Why Are Inner Melbourne Property Prices Rising? The Real Culprit May Be the Victorian Government

Inner Melbourne's Property Market Is Under Pressure—and the Government Is Making It Worse

Inner Melbourne property prices have now reached record levels, but not for the reasons you might expect. While headlines would have you believe it’s simply demand pushing up prices, the real cause is more deliberate and more concerning: the Victorian Government is actively squeezing the market from all sides.

From land availability to rental stock, the supply side of the property market has been throttled by regulation, taxes, and red tape. At every level—state planning, local permits, landlord laws, development contributions, and property taxes—the Government has added pressure. And instead of releasing that pressure, they appear intent on keeping their foot firmly on the throat of every Victorian trying to own, build, or invest in property.

Land Supply Is Being Deliberately Constrained

The most immediate factor influencing the rise in prices is the chronic undersupply of new housing. Melbourne is currently on track for its worst year of new supply in decades. Greenfield development has slowed dramatically due to planning delays and a lack of timely land release.

Even where rezonings are announced—such as the recent announcement of 27 new growth areas—the delivery timeline is years away. It’s policy on paper, not homes on the ground. The bureaucracy surrounding permits, approvals, and infrastructure levies makes it near-impossible for developers to respond quickly to demand.

This artificial restriction of supply drives prices up—not because demand is irrational, but because the Government won’t get out of the way.

The Rental Market Is Being Driven to Collapse

The same heavy-handed approach is also destroying the rental market. In just 12 months, Victoria lost over 20,000 rental properties. The reason is clear: landlords are leaving the market.

With over 130 different rental law changes introduced in just the last few years—most heavily favouring tenants—and multiple increases to land tax and council rates, it’s no longer viable for many investors to hold on.

What we are seeing now is a textbook case of supply retreating in response to hostile policy. As more properties are sold or withheld from rental, the remaining stock becomes more competitive, pushing up rents and reducing choice. The very people these policies claim to protect are the ones now suffering the most.

Taxes and Charges Are Pushing Prices Even Higher

It’s not just land supply and rentals. Across the board, the cost of building and owning property in Victoria has skyrocketed.

According to the Housing Industry Association, government-imposed costs now make up around 40% of the cost of a new home. Developers are being taxed out of viability. Purchasers are being priced out of affordability.

If the Government was serious about fixing affordability, the first step would be obvious: reduce the financial and regulatory burden on those delivering housing.

What Can Be Done? Let the Market Breathe

Instead of announcing more long-term growth areas and imposing even more regulation, the Victorian Government could take real, immediate action to help solve this problem.

Release land that’s already zoned. Simplify planning processes. Wind back punitive taxes and charges. Cease demonising landlords and investors. Most importantly, stop trying to centrally control a market that requires flexibility and supply responsiveness.

If the Government truly wants to help Victorians get into homes—whether owned or rented—they need to take their foot off the throat of the market and let it breathe.

Conclusion: The Problem Is Policy, Not People

The current rise in inner Melbourne property prices is not just a market cycle. It is a policy-driven result of years of interference, overreach, and financial strangulation.

Rather than helping the market recover, the Victorian Government continues to apply pressure—limiting land, driving away investors, and burdening builders and buyers alike.

Until that changes, property prices will continue to climb—not because of booming demand, but because supply has been deliberately choked.