MELBOURNE HOUSING POISED FOR CYCLICAL RECOVERY IN 2025–26
Lower interest rates, firm population growth and tight supply set the stage for a late-2025 upturn, though Melbourne’s price discount to other capitals is likely to persist, according to new research.
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Melbourne’s residential market appears to be on a comeback path, with a pricing recovery expected to take shape from late 2025 and continue through 2026 as borrowing costs ease and demand holds up.
New research by the MaxCap Group, commercial real estate fund manager, argues that lower mortgage rates will be the key catalyst for the next upswing, with stabilising sentiment and gradually improving activity reinforcing the turn.
The city has underperformed since 2022. While Brisbane, Perth and Adelaide posted strong gains, Melbourne recorded a modest correction.
One effect has been a lift in relative affordability. Local prices now sit below a wide set of comparable markets, including Brisbane, the Gold Coast, the Sunshine Coast, Canberra and Adelaide, and could trail Perth by year end.
That discount is expected to endure even as prices rise, reflecting differences in tax settings, investor participation and recent growth momentum elsewhere.
Several cyclical and structural forces are in play. Higher interest rates and softer sentiment have been a clear headwind over the past two years.
A heavier state tax take as Victoria pursues budget repair has also weighed on investor activity. Property-related imposts such as land transfer duty and land tax are taking a larger share of state revenues in 2025–26, and that has cooled appetite at the margin.
Set against those drags are supportive fundamentals. Population growth remains robust, interstate outflows are easing, and the construction pipeline is constrained.
The research estimates an 8,000-dwelling shortfall in Victoria in 2025, with the shortage most acute in the city of Melbourne. Rental markets remain tight, with a residential vacancy rate of 1.8 per cent in August pointing to ongoing pressure on rents and a continued incentive to build.
At a sub-market level, undersupply is most evident across the inner and middle rings and through the south-east corridor. There are early signs of price stabilisation, with more than half of the most-traded suburbs shifting from annual declines to annual growth.
The initial gains are concentrated in more affordable fringe areas, where price points and borrowing capacity are best aligned as rates begin to fall.
Looking ahead, model-based projections indicate prices should lift as mortgage rates decline, incomes rise and building activity gradually recovers. The upgrade cycle is expected to be measured rather than explosive.
Without near-term reform to property taxes, the recovery is likely to be more subdued than previous Melbourne upswings, and the city’s price discount to other capitals is expected to persist through this cycle.
The research also contrasts Melbourne’s broader post-pandemic performance with other markets, noting a deeper peak-to-trough decline in CBD office values than Sydney.
Even so, the residential turnaround is framed as primarily a function of the interest rate cycle rather than policy shifts. Risks to the outlook include a slower-than-expected pace of rate cuts, construction cost pressures that delay supply, and any renewed deterioration in investor sentiment.
For buyers, the combination of improved affordability, tightening rental conditions and the prospect of lower rates suggests a narrowing window before momentum rebuilds. For sellers, the message is that late 2025 into 2026 should deliver firmer conditions, especially in well-located, appropriately priced stock across the inner and middle rings where undersupply is most pronounced.
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The oceanfront house at the northern end of the affluent barrier island was a longtime vacation home of late Prince Albrecht of Oettingen-Spielberg.
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The 11th-generation heir of a German royal family has sold an oceanfront mansion in Palm Beach, Florida, for $30.27 million.
The 4,675-square-foot home on East Inlet Drive was built in 1960 and stands on 1.24 acres of oceanfront land, one lot away from the northern border of the Palm Beach barrier island.
It has six bedrooms, an ocean-facing veranda and pool deck and a direct path to the white-sand beachfront through lush greenery.
The property was purchased in 1987 by the late Prince Albrecht of Oettingen-Spielberg—10th in the line of a noble German dynasty that traces back to the 17th century—for $1.75 million, according to property records.
The German prince died in November, and the property was sold by his son and heir, Prince Franz-Albrecht of Oettingten-Spielberg, according to the deed recorded with Palm Beach County on Monday.
The buyer was a Florida-based LLC, managed by a law firm in East Hampton, New York, and represented by Island Realty PB.
“The new buyer is going to renovate the existing structure and breathe more life into it,” said listing agent Whitney McGurk, who represented the seller alongside Lisa Pulitzer, both of Brown Harris Stevens. “It was seldom used by the former owner.”
The aristocrat’s home was first listed for $45 million in 2024 and was reduced over the years as it cycled through different brokers and was also offered to rent. It was reduced for the final time to $32.9 million in February of this year.
Because of the property’s proximity to the Palm Beach Inlet, which divides the Palm Beach island from the barrier island to the north, it is close to great snorkelling and fishing along the jetty, as well as one of the best surf breaks in Palm Beach, according to McGurk.
“The house was always the ultimate beach house,” said McGurk. “Snorkelling, fishing, surfing, relaxing on the beach—it’s all right at your doorstep.”
The late owner’s son Prince Franz-Albrecht is the 11th-generation head of the family, as well as a hunter and conservationist married to model and socialite Baroness Cleo von Adelsheim.
His full name is Franz-Albrecht Alois Christian Ferdinand Maria Notger, Prince of Oettingen-Oettingen and Oettingen-Spielberg. He couldn’t immediately be reached for comment.
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