Rate cuts and value lead to Melbourne property price rebound

Last month’s 0.25% rate cut by the Reserve Bank of Australia, improved consumer sentiment, and plenty of activity from bargain-hunting buyers and investors has led to property prices in Melbourne rebounding sharply. 

The latest monthly data from real estate analytics firms PropTrack and CoreLogic shows residential property in the Victorian capital bounced back from its recent slump in price and value in February 2025.

There was also a solid boost in Sydney during the month, reflecting our most expensive capital city property market’s sensitivity to interest rate movements.

PropTrack Home Price Index

REA Group’s PropTrack says national home prices lifted 0.40% in February to hit a new record and reverse the small price falls seen in recent months.

Across Australia, prices are now sitting 3.94% higher than a year ago.

Capital city markets also led the price bounce, lifting 0.45% in February. 

In contrast, regional areas recorded a 0.28% rise in prices.

PropTrack’s data shows Melbourne was the strongest performing of the 15 capital city and regional markets it measured in February, with prices lifting by a substantial 0.67%.

“February’s rate cut boosted borrowing capacities, and improving affordability and buyer confidence have driven renewed demand and price growth,” says PropTrack Senior Economist Eleanor Creagh.

“After a period of sustained higher interest rates, buyers who held off purchasing are re-entering the market.

“Auction clearance rates have strengthened, reflecting renewed competition.” 

Despite the bounce in February, Ms Creagh points out that prices in Melbourne are still 2.50% below their levels a year ago. 

“Price momentum has been weaker in Melbourne for much of the past five years, partly due to weaker economic conditions, greater buyer choice and higher property taxes,” she says.

Housing supply is also generally better in Melbourne.

“Additionally, construction activity in Victoria has aligned more closely with population growth over the past decade,” Ms Creagh says.

Melbourne’s great rival, Sydney, was the other star performer in February on PropTrack’s numbers.

Home prices in the harbour city lifted 0.50% in February to a new record high and are 2.66% above their levels a year ago.

“Market sentiment has improved now interest rates have started to move lower,” Eleanor Creagh says.

“As a result of the boost to purchasing power, price falls in Sydney have reversed.

“The improvement to affordability and buyer confidence has driven renewed demand and price growth,” she says.

PropTrack says growth has slowed in Perth (+0.02%), Adelaide (+0.33) and Brisbane (+0.29), in recent months. 

However, the mid-sized cities remain the strongest performing capitals over the past year, with prices up 13.12%, 11.91% and 10.21%, respectively.

CoreLogic Home Value Index

CoreLogic’s national Home Value Index rose 0.3% in February 2025, breaking what the firm describes as “the short and shallow downturn” that lasted just three months and dragged the national measure of home values 0.4% lower.

Every capital city and “rest-of-state region” measured by CoreLogic saw value gains, with the exception of Darwin (-0.1%) and Regional Victoria (0%).

The strongest performers were Melbourne and Hobart, both chalking up a 0.4% rise in values during February.

For Melbourne, the rise breaks a streak of ten consecutive months of falling home values. 

However, values in the Victorian capital remain 3.2% lower than 12 months ago, and Melbourne remains the sixth cheapest capital city on CoreLogic’s numbers, with a median dwelling value of $772,561. 

Sydney also saw a turnaround in its fortunes in February, with a 0.3% boost in values to record a median dwelling value of $1,186,459.

Growth was slower across the mid-sized capitals of Brisbane (+0.2%), Perth (+0.3%) and Adelaide (+0.3 %), a marked slowdown from the pace which has seen median values in those cities grow at an astonishing 9.7%, 14.3%, and 11.9% respectively over the past 12 months.

CoreLogic says the return to growth across Sydney and Melbourne is being driven by the more expensive end of the market, with upper quartile house values leading the monthly gains in both cities.

This section of the market has recently seen the sharpest declines.

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CoreLogic’s research director, Tim Lawless, says better market conditions in Sydney and Melbourne, in particular, have more to do with improved sentiment than any immediate improvement in borrowing capacity.

“Expectations of lower interest rates, which solidified in February, look to be flowing through to improved buyer sentiment,” he says.

“Along with the modest rise in values, we have also seen an improvement in auction clearance rates, which have risen back to around long-run average levels across the major auction markets.”

The take-out

The return of price and value growth to Melbourne’s property market was inevitable.

Despite its lackluster performance in recent years, Melbourne’s fundamentals remain sound.

It’s now Australia’s largest city, with strong population growth, particularly from overseas migration, a strong economic base and great housing affordability, especially when compared to Sydney, Brisbane and Canberra.

The latest data from PropTrack and CoreLogic underlines our long-held view at Freedom Property Investors that buyers should put aside negative media “noise” and consider buying in Melbourne, as property in the southern city is currently still seriously undervalued when compared to long-term historical trends.