Melbourne's Value Gap

Something has happened to the Australian property market that would have sounded implausible five years ago. Melbourne now has the lowest median house price of the four largest capital cities. Not the second highest, where it sat for most of the past two decades. The lowest.

Brisbane has overtaken it. Perth has overtaken it. Adelaide is within reach. For a city that adds more people every year than any other in the country, that is a genuinely strange position, and it is worth understanding properly rather than reaching for the obvious conclusion.

The numbers, as at 31 May 2026

The gap is not marginal. A buyer in Melbourne is looking at a median roughly $313,000 below Brisbane and $238,000 below Perth. Against Sydney the gap is $469,000, which is more than the entire median price of a house in some regional centres.

Now the part most commentary skips

It would be easy to write the next paragraph as "and therefore Melbourne is due to catch up". We are not going to, because that is not something anyone can know, and a property firm implying otherwise should be read with suspicion.

Melbourne is cheap for reasons. Victoria has increased property taxes on investors, and from 2026 the vacant residential land tax applies to residential-zoned land across the entire state rather than a defined inner-Melbourne boundary. Land tax rates scale progressively. A number of investors have responded by selling, particularly at the more affordable end. That is a real, ongoing headwind, and it is a large part of why Melbourne rose half a per cent while Perth rose more than a quarter.

Anyone presenting Melbourne's affordability without that context is giving you half the picture.

What sits on the other side of the ledger

Population

Victoria recorded the largest increase in people of any state, adding 123,507 over the period, and passed seven million residents. Greater Melbourne had the largest increase of any capital city at around 105,000. Net overseas migration accounted for the largest share of that growth.

Western Australia grew faster in percentage terms, at 2.2 per cent. But in absolute human beings needing somewhere to live, Victoria led the country.

Supply, which is the constraint

Against that demand, Victoria is not building enough.

• Dwelling approvals are about 13 per cent below the ten-year average, and completions about 9 per cent below.
• Melbourne apartment approvals fell to a near 20-year low, with 567 units approved in a recent quarter.
• Planning approvals take around 144 days, the slowest of any state in Australia.
• Construction costs are roughly 40 per cent above pre-pandemic levels, and labour is being absorbed by government infrastructure projects.

The rental market shows the consequence. Melbourne's vacancy rate has tightened to well under the three per cent generally considered balanced.

The things that do not appear in a price table

Melbourne retains what drew people to it in the first place: a university sector that attracts students from across the region and retains a meaningful share of them as skilled workers, a health and research precinct of genuine international standing, and the cultural and sporting infrastructure that keeps turning up in liveability rankings. Those are slow-moving assets. They do not move a median in a quarter. They are a large part of why people keep arriving.

So what does it actually mean?

Here is the honest framing. Melbourne currently has:

• the strongest absolute population growth in the country
• the weakest recent price growth of the major capitals
• supply running below its own ten-year average
• a tax settings environment that has actively discouraged investors

Those four facts are not in dispute. What happens next is.

One reading is that demand and constrained supply eventually reassert themselves and the gap narrows. Another is that the tax settings keep a lid on Melbourne for as long as they remain, and the gap persists or widens. Both are arguable. We do not know which is right, and neither does anyone quoting you a five-year forecast.

What we would say is this: the questions worth asking have changed. In a market rising 25 per cent a year, almost anything works and timing dominates. In a flat market with constrained supply, what you buy matters far more than when. Asset selection, contract terms, the developer's delivery record and your own holding period do the work that momentum used to do.

Where this leaves an off-the-plan buyer

Two things follow specifically for off-the-plan, and they pull in opposite directions.

Fewer approvals means less new stock reaching the market in the years ahead. Apartment approvals at a 20-year low are approvals that will not become completions in 2028 and 2029.

Fewer approvals also means fewer projects, and more concentration risk. When a market thins, the gap between a developer who delivers and one who does not becomes the single most important variable in the purchase. Construction costs up 40 per cent and a 144-day approval queue are not abstractions. They are the conditions under which your building either gets finished on time or does not.

That is the part where the work is. Not in predicting the median.

How Nobilis fits

We introduce buyers to off-the-plan and off-market projects from a curated group of developers, through the licensed estate agents appointed to sell them. Our advisory costs you nothing.

In a market like this one, the value is not access to more listings. It is narrowing the field to projects that stand a good chance of being delivered as described, understanding what a given contract actually commits you to, making sure the right questions reach your conveyancer before you sign, and being honest when something does not stack up for your circumstances.

We have told buyers to wait, to look somewhere else, and to walk away from projects entirely. In a flat market that is worth more than it is in a rising one.

General information only, current at the date shown. This article is market commentary and is not a forecast, a valuation, or a recommendation to buy, sell or hold any property. Nobilis Property Group provides property advisory services and does not provide financial, investment, taxation, legal or credit advice. Obtain advice from appropriately licensed professionals before making any property decision.