Melbourne’s Housing Market Stronger Than Headlines Suggest

The loudest voices in Melbourne’s property market have spent two years telling the same story: taxes too high, sentiment too low, capital heading elsewhere. But new research suggests that story, while not wrong, is incomplete—and that the poor sentiment may itself be one of the bigger obstacles to recovery for the state. Charter Keck Cramer national director of research Richard Temlett says it simply. “Negativity breeds negativity,” he tells The Urban Developer . “Look at the stats. It’s not all the worst in the world. We need to have some context.” Charter Keck Cramer’s February 2026 report, commissioned by the Urban Development Institute of Australia Victoria, benchmarks Victoria’s housing market performance across three periods: the decade to 2019, the Covid era and the past 12 months. Temlett says reading any single metric in isolation, without long-term context or interstate comparison, produces a distorted picture. Leader on key housing metrics Victoria ranks first among the states on four of the 10 key metrics assessed: job creation at 59,300 positions, residential approvals at 56,329 and home completions at 54,645. Population growth rounds out the four, with the state expected to add 1.255 million residents between 2021 and 2031. Melbourne is on track to overtake Sydney as Australia’s most populous city within that period. Yet for all those strengths, one issue continues to be a blemish on any optimistic conversation about development in the state. Taxes and charges. But even they don’t define the market, according to Temlett. ▲ Charter Keck Cramer national director of research Richard Temlett: Melbourne has the opportunity to become the most liveable city in the world again. Property levies now account for 46.2 per cent of Victorian Government revenue, up from 24 per cent in 2014. That figure has been widely cited as evidence that Melbourne is uninvestable, he says. “And yet, when I speak with a lot of investors, they’re still making moves in Melbourne,” Temlett says. “They can still see the longer-term fundamentals, despite only ever seeing in the media when a big developer says ‘Melbourne is uninvestable’. “That gets the headlines but no one really ever sees that people are still buying sites, launching projects and investing in Victoria.” Victoria taxing itself into a housing shortfall The tax burden is not just deterring investment, it is actively eroding the revenue it was designed to collect, UDIA Victoria chief executive Linda Allison says. The Windfall Gains Tax, for example, was budgeted to raise approximately $90 million. It collected $15 million. This tax, according to Allison and Temlett, has created a market where uncertainty has overtaken appetite. Transactions have dried up, projects have stalled and the taxes designed to capture value are instead eliminating the activity that generates it. “If we could return to the kinds of numbers we were delivering in the apartment sector before the pandemic, revenue would actually increase to government in the hundreds of millions of dollars,” Allison tells The Urban Developer . “These taxes and levies put out the unwelcome mat instead of the welcome mat.” Foreign buyer participation has fallen from a peak of 32.5 per cent of new Victorian home purchases to 6.5 per cent—a decline the report links directly to successive surcharge increases. Apartment construction has roughly halved from pre-pandemic levels over the same period. ▲ UDIA Victoria chief executive Linda Allison: There's a tremendous opportunity to harness Victoria's strengths and restore it to a premier property destination. Melbourne poised for correction Melbourne unit prices rose just 6.7 per cent over the five years to 2025, against 97 per cent in Brisbane and 80.4 per cent in Perth. Temlett’s research identifies a 15 to 20 per cent recalibration potential in Melbourne’s unit market as sentiment shifts. “Brisbane is extremely expensive,” he says. “People are actually leaving those cities to come to Melbourne because they can get higher-paying jobs or the cost of living here is actually lower.” Melbourne has land. Sydney does not. That distinction, Temlett says, gives Victoria capacity to absorb population growth that no other Australian city can match. Greenfield development is the backbone of Victoria’s housing supply and, according to both Allison and Temlett, one of its most underappreciated advantages. More than 50 per cent of new homes are still being built in growth corridors, driven by affordability pressures and genuine buyer preference for detached housing. Unlike Sydney, which is constrained by geography and largely reliant on apartments, Melbourne can deliver volume across multiple product types and price points. That capacity, Temlett says, is precisely what gives Victoria a leg up solving the current crisis if the right policy signals are sent. “We’ve got so much opportunity, we can actually literally build ourselves out of this crisis,” he says. “Melbourne is investable. Melbourne has long-term fundamentals but we actually need to have a change of mindset.” Knight Frank’s This Is Melbourne report, released this week, draws a similar conclusion. Managing director Victoria Dominic Long says Melbourne is “Australia’s strongest long-term growth city”, pointing to the projected population increase of 123,500 people in 2025—the largest of any Australian capital—and office rents 46 per cent cheaper than Sydney. The firm’s Australian Horizon 2026 report warns that “investors risk missing the bigger picture amidst the noise” and that those prepared to look through current headwinds “can take advantage of very attractive pricing”. Four reforms to unlock the recovery Acting on that opportunity requires policy action across four areas, Allison says. Land supply and planning reform is the most immediate. ▲ The industry best placed to actually respond most quickly at the moment is the greenfield market, Allison says. Precinct structure planning currently takes up to 10 years from inception to a home starting on a block, and the net developable area of PSPs under development has fallen from a historic average of around 75 per cent to approximately 50 per cent. Tax reform is the most urgent lever, with calls to abolish the Windfall Gains Tax, place a moratorium on the Foreign Purchaser Additional Duty for off-the-plan purchases, update stamp duty thresholds and commit to no new property taxes. Infrastructure delivery must align with housing targets, particularly across Melbourne’s west, outer metro corridors and regional centres where population growth is outpacing investment most acutely. Workforce capacity rounds out the list. Victoria faces a projected shortfall of nearly 23,000 construction workers to meet National Housing Accord targets, requiring investment in training, credential recognition and Modern Methods of Construction. Missing ingredient for investors Above all, Temlett says, “certainty is what’s needed”. “If the government gives people more certainty, the capital that’s currently going to Brisbane and Sydney would stay in Victoria,” he says. Housing, he says, needs to move beyond the political cycle—with federal, state and local governments committing to a shared road map regardless of which party holds office. “It needs to transcend political divides,” he says, adding that younger generations are “already losing faith in a political class that has repeatedly promised reform and delivered little”. “I’m convinced that the millennials and the younger generations will respect politicians who say, ‘look, we’ve got an issue, but this is what we’re going to do. Here’s the road map. It’s not going to happen overnight’—versus the normal promises that change in a month’s time.” While all is not well in Victoria, there are many very positive points on which developers should be focused, Allison says. “But it comes down to: do we want to be at the top of a ladder of weak-performing states or do we want to be in a league of our own?” she says. “When the property industry is doing well, the economy is going well, people have jobs and people have homes.” For Temlett, the case for acting now is straightforward: “2026 is now the year for big and brave decisions”.

Melbourne’s Housing Market Stronger Than Headlines Suggest

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Melbourne’s Housing Market Stronger Than Headlines Suggest

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