Selling now may be prudent for investors facing unsustainable negative cash flow due to Victoria’s high tax burden and recent RBA rate hikes. While structural undersupply supports medium-term value, conflicting 2026 forecasts—ranging from 6.6% growth (KPMG) to a -1.7% correction (ANZ)—create significant timing risk.
The Melbourne market is currently navigating a tension between a broader recovery and new interest rate pressures. Investors who have carried out-of-pocket costs for years are now weighing these losses against a tightening tax environment and diverging growth projections.
The impact of Victorian property taxes
Victoria currently has Australia’s heaviest property tax burden, with land tax rises, VRLT expansion, and various levies eroding net yields (Forge Property, February 2026). Combined with tenancy law reforms that reduce landlord flexibility, many investors in the eastern suburbs and peninsula regions are finding negative gearing unsustainable.
Rising listing competition
Vendor confidence improved through late 2025, leading to a rise in listed stock. Appraisals surged over 75% month-on-month into early 2026, and listings increased nearly 40% since December 2025 (Raine & Horne). While open for inspection attendances were up 3% year-on-year (Raine & Horne), the February and March 2026 rate hikes have dampened buyer urgency (Domain).
Capital Gains Tax (CGT) timing
Settling before 30 June 2026 can be advantageous for those in a low-income year, such as during retirement or part-time work, to reduce the effective tax rate. Other strategies include splitting the gain between joint owners or using existing capital losses on other assets to offset the liability.
The forecast divergence
The primary risk is the lack of consensus on short-term price direction. KPMG projects 6.6% house price growth for Melbourne in 2026, while ANZ revised its forecast to -1.7% following the March 2026 rate hike. This spread makes it difficult to determine if the cost of holding the property outweighs the potential for recovery in 2027.
Frequently asked questions
Should I sell my investment property before June 30?
Selling before 30 June 2026 may be beneficial if you are in a lower-income year, which can reduce your CGT liability. However, remember that the CGT event is triggered by the contract signing date, not the settlement date. Consult a tax professional to confirm your specific marginal rate impact.
Are more investors selling in Melbourne right now?
Yes, investor divestment is increasing due to the cumulative effect of land tax, the Short Stay Levy, and absentee owner surcharges. This trend is creating more buying opportunities for owner-occupiers, particularly in investment-heavy submarkets where net rental yields have been materially compressed (Forge Property, February 2026).
How are 2026 interest rate hikes affecting buyers?
The RBA rate hikes in February and March 2026 have introduced new caution into the market. While buyer numbers remained relatively stable through 2025, recent hikes have reduced buyer urgency (Domain), meaning properties may take longer to sell or require more precise pricing to attract offers.
What factors support holding my property long-term?
Chronic undersupply and the fastest population growth in Australia continue to support medium-term value appreciation. Many analysts, including ANZ and Domain, forecast that Melbourne is likely to outperform in 2027 as the market recovers from the recent period of instability.
Questions to ask your agent
- How many competing investment listings are currently active in my specific pocket of the eastern suburbs or peninsula?
- Based on current buyer feedback from March and April, is the demand coming from owner-occupiers or other investors?
- What is the current gap between the asking price and the actual settlement price for similar properties in this corridor?
This article contains general market information based on data current as at April 2026. It does not constitute financial, legal, or real estate advice specific to your property or circumstances. For an appraisal and tailored advice, speak with a Fletchers agent in your area.