home or investment property.

Tight rental conditions: With Melbourne’s vacancy rates tightening, this is prompting investor urgency in inner/middle rings where rental demand is strongest. The national vacancy rate sits at around 1.3 per cent at end of June 2025, making renting conditions tough across all states. Melbourne is around 1.8 per cent, which is still considered very low.

Stock shortages: New listings are down by around 7 per cent year‑on‑year, keeping pressure on prices despite restrained supply.

Not all Melbourne suburbs are equal

Inner vs outer suburbs

Inner and middle suburbs such as Yarraville, Carlton, Fitzroy, Richmond and the City of Brimbank are currently attracting the most buyer demand for both investors and owner-occupiers.

Investors are brought in for the strong rental yields and owner-occupiers enjoy the various amenities, and transport connectivity making them highly desirable to young families.

Outer growth corridors (e.g., Melton, Wallan, Officer, Clyde North, Clyde) remain value‑oriented and attractive to some first‑home buyers and investors, but they come with trade‑offs: longer commute times, less established infrastructure and potential oversupply risk in some new estates. These suburbs provide a risky investment opportunity, but if you’re looking for a home you might find some good value for your money.

Oversupply issues

Invest with caution. Melbourne has been renowned for the oversupplied apartment towers, especially the off‑the‑plan developments that have been in abundance.

If there is an oversupply, this means your investment will take quite some time to increase in value.

If you’re buying an apartment, it is best to seek quality, boutique buildings that have a smaller number of apartments and are in well‑located precincts (e.g., Elsternwick, Glen Iris, Carlton) because these types of properties are more likely to perform.

Steer clear of apartment towers with high body corporate fees, poor designs or lack of owner‑occupier appeal, as this will hamper the growth of your investment.

Buyer beware

If you’re an investor looking to buy in Melbourne, it is important to understand the significant change in the tax free threshold for land tax (note, your home is excluded).

The annual levy based on the site value of all taxable Victorian land held as of 31 December, excluding your home, charitable land or farming land is:

• For 2025 assessments, the tax-free threshold has dropped dramatically:
  • Individuals: $50,000
  • Trusts: $25,000.
• Land tax progressive tax rates now apply. For instance:
  • $50,000–$100,000 = $500
  • up to $3 million-plus = up to 2.65 per cent above higher bands.
    
    
• New absentee owner surcharge: Higher taxes apply to foreign or overseas-based owners—starting from 4 per cent and climbing toward over 6 per cent for high-value properties.

Also, this is reviewed on your combined holdings. This is important, especially if you own multiple properties that will push you over the threshold.

You can mitigate this by diversifying your investments across states, or you might consider ownership structuring options (e.g. holding via trusts or companies).