Following the Reserve Bank of Australia’s first interest rate cut in four years, buyers quickly moved from being cautious to confident, and it’s starting to show in the numbers.
And nowhere is the turnaround more evident than Melbourne, where the inner-city market is finally making a comeback.
House prices in inner Melbourne have jumped 3.6% in the past three months, while unit prices are up 5.9%, making it the fastest-growing region for both asset classes nationwide.
After years of trailing the rest of the country, Melbourne’s affordability is now starting to attract buyers and investors back to the market. With prices still lower than Brisbane, Adelaide, and even Perth in some pockets, it’s a market that’s offering great value particularly close to the CBD.
According to PropTrack, Melbourne has “underperformed the rest of the country so much” that many now see it as a value play. And the data backs that up. Confidence is improving, sentiment shows more Victorians expect prices to rise, and investors who were once put off by taxes and increased compliance costs are beginning to re-enter the market.
Markets often move before the headlines do and by the time everyone agrees prices are rising, the best buying is already behind you.
On the ground, there is already growing evidence that Melbourne is starting to move. Agents are reporting that properties are selling well above their guide prices. I’ve been talking about this for a few months now, and it is clear that momentum is rising.
And it’s not just Melbourne. Townsville, Darwin, and the Gold Coast have all posted strong quarterly gains. Townsville, in particular, has recorded 21.86% house price growth over the past year and nearly 24% for units, which is the highest in the country. High rental yields and tight supply continue to attract investor interest in the north, but that pace of growth may be starting to cool.
Darwin, meanwhile, is in the early stages of what could be a longer-term recovery. It’s seen prices rise 3.3% for houses and 2.2% for units over the past three months, driven by undersupply and a large shortfall in new construction. With yields still higher than any other capital, it’s a good option for yield-focused investors.
The bigger picture here is sentiment. What began as a slow change following February’s rate cut is now taking hold. Economists at the big banks, including Westpac and ANZ, are increasingly forecasting more cuts ahead, potentially as soon as the next RBA meeting and buyers are acting accordingly.
As we’ve talked about previously, rate cuts improve borrowing capacity, but massively impact sentiment. They create a sense that things have bottomed out and that the worst is behind us. And that shift in mindset is often what triggers a wave of new activity. That’s exactly what we’re seeing now.
But as much as confidence is rising, affordability is still a big factor. The market is finding its footing, and not taking off in a frenzy. That’s a good thing. It creates an opportunity for buyers who understand the fundamentals and are prepared to act now.
Not every market is moving the same way. Townsville might be slowing. Perth, after two years of outperformance, is showing signs of fatigue. But that’s why it’s so important to know the market you’re buying into. Some areas grow in long, compounding cycles. Others run. You can build wealth in any market. But you do need to buy the right properties at the right time in the cycle.