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Melbourne’s Property Market Lost Ground While Other Capitals Surged

A Comparative Analysis of Australian Major Capital City Residential Property Markets (2022–2026)

Prepared by Property Investors Council of Australia | April 2026

Executive Summary

Melbourne is the worst-performing major Australian property market since January 2022, delivering just 3.5% cumulative dwelling value growth through December 2025, while Perth surged 77%, Adelaide 54%, Brisbane 47%, and Sydney **16%**¹.

The gap has continued to widen into early 2026, with Melbourne the only capital recording negative quarterly growth in Q1 2026 (–0.6%) while Perth added **7.3%**².

This divergence represents the most dramatic inter-capital performance split in modern Australian property history. A confluence of punitive state taxation, investor exodus, COVID-era scarring, and outside of Government spending, weak economic fundamentals created a negative feedback loop in Melbourne.

By contrast, other capitals benefited from stronger private sector economies, interstate migration, and more favourable property policy settings.

Conservatively, this underperformance has cost Melbourne property owners between $98,000 and $590,000 in unrealised gains, relative to other capital city growth trajectories.

1. From Second-Most Expensive to Sixth: The Price Data

The Cotality (formerly CoreLogic) Hedonic Home Value Index reveals Melbourne’s divergence from the national trend. Between January 2022 and December 2025, national dwelling values rose 25.5%, while Melbourne managed just 3.5%, and remains the only capital city that has not recovered its early-2022 peak³.

Cumulative dwelling value growth (Jan 2022 – Dec 2025)

Melbourne’s trajectory was uniquely weak. It fell 8.1% in 2022, recovered +3.5% in 2023, declined again in 2024 (–3.0%), and saw only modest growth in 2025⁴.

As of March 2026, Melbourne’s median dwelling value of $828,249 remains 1.3% below its March 2022 peak⁵.

Melbourne has dropped from the second-most expensive capital to sixth, overtaken by Brisbane, Perth, Adelaide, and Canberra.

2. Victoria’s Economy Has Underperformed

Property markets reflect economic fundamentals, and Victoria has lagged across multiple indicators:

• Gross State Product: 1.1%–1.5% growth vs stronger interstate performance⁷
• Per capita GSP: –0.8% decline
• Household income: ~10% below national average⁸
• Unemployment: 4.7% (highest mainland state)⁹
• Wage growth: 3.2% (lowest major state)¹⁰
• State debt: projected to reach $187 billion by 2028¹³

This fiscal position has driven increased reliance on property taxation.

3. Population Flows Have Reshaped Demand

Only Queensland and Western Australia have maintained strong net interstate migration gains, while Victoria has remained broadly neutral¹⁶.

The composition of growth is critical:

• Victoria’s growth is 71% driven by overseas migration
• Queensland’s growth includes higher interstate migration (home buyers with equity)

At a city level:

• Melbourne: +105,000 population but –8,600 internal migration
• Brisbane and Perth: strong population growth with positive internal migration²⁰

Overseas migration has also declined significantly since its peak, disproportionately impacting Victoria²¹.

4. Policy Settings Have Impacted Investor Confidence

Victoria introduced significant property tax changes:

• Land tax threshold reduced from $300,000 to $50,000
• Additional levies and increased marginal rates
• Expansion of vacant land tax
• Short-stay accommodation levy
• 150+ rental reforms

No other state combined taxation increases with regulatory tightening at this scale.

Impact:

• 22% of Victorian investors sold property vs 16.7% nationally
• ~4,900 additional investment properties sold
• ~22,000 fewer rental bonds
• Global investment declined from $10B to $5B (–53%)²⁷

5. Seven Reinforcing Factors

Melbourne’s underperformance is driven by multiple interacting factors:

1. Higher housing supply relative to demand
2. Looser rental market (higher vacancy, lower rental growth)
3. COVID-era impacts and prolonged lockdowns
4. Weak CBD recovery and office vacancy
5. Interest rate sensitivity during weak sentiment
6. Economic underperformance
7. Rising state debt and taxation

6. Why Melbourne Fell Behind

Melbourne’s performance reflects a compounding effect:

• Demand weakened post-COVID
• Policy changes reduced investor activity
• Capital shifted to stronger markets
• Higher listings increased buyer leverage
• Negative sentiment reinforced slower growth

Meanwhile, competing markets benefited from:

• Supply constraints
• Strong migration
• Stronger economies
• Favourable policy settings

7. The Cost of Underperformance

Melbourne’s actual growth:

• $28,236 per dwelling (+3.5%)

If Melbourne matched other cities:

Even compared to Sydney, Melbourne owners have forgone nearly $100,000 per dwelling.

8. Conclusion

Approximately 70% of Australians own residential property, and housing represents 55.8% of household wealth.

When policy settings impact property markets, the consequences extend far beyond prices — affecting financial security and long-term wealth.

For Melbourne property owners, the scale of unrealised gains relative to other cities is substantial and, at current levels, life-altering.

References

¹ Cotality Hedonic Home Value Index, Jan 2022 – Dec 2025
² Cotality HVI Report, April 2026
³ Property Update – Median Property Prices
⁴ CoreLogic Housing Data Reports
⁵ Cotality Housing Market Analysis
⁷ ABS State Accounts 2024–25
⁸ AFR Economic Analysis
⁹ ABS Labour Force Data
¹⁰ ABS Wage Price Index
¹³ UNSW BusinessThink Report
¹⁶ ABS Regional Population Data
²⁰ ABS Population Data
²¹ Centre for Population Statement
²⁷ PIPA Survey, Cotality & Market Data

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