The Relationship Between Melbourne’s Median House Price and Economic Factors

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melbourne median house price

Melbourne’s vibrant lifestyle, world-class education and excellent job opportunities have made it a prime location for homebuyers. In recent years, Melbourne’s property market has experienced a significant increase in the median house price. The city’s real estate market is dynamic, and several factors can influence it. Understanding the relationship between Melbourne’s median house price and economic factors can help you make informed decisions while investing in property.

Melbourne’s rapidly growing population has consistently demanded more housing, leading to a sharp spike in property prices. Property prices are affected by various economic factors, such as inflation, interest rates, and unemployment rates. These economic factors may have a direct or indirect impact on Melbourne’s median house price, making it important to analyze and understand their influence.

Population Growth and Property Prices

A city’s population growth rate is an essential factor that affects the demand and supply of property. Melbourne has a population growth rate of around 2.4%, making it one of the fastest-growing cities in Australia. As the population grows, there is a higher demand for housing, which may lead to rising property prices. Furthermore, as the city becomes more crowded, people may be willing to pay a premium for properties located in areas with less congested streets.

Infrastructure Development and Property Prices

Infrastructure development is another essential factor that impacts property prices. Efficient public transportation systems, access to good schools and hospitals, and other facilities are essential to potential homebuyers. In Melbourne, several infrastructure developments, such as the Victorian Government’s investment in the Suburban Rail Loop, have impacted property prices in the areas directly served by these projects.

Interest Rates and Property Prices

Interest rates play a crucial role in the property market, as they determine the affordability of loans. Low-interest rates encourage buyers to take out mortgages and invest in property. Conversely, high-interest rates can make it challenging for buyers to purchase and finance property, making the market less competitive. In Melbourne, interest rates have been relatively low in recent years, which has contributed to the significant increase in property prices.

Unemployment Rates and Property Prices

Unemployment rates can also impact the property market in Melbourne. Higher unemployment rates can lead to individuals experiencing financial difficulties, which may lead to a decrease in property demand. This, in turn, may lead to lower property prices. Additionally, a decline in job opportunities can lead to people migrating to other cities or countries, leading to reduced property prices.

Inflation and Property Prices

Inflation refers to the rate at which prices for goods and services increase. Inflation can impact the property market by reducing the purchasing power of potential buyers. Higher inflation rates can result in the increased cost of living, making buying property less affordable. This may lead to a market slowdown and a decrease in property prices. However, inflation can also positively impact property prices as it may lead to an increase in rental income, increasing the value of investment properties.

Foreign Investment and Property Prices

Foreign investment is another factor that can impact the property market. In recent years, Melbourne has seen a steady inflow of foreign investment in its property market. As a result, foreign investment has contributed to the increase in property prices in certain areas. Additionally, foreign investors can have a significant impact on a market, given their financial power.


In conclusion, several economic factors influence Melbourne’s median house price, making it a complex and dynamic market. Population growth, infrastructure development, interest rates, unemployment rates, and inflation are some of the essential factors that impact the market. Understanding these factors can help potential homebuyers make informed decisions while investing in property. If you’re considering purchasing property in Melbourne, read our Guide to Buying a House in Melbourne to learn more.


What is the current median house price in Melbourne?

According to the Domain House Price Report for the June quarter of 2021, the current median house price in Melbourne is $955,000.

What are the economic factors that influence Melbourne’s median house price?

Melbourne’s median house price is influenced by several economic factors, including population growth, infrastructure development, interest rates, unemployment rates, and inflation.

Can foreign investment impact property prices in Melbourne?

Yes, foreign investment can have a significant impact on property prices in Melbourne. In recent years, there has been a steady influx of foreign investment in Melbourne’s property market. Foreign investment has contributed to the increase in property prices in certain areas.

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