Melbourne’s softer price growth compared with other capitals has more to do with how much the city has built than with how hard it has taxed property, according to Ray White chief economist Nerida Conisbee (pictured). For mortgage brokers, that distinction helps explain why Victoria looks relatively affordable on prices but tougher on rents.
“Melbourne’s affordability hasn’t been created by taxes; it has been built,” Conisbee said.
Over an extended period, Victoria has added a larger share of new housing than any other state. Around 30% of all new dwellings constructed nationally over the past decade have been in Victoria, while the state has accounted for about 27% of population growth over the same time. That sustained building pipeline has limited how far prices and mortgage‑rate‑driven repayments have stretched would‑be buyers’ borrowing capacity relative to other capitals.
“The impact of that supply is clear in the data,” Conisbee said.
Melbourne has recorded the lowest house price growth of any major capital over the past five years, alongside a smaller lift in values than markets such as Brisbane, Perth, and Adelaide.
However, tax changes aimed at property investors have not created affordability across the board. Instead, they have reduced the pool of rental homes and shifted where the pressure shows up.
Rental bonds fell by more than 20,000 between mid‑2023 and mid‑2024, signalling fewer investment properties. As a result, owner‑occupiers have benefited from slower capital growth, while tenants have borne the brunt through tighter vacancies and stronger rent increases.
“In most cities, housing pressure has shown up in prices. In Melbourne, it has shown up in rents,” Conisbee said.
Fresh SQM Research figures underline how tight conditions have become, with Australia’s national residential vacancy rate falling to just 1% in March and Melbourne’s vacancy rate edging down to 1.4%, as advertised rents continue to climb across most capitals.
For brokers, that split means some clients may see more approachable entry prices, but others – particularly renters trying to save a deposit – are contending with higher living costs that can erode buffers and delay purchase plans.
Conisbee cautions that importing Victoria’s investor tax settings into already supply‑constrained states such as Queensland, Western Australia, and South Australia risks amplifying rental stress without delivering Melbourne‑style price outcomes.
Over time, there is also a danger that rising costs, weaker business confidence, and heavier taxes will slow Victoria’s construction pipeline, undermining the very supply advantage that has supported relative affordability.
Nationally, recent ABS data show completions fell 1.7% in the December quarter to 43,536 dwellings, leaving Australia about 77,500 homes behind the National Housing Accord’s 1.2‑million target just 18 months into the five‑year plan – a warning sign for any state relying on future building to keep a lid on prices.
“The lesson is simple: if you want better housing outcomes, you have to build,” Conisbee said.
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