Melbourne's apartment market is emerging as the value play among Australia's eastern seaboard capitals, with investors drawn to the city's $625,000 median price point.
Affordability in Brisbane and Sydney continues to deteriorate, according to JLL's H1 2026 Australian Apartment Market Outlook released today.
Despite near-term headwinds from the Reserve Bank's rate hikes to 4.35% and Federal Budget changes to negative gearing, Melbourne's combination of tight vacancy rates at 1.5%, robust owner-occupier demand, and improved relative affordability is creating compelling opportunities for strategic investors and developers.
"Melbourne presents an attractive value proposition right now," said residential research manager at JLL Australia, Will Silk.
"While Brisbane has reached a five times price-to-income ratio and Sydney sits at 4.5 times, Melbourne's 4.1 times ratio represents genuine relative affordability combined with strong fundamental drivers."
Melbourne recorded a 1.3% apartment price growth year-to-date to April 2026, reaching a median of $625,000, with annual growth of 2% to December 2025 signalling recovery from pandemic-era disruptions.
Rental growth remains solid at 3.6% year-on-year to December 2025, with median weekly rents at $575.
JLL researchers expect this ratio to provide the catalyst for some renters to start considering purchasing their own apartment, given the opportunity for growth.
Vacancy rates across Australia's major apartment markets remain severely compressed – Brisbane at 0.8%, Sydney at 1.3%, and Melbourne at 1.5% - all well below the long-term average of 2.3%.
This tightness is driving sustained rental demand and creating favourable conditions for build-to-rent and off-the-plan investment strategies.
However, supply challenges persist. Victoria saw apartment approvals decline 7.9% in the year to March 2026, with completions falling 19.1% over the year to December 2025.
Higher input costs are significantly impacting developer feasibility models, particularly for mass market product where construction cost inflation continues to outpace sales realisations.
“The owner-occupier market remains remarkably robust because these buyers are less price sensitive – they're making lifestyle and long-term wealth decisions rather than purely investment calculations," said JLL’s head of residential project sales in Australia, Freya Watson.
"Meanwhile, investors are increasingly recognising Melbourne's entry point advantage.
"When you can acquire quality apartment stock at $625,000 versus $825,000 in Sydney or $750,000 in Brisbane, the capital growth potential becomes very compelling.”
Watson said strong employment and liveability makes Melbourne attractive.
“Melbourne’s overall employability and liveability has long made it an attractive proposition – JLL’s forecast also confirms its affordability relative to Sydney and Brisbane,” said Watson.
Contrary to initial market concerns, the Federal Government's proposed changes to negative gearing provisions are expected to benefit off-the-plan apartment sales by creating tax incentives for newly constructed dwellings.
This policy shift may redirect investor capital toward new apartment developments and away from established housing stock.
JLL forecasts Melbourne apartment prices will grow 3% through 2026, accelerating to 6.5% in 2028 and 7.5% in 2029 as interest rates soften and constrained supply meets sustained demand.
Over the five-year period to 2030, Melbourne is projected to deliver 5% average annual price growth, closely matching Sydney's 4.9% and approaching Brisbane's 5.6%.
Rental growth is forecast at 4% through 2026, with a five-year average of 3.6% supported by strong population growth, constrained new supply, and improved relative affordability compared to other capitals.
"Melbourne is expected to benefit from robust income growth, a strong build-to-rent sector delivering quality rental accommodation, and the likelihood of overtaking Sydney as Australia's most populous city," said Watson.
"For investors and developers with medium-term horizons, the fundamentals are compelling despite near-term rate headwinds.”
