Inner Melbourne Leads National Property Price Growth Following Interest Rate Cut

Following the Reserve Bank of Australia's (RBA) pivotal interest rate cut in February 2025, the Australian property market has witnessed a notable resurgence, with inner Melbourne emerging as the unexpected leader in both house and unit price growth. This development marks a significant shift in market dynamics, particularly for a city that had previously lagged behind other capitals in terms of property value appreciation.

Key Growth Figures and Market Leaders

According to recent data from PropTrack, inner Melbourne house prices have increased by 3.6%, while unit prices have surged by 5.9% since February. These figures represent the fastest quarterly growth for both property types across all Australian markets.

Other notable performers include:

• Darwin: House prices rose by 3.3%, reversing a prolonged period of underperformance.

• Gold Coast: House prices climbed nearly 3%, continuing its trend as a lifestyle-driven hotspot.

Drivers Behind Melbourne’s Resurgence

REA Group senior economist Anne Flaherty attributes Melbourne’s renewed appeal to its relative affordability. After years of stagnation, Melbourne’s property prices are now lower than those in Brisbane and Adelaide, and are approaching parity with Perth. This price positioning has made Melbourne increasingly attractive to both owner-occupiers and investors seeking value in a recovering market.

“Home prices have underperformed the rest of the country so much and are now cheaper than Brisbane, Adelaide and on track to be cheaper than Perth,” Flaherty noted. “That’s driving a lot of people to see value in the Melbourne market.”

The February rate cut has acted as a catalyst for buyer confidence, with some regions experiencing price increases of up to 6% in just three months. This renewed optimism is reflected in REA Group’s Residential Audience Pulse survey, which found that 40% of Victorian buyers believe it is a good time to purchase property—the highest sentiment level nationwide.

Annual Growth Trends and Investment Hotspots

While Melbourne leads short-term growth, Queensland regions dominate annual performance. Townsville stands out with:

• House prices up nearly 22% year-on-year

• Unit prices up 23.6%

Darwin also continues to attract investors due to its exceptionally high rental yields, driven by a combination of low median property prices and relatively high rents. This yield advantage positions Darwin as a compelling option for income-focused investors.

“From an investing perspective, Darwin offers very high yields,” Flaherty said. “The median price of a home in Darwin is relatively low but the rents are relatively high.”

However, Flaherty cautions that Townsville’s growth rate has begun to decelerate, suggesting a potential shift in investor focus toward emerging markets like Melbourne and Darwin.

Additional Insights and Market Implications

• Migration and lifestyle shifts continue to influence regional markets, with coastal and lifestyle destinations maintaining strong demand.

• Supply constraints in inner-city areas, particularly in Melbourne, may further accelerate price growth as demand intensifies.

• Speculation around future rate cuts is fueling expectations of continued upward momentum in property values over the next 12 months.

Conclusion: A Market Reawakening

The Australian property market is undergoing a dynamic transformation, with inner Melbourne’s resurgence signaling a broader recovery fueled by monetary policy shifts and changing buyer sentiment. As affordability, rental yields, and regional performance continue to shape investment strategies, stakeholders must remain agile and informed.

Melbourne’s current trajectory suggests it may reclaim its position as a national property leader, offering both short-term growth and long-term value. With further rate adjustments potentially on the horizon, the next 12 months could prove pivotal for buyers, investors, and policymakers alike.