Melbourne home prices have taken a $5000 hit in June, with experts pointing the finger at federal and state governments as well as interest rate hikes.
Melbourne house values are worth less than they were a year ago after losing almost $5000 in June, the fourth straight month of tumbling prices.
It’s the latest in a growing list of market hits being linked to an Albanese government decision to change negative gearing and capital gains tax benefits for property investors in their May budget, with the city’s clearance rate having also plunged to just 46.6 per cent over the weekend in one of the worse figures seen since 2021.
The latest home value data show’s Melbourne’s typical $984,000 house price is now below the same time in 2025, with PropTrack data showing it is the nation’s worst performing capital after a 1.8 per cent drop in values in the span of 12 months.
It equates to an annualised $18,000 hit to the city’s typical home price, which had been above $1m until May after a modest recovery sparked by last year’s interest rate cuts.
Regional house values also dropped in the past month, shedding a little over $600 as they fell 0.1 per cent to $638,000, though there were bright spots with double-digit growth still being recorded in dwelling values for the state’s affordable north west regions and around Ballarat.
Melbourne’s more affordable unit price remained flat in June, unchanged at $623,000, while there was a 0.1 per cent increase for the $451,000 regional median.
PropTrack senior economist Anne Flaherty said the declines for Melbourne were accelerating, with the past month’s drop similar to what was seen in 2022 when interest rates rose 4 percentage points from May to December.
“What we are seeing is a lot of nervousness in the market at the moment; three interest rate increases … and we have also seen sudden (federal) tax changes for investors that have likely reduced the demand,” Ms Flaherty said.
“It’s still too soon to be sure what the full impact (of the tax changes) will be. But the fact that all the capitals have decreased shows that something has shifted.”
The economist added that the city’s weak auction clearance rate, struggling in the high 40s throughout much of June, was likely compounding price falls as in many instances vendors would reduce their expectations to get a sale within a few weeks of a failed auction.
“Our forecasts success that prices will decline further,” Ms Flaherty said.
Asked if Melbourne might continue to lead the rest of the country down as a result of the federal government tax changes, the economist said “there is a good argument” that it would.
“Those changes will further reduce the amount of price growth we would otherwise have seen,” she said.
However, Ms Flaherty did rule out “dramatic” reductions like a 20 per cent drop, noting the need for housing to live in would always put a limit on home price falls.
Property Investor Council of Australia chair Ben Kingsley argued Melbourne’s recent falls in value could actually mean it was outpaced by other major capitals, as it was likely some buyers would continue to pursue it due to its comparable affordability.
However, the property professional said after years of underperforming it was clear the city’s housing market was “the product of a crap economy being led by a very poor government”.
“Outside of government spending at the moment, there’s very little private investment here,” Mr Kingsley said.
“And the property prices are reflecting that.”
He added that with Melbourne’s home value falls seemingly accelerating, the addition of federal government tax changes had been “the straw that broke the camel’s back” after years of Victorian government initiatives that had hurt the state’s housing economy.
“But I don’t think Melbourne will have a big correction from here … we are already on the canvas, so it’s very hard to fall to the canvas again,” Mr Kingsley said.
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