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Just don’t expect a major boom any time soon.

“We’re seeing a clear uptick in buyer activity,” said Luke Assigal, Director of Melbourne’s Parley Property Advisory.

“The clearance rates are trending upwards, and we’re seeing more emotional buying decisions, which is typically a sign of growing confidence.

“The overall sentiment is cautiously optimistic,” he said.

The latest sales data backs it up.

Over the three months to 30 June, the median Melbourne dwelling value has grown by a modest 1.1 per cent, according to the latest data released by Cotality (formerly CoreLogic).

Given earlier losses, the median was down 0.4 per cent on a year earlier — Melbourne was the only capital city to record price falls for the year — yet the recent uptick suggests green-shoots are starting to form around Port Phillip Bay.

Dr Jenny Jia, Director of JL Property Buyers Agent, said Melbourne was now the most value-for-money property market nationwide.

“Sydney’s median house price now exceeds Melbourne’s by over 50 per cent – marking one of the largest prices differentials in the past 55 years,” she told Australian Property Investor Magazine.

“From a historical perspective, such disparities have consistently narrowed over time.”

Dr Jia said that since February the Melbourne market had seen a “clear upward trend.”

“This is particularly evident in the affordable and prestige segments, both of which have recorded notable growth,” she said.

“The mid-to-upper end of the market is also showing signs of recovery, although the momentum is not as pronounced as at the two ends of the spectrum.”

Matthew Hughes, Managing Director, Capital Property Advisory, said the Melbourne market was in a transitional phase, with the southern capital emerging from the doldrums.

“We’re seeing clear signs on the ground that the market has started to turn, in some areas more than others,” he said.

“While CoreLogic (now Cotality) and other datasets naturally lag, buyer enquiry levels, auction clearance rates, and time-on-market metrics are all tightening.

“This is particularly evident in the inner- and middle-ring suburbs, where supply is limited and demand is steadily returning,” Mr Hughes said.

Carly Susic, Director, Select Property Advocates, said the Melbourne market was attracting increased interest from interstate yet it remained inconsistent, with vendor expectations being unmet in some cases.

“The current Melbourne market is a bit patchy, we are seeing some competitive bidding at auctions, as well as some that are falling short of vendors’ expectations,” Ms Susic said.

“Good quality homes that are priced well are seeing competition but compromised and low grade properties or properties that are even slightly overpriced are being left behind by buyers.

“We have seen in recent months an increase in the investor market from interstate, mostly Sydney buyers that are now seeing Melbourne as good value, but we are still seeing a lot of local investors selling up their investment properties,” she said.

Ms Susic said the state of the Melbourne market varied widely depending on location and price point.

“The main strengths we are seeing is in the investment market and first home buyer market in the fringe suburbs where you can still buy a solid home on a full block of land around or under $1 million,” she said.

“I think buyers will remain a little cautious and price sensitive this year,” she said.

“It is hard to predict due to the global uncertainty, however, if we continue to see the investors coming back into the market, then we would expect it to continue to strengthen into 24 months from now.”

Rents starting to rise

According to Cotality, the median Melbourne house price is $947,611 and median price of an apartment is $617,395.

Over the 12 months to 30 June, house prices were unchanged, while the median apartment value fell 1.3 per cent. Nationally, property prices rose 3.4 per cent over the past year, and 0.6 per cent last month. Melbourne’s median dwelling value rose 0.5 per cent last month.

Despite those prices being low compared to other capitals, rents in the city have shown little growth, and Melbourne’s gross rental yield is 3.7 per cent, ahead of only Sydney (3.1 per cent), according to Cotality.

Over the past 12 months, Melbourne house rents grew by 0.7 per cent, the lowest of all capitals, and apartment rents grew by 1.8 per cent, the second lowest nationwide.

(Source: Cotality)

Yet rents were now starting to increase, according to Lynda McNeill, Director of Melbourne’s Inview Property Group.

“Rental returns are improving for the first time since the pandemic, which is a great sign for both landlords and investors,” she said.

Yet significant headwinds for investors remained.

“Tightening lending conditions and additional taxes, the introduction of minimum rental provider standards, and ongoing regulatory changes are adding complexity and compliance costs for landlords,” Ms McNeill said.

“All of this is happening while the broader housing crisis continues to put pressure on the market, especially in areas that are already struggling.”

Ms McNeill said she expected the market would continue at a steady pace.

“Over the next 12 to 24 months, Melbourne’s property market is expected to keep growing, albeit at a slower and steadier pace than we have seen in the past,” she said.

“We are unlikely to see the fast price jumps that happened after Covid or during previous interest rate cuts.

“Instead, growth is likely to be more gradual, with factors like affordability and government policies playing a bigger role.”

Mr Hughes was slightly more upbeat.

Melbourne would see modest but accelerating growth in values over the next 12 months, driven first by first home buyers and later by investors returning for rental yield, he said.

“The fundamentals are already in place: strong population growth, supply constraints, and improving sentiment as a result of rate cuts and the soon-to-be-introduced first home buyer scheme in January 2026.

“In 24 months, I believe Melbourne will be seen as the ‘comeback city’ of the Australian property market.”