Melbourne’s property market is regaining momentum, with a steady resurgence in investor demand signalling renewed confidence in the city’s long-term fundamentals.

After several years of softer sentiment and price correction, confidence is returning. Investors are once again active in Melbourne’s market, attracted by improved affordability, population growth and a rental sector that remains under pressure.

Investor numbers are up

The latest Australian Bureau of Statistics (ABS) lending indicators revealed a 5% increase in investor loans in Victoria between June 2024 and June 2025.

This was the highest year-on-year growth amongst the mainland states: 

  • Victoria up 5.2% 
  • South Australia up 1.7%
  • New South Wales up 1.2%
  • Queensland up 0.9%
  • Western Australia down 6.2%

As the graph shows, Victoria’s investor numbers have steadily increased over the last two years following a sudden decline between 2021 and 2023.

Affordability is attracting investors back

One of the key drivers behind this rebound is Melbourne’s relative affordability. Over the past two years, property prices have declined, creating opportunities for investors who may have been priced out during the market’s peak.

According to Cotality, Melbourne’s median dwelling value was $805,880 in September 2025. While this was up 1.9% from the same time last year, it remained 2.7% below its previous peak in March 2022. And, as the table shows, this is also lower than several other capitals.

This has reopened the market to investors who were previously sidelined. Properties that were once considered expensive now offer potential for long-term capital growth, particularly as the market stabilises and begins its gradual recovery.

Population growth is underpinning demand

Melbourne’s strong population growth is another factor supporting investor interest. According to the ABS, Victoria’s population increased by 1.8% between the March quarters of 2024 and 2025. This resulted in an additional 124,600 people over that period, which was the highest number among all the states.

Of this growth, a significant 74.7% came from net overseas migration, including the return of international students and skilled workers following the pandemic.

This influx of residents creates ongoing demand for housing, particularly in inner and middle-ring suburbs where accessibility and amenities are in high demand.

Investors recognise that population-driven demand often translates into capital growth over time, making Melbourne a compelling market. 

Tightening rental market is boosting returns

The rental market in Melbourne is also tightening, another key factor motivating investors to return to the city. Vacancy rates remain low, sitting at 1.8% in August 2025, according to SQM Research. Although this was slightly higher than the same time in 2024 (1.6%), it remains below what the Real Estate Institute of Australia considers a balanced rental market (3%).

At the same time, weekly asking rental rates continued to rise, up 2.9% between August 2024 and August 2025, according to SQM Research.

Climbing rental rates boost rental yields, while low vacancy rates give investors confidence in their ability to place tenants quickly. For investors, this environment offers the potential for both immediate cash flow and longer-term gains.

Looking ahead

While caution is still warranted – interest rates, economic conditions, and policy changes can all impact investor sentiment – the current indicators point to a market increasingly favourable for those looking to invest in Melbourne. Price corrections have improved affordability, population growth supports sustained housing demand, and tight rental conditions underpin strong cash flow potential.

Notably, capital growth also appears to be on the horizon again. After two years of price declines, recent data shows that Melbourne’s property values have begun to grow again.

For investors, a property investment strategist will help you assess the market carefully, identify high-demand suburbs and use data-driven insights to make informed decisions. As Melbourne’s property market strengthens, investors guided by strategy and clarity will be best positioned to capitalise on the next phase of growth.

Looking to invest strategically in Melbourne’s recovery market? 

At SAFORE, we help investors navigate changing markets with clarity, cutting through the noise to uncover real opportunities. With a strategy-first approach, we help you strike a balance between cash flow and sustainable long-term growth. Call us on 1300 69 77 67 or click here to book your strategy session now.