In response to global economic uncertainty, interest rate cuts have been strategically introduced to support market stability and growth. Most lenders have adjusted mortgage rates accordingly
While prestige sale transactions have been slow-moving, similar to the stock market performance, many are anticipating further rate reductions in 2025 potentially enhancing borrowing conditions for high-end buyers
Winter/25
Melbourne Prestige Residential
Recent price growth for Melbourne’s prestige homes have remained relatively stable, with apartments carrying most of the growth. Improving buyer confidence and broader economic optimism are expected to support renewed momentum over the next two years
A lower supply of exceptional prestige luxury rentals is keeping prices elevated, although future growth is expected to moderate
The Economy Key Drivers
Interest Rate
3.85%
The Reserve Bank of Australia (RBA) lowered the interest rate target 25 bps to 3 85% in May 2025 Many banks followed this direction and adjusted their mortgage lending rates accordingly. Interest rates significantly influence the cost of borrowing money, which in turn affects the willingness and ability to apply for a home loan. The RBA forecasts the target could be 3 40% by the end of 2025, and 3 20% in 2026 When interest rates are lowered, borrowing becomes cheaper, which can stimulate demand for residential property and drive economic growth
Economic Growth 1.3%
Stock Market Return
-0.7%
There have been many instances of strong stock market performance being a leading indicator for an upward momentum in prestige residential price growth Australia’s stock market performance on the S&P/ASX 200 eased in the first quarter with -3 9% growth, to calculate a total annual change of -0 7% in the year ending March 2025 This comes after annual change of -5.5% in 2022, then solid annual growth of 7 8% in 2023 and 7 5% in 2024
Economic growth remains a key driver given it can increase demand across property markets Australia recorded economic growth at 1 3% in 2024, following stronger performance of 3.1% in 2022 and 1.5% in 2023. Looking forward, the RBA forecasts economic growth to lift to 2 1% in 2025 and 2.2% in 2026. Ideally, sustainable economic growth is considered to be around 2% to 3% When it comes to new private business investment in Australia, there was 0 3% growth in 2024, following significant growth of 6.1% in 2022 and 8 8% in 2023 In 2025, business investment is forecast to rise by 0.6% in 2025 and 2.9% in 2026.
Wealthy Population Growth
3.9%
The wealthy population across Australia continues to increase, despite the extended period of global economic instability and geopolitical shocks. The drivers of wealth creation and maintaining this wealth have been real estate and the solid underlying performance of the stock market Australasia’s wealthy population grew by 3 9% in 2024, to 49,367 people with net wealth of more than US$10 million This population is forecast to grow by a further 5.3% by the end of 2028 (or an average 1 3% per year) according to the Knight Frank Wealth Sizing Model
Source: McGrath Research, Knight Frank Research, RBA
Prestige Residential Sales Update
Prestige Sales
Prestige residential sale transactions above $3 million tallied to 40 in the first quarter of 2025 across Melbourne, a downward movement of 88% from the previous quarter This fall in sales resulted at a time when market confidence was in a holding pattern with a federal election on the horizon and many were anticipating a further reduction in interest rates. Over the past year, the total number of prestige sales was 42% lower, reaching 1,186 sales
Total Number of Prestige Sales ($3m+) Melbourne Prestige
Source: McGrath Research
Super-Prestige Sales
The share of super-prestige sales (above $5 million) was recorded at 24%, compared to the total number of prestige sales (above $3 million) across Melbourne in the year ending March 2025 This was slightly lower than one year ago when the proportion was 25%, but remains above the 19% share recorded five years ago. Over the past year, Melbourne’s super-prestige sales volume has fallen by 43%, but grown over the past five years by 186%
Share of Super-Prestige Sales ($5m+), by Number
Source: McGrath Research
Source: McGrath Research
Prestige Residential Sales Update
Duration 79 days
