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Melbourne affordable market defies national data as listings drop, competition lifts: ‘It’s starting’
Melbourne’s property recovery is expected to favour first home buyers and investors, with the sub-$1 million market poised for growth while higher-end properties continue to struggle.
Melbourne’s affordable housing market could be on the cusp of a price rebound, with one property expert predicting that renewed investor interest will drive values higher from the second quarter of 2027.
Buyers Edge Property director Jason Titus said the city’s entry-level market had already bottomed out, with tightening supply and stronger buyer demand signalling a shift in market conditions.
His comments came as Domain’s latest auction data showed Melbourne’s clearance rate for the week ending 25 October was 56 per cent, remaining largely unchanged from May and bucking the national trend.
Overall, the city has seen new listing volumes drop at least 14.3 per cent year on year, with fewer homes going to market. The drop in listings has resulted in increased buyer competition, lifting demand for affordable markets.
“In the investor and first home buyer market, it’s already hit the turning point and it’s starting. It hasn’t quite played out in the pricing yet, but there are just precursors for growth,” Titus told REB.
He said affordable properties had been selling the most successfully at auctions, while higher-end, owner-occupier homes were struggling to transact, weighing on the overall clearance rate.
Additionally, Titus said entry-level markets with properties of $1 million or less were seeing higher proportions of dwellings selling above asking prices, signalling increased competition.
“If more properties are being sold below asking price, that’s a bad sign because there are more properties on the market, buyers have more choice and they would get the property below asking price,” he said.
According to Titus, growth had also been fuelled by established investors moving money out of interstate markets that had seen strong growth and into Melbourne’s affordable market.
“Stock levels in Perth in the last three months have skyrocketed because established property investors are moving their money out of Perth and into the affordable market into Victoria,” he said.
Aside from increased investor demand, Titus said falling supply would continue fuelling competition in entry-level markets.
He said that Stonnington, which had around 1,000 properties listed for sale during the second quarter of 2026, had since fallen to the low 800s.
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“If we’re sitting at 800 properties on the market right now in Stonnington, it’s pretty close to the bottom, whereas the top would’ve been around 1,000 this year,” he said.
He said the reduction from the earlier peak suggested the market was moving towards tighter supply, potentially giving buyers less choice and reducing their negotiating power, pushing prices upwards.
He said that as cheaper units rose in value, buyers may opt to pay slightly more for entry-level houses, increasing prices in the segment and eventually driving growth further up the market.
“Then all of a sudden, the three by one houses are no longer 700,000, they’re 900, 950, and now you’re stepping into the four bedroom, two bathroom houses,” he said.
On the other hand, Titus projected that higher-end markets for seasoned owner-occupiers won’t see significant price rises until the end of next 2027 or beyond.
He said properties worth $1.5 million or more had been struggling to find buyers, as purchasers continued to be restrained by rising interest rates and cost-of-living pressures.
“Let’s call it nine to 12 months because inflation isn’t going away – the Strait of Hormuz is not opening up anytime soon,” he said.
“Next year’s going to be pretty dirty when it comes to this type of stuff, but that’s not going to stop first home buyers coming into the market – it will stop the upgraders upgrading their properties from a $1.5 million property to a $2 million property,” he said.
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