It wasn\u2019t always like this. Back when Melbourne was crowned the second best city in 2016, it was also Australia\u2019s second most expensive. But Victoria has been delivering new housing, has increased taxes on secondary homes which discouraged some property investors, and the 2020 pandemic and subsequent lockdowns prompted some population outflows.<\/p>\n
\u201cIt\u2019s pretty much been evolving that way since about 2021 \u2026 when we started to see a lot of the disruption that really caused Melbourne to have quite a soft housing market,\u201d Lawless says. \u201cA lot of people left the state through the pandemic.\u201d<\/p>\n
And while people are returning \u2013 recent research by property advisory firm Charter Keck Cramer found that Victoria\u2019s population is expected to outgrow other states and territories over the next 25 years, adding about 1.3 million people in the decade from 2021 \u2013 the state\u2019s high debt burden and tax imposts on property investors are often cited as keeping the housing market from recovering strongly.<\/p>\n
\u201cIt is unprecedented in many ways that Melbourne would be so comparatively affordable relative to Sydney, let alone Perth, Adelaide and Brisbane,\u201d Lawless says. \u201cI mean, when you look at if you stack all the capital cities in a list and look at the median housing values, Melbourne comes in at number six now.\u201d<\/p>\n
But it also means buyers\u2019 money goes a lot further. Victoria is leading the nation when it comes to first home buyers, who can now purchase an entry-level unit at a lower price than five years ago, Domain data shows.<\/p>\n
First home buyers made up almost a third of owner-occupier lending in Victoria in the year to September, Australian Bureau of Statistics data shows, above the 10-year average and a higher share than in NSW.<\/p>\n
Separate Domain data shows an entry-level house price in Melbourne is $720,000, while the median price is $1,111,084 \u2013 still less than Sydney\u2019s entry house price of $1,150,000.<\/p>\n
Melbourne is also leading the country when it comes to rental affordability.<\/p>\n
While rents in all Australian capital cities are at record highs, for houses, they are lowest in Melbourne, at $580 a week.<\/p>\n
In contrast, Sydney\u2019s median asking rent for houses was $800, while Perth, Darwin and Canberra all commanded $700 for houses.<\/p>\n
\u201cRents in Melbourne, while still painfully high historically speaking \u2026 are still significantly lower than the other states,\u201d says Ashleigh Chang, an associate in Grattan\u2019s Housing and Economic Security Program. \u201cIt\u2019s a step in the right direction for Melbourne.\u201d<\/p>\n
Victoria\u2019s controversial investor tax regime has also helped Melbourne become one of Australia\u2019s most affordable major housing markets<\/a>.<\/p>\n Loading<\/p>\n The latest rental bond data shows 23,000 landlords have exited the market since mid-2023, following the investor tax rises announced in the May 2023 state budget, a trend analysts say has helped home buyers.<\/p>\n Independent economist Saul Eslake says while these taxes were initially imposed by the Victorian government as a revenue-raising measure, they have inadvertently helped Melbourne\u2019s housing affordability.<\/p>\n \u201cVictoria needed to raise more revenue or cut spending given the financial hole it is in \u2013 they were not intended as a housing policy measure,\u201d he says. \u201cBut they\u2019ve had the effect of discouraging investment in Victoria by property investors, and I would say that\u2019s a good thing.\u201d<\/p>\n Victoria has also built more homes than any other state, Eslake adds. \u201cMore dwellings have been completed in Victoria than NSW, despite NSW having 30 per cent more people.\u201d<\/p>\n For Chang, the real success of Melbourne (and Victoria) lies in its attention to housing supply. The state government has recently released all drafts for its 60 proposed activity centres<\/a>, mostly based around public transport hubs in inner and middle Melbourne suburbs.<\/p>\n