Melbourne prestige homes took an average 79 days on market - from the time they were listed to the day they went under contract - in the March 2025 quarter This duration was 76 days the quarter before and 73 days one year ago A low number of days on market mean homes are selling fast with more desirable properties, while a high number of days suggests a slower market Houses averaged 64 days to sell in Q1 2025, which was 4 days longer than in Q4 2024 but 4 days less than in Q1 2024. Apartments took an average 98 days to sell, being 3 days longer than the previous quarter and 19 days more than a year ago
Average Days on the Market
Source: McGrath Research
New Listings
+18.0%
Newly advertised property listings in Melbourne were 18 0% higher in the month of March 2025 than the equivalent period last year. This trended above the 10.0% average for the combined capitals of Australia
Melbourne’s total number of listings in the month of March 2025 were 8 3% above the equivalent period last year By comparison, total listings were an average 8.5% higher across the combined capitals of Australia
Source: McGrath Research, CoreLogic
Source: McGrath Research
Prestige Residential Prices Update
Property price changes can provide a benchmark for market performance and can help identify emerging trends
Melbourne prestige property prices fell by 2 1% in the year ending March 2025, with a fall of 0.4% recorded in the most recent quarter Looking back at price growth over the five years from Q1 2020, prestige houses (14 5%) outpaced prestige apartments (8.2%). In Q1 2025, prestige house prices were 1 7% below a quarter ago, and were 4 8% lower over the past year In the same quarter, apartment prices rose by 1 1% after rising 1 3% in the past year
Change in Prestige Prices Melbourne Prestige
Source: McGrath Research
By the end of 2025, McGrath Research forecasts Melbourne prestige prices to improve to be similar to a year ago, followed by a stronger 2% rise in 2026 These projections reflect a shifting market where new supply has outweighed demand, with better sentiment derived from an improving lending environment
Forecast for Prestige Prices Melbourne
Source: McGrath Research Prestige Price Outlook
Source: McGrath Research
Prestige Residential Rents Update
Prestige Yield +2 bps
Melbourne prestige gross rental yields rose 2 bps in the Q1 2025 quarter to be 3 55%, while this was 20 bps higher than a year ago. Apartment yields (4.67%) consistently outperform house yields (2 65%) across most markets Prestige house yields rose 1 bp in Q1 2025 and increased by 14 bps over the past year, while prestige apartment yields were up 4 bps in this past quarter and 26 bps higher from a year ago
Change in Gross Rental Yield Melbourne Prestige
Melbourne residential rental vacancy was recorded at 2.5% in Q1 2025, rising 30 bps in the quarter and overall, 10 bps higher over the past year Generally, 3% vacancy is considered a balanced market between rental supply and demand Below this benchmark is considered to be an undersupplied pool of rental homes Changes in rental vacancy can have a significant impact on the residential property market, influencing both rental prices and property values
Change in Residential Rental Vacancy
Source: McGrath Research, REIV
Source: McGrath Research
Source: McGrath Research
Prestige Residential Rents Update
Prestige Rents
Melbourne prestige property rents rose by 3 5% in the year ending March 2025, with stable growth recorded in the most recent quarter Looking back at rental growth over the five years from Q1 2020, prestige houses (39 1%) outpaced prestige houses (30.7%). In Q1 2025, prestige house rents were 1 5% below a quarter ago, but were 0 2% higher over the past year In the same quarter, apartment rents rose by 2 0% after rising 7 6% in the past year
Change in Prestige Rents Melbourne Prestige
Source: McGrath Research
Prestige Rental Outlook
As the prestige rental market in Melbourne moves towards equilibrium, McGrath Research forecast less upward pressure on rents to be 4% at the end of 2025, with a further 3% rental growth likely in 2026.
Forecast for Prestige Rents
Melbourne Prestige
Source: McGrath Research
Source: McGrath Research
Definitions
Prestige Property
The most desirable and most expensive property in a given location, generally defined as the top 5% of each market, by value
Prestige Sales
Melbourne prestige sale transactions hold a threshold of A$3 million
Super-Prestige Sales
Melbourne super-prestige sale transactions hold a threshold of A$5 million
Wealthy Population
A high-net-worth individual (HNWI) with a net worth of at least US$10 million
