Melbourne’s market is currently showing conflicting signals rather than a uniform stabilisation. While KPMG projects house prices to rise 6.6% in 2026, ANZ Research forecasts a -1.7% fall following March rate hikes. Actual data shows a 0.6% drop in values during the March 2026 quarter (PropertyUpdate/Cotality).
The market is currently split between long-term growth trajectories and immediate rate-driven pressure. This divergence is most evident in the contrast between forecasted annual gains and the flat growth seen in February 2026 (Cotality Home Value Index).
Conflicting professional forecasts
Forecasters are divided on the short-term trajectory. Domain projects the median house price to reach approximately $1.17 million by the end of 2026, and PropTrack forecasts capital city prices rising 6–8% in 2026. However, ANZ Research revised its 2026 Melbourne forecast to a -1.7% fall, citing RBA tightening, inflation, and a drop in consumer confidence.
The two-speed market dynamic
Value movement depends heavily on property type and location. Affordable and outer-suburban properties are currently outperforming the city median, driven by first-home buyers and investors (Bamboo Routes, January 2026). Conversely, inner-city high-density apartments are experiencing softer conditions.
Impact of investor divestment
A wave of investor exits is increasing supply in inner-city apartments and certain middle-ring townhouse suburbs. This is driven by Victoria’s heavy property tax burden in 2026, including the VRLT, congestion levy expansion, and the Short Stay Accommodation Levy. Most of these divested assets are being absorbed by owner-occupiers or long-term investors.
The interstate valuation gap
Melbourne is currently trading at a historically wide discount compared to other capitals. The median house price gap between Melbourne and Sydney exceeds $600,000, and Melbourne’s median has recently dipped below Perth’s (Domain). While this presents a value proposition, it reflects the current friction in the local market compared to the sharp growth seen in Western Australia.
The timing risk
The primary uncertainty is whether the current price correction is a short-term reaction to the March rate hikes or the start of a deeper adjustment. While long-range forecasts project house prices reaching $1.402 million by 2030 (Propertybuyer), the immediate month-on-month volatility makes precise timing difficult for vendors.
Frequently asked questions
Are house prices in Melbourne going to fall in 2026?
Forecasts are contradictory. ANZ Research predicts a -1.7% fall due to RBA tightening and inflation. In contrast, KPMG projects a 6.6% increase for houses and 7.1% for units in 2026. Actual recent data showed a 0.6% drop in the March 2026 quarter (PropertyUpdate/Cotality).
How does Melbourne compare to other capital cities?
Melbourne currently offers a significant discount, with a median house price gap of over $600,000 compared to Sydney. Historically, Melbourne has sat well above Perth and Adelaide, but it has recently dipped below Perth’s median (Domain), marking an unusual shift in the national hierarchy.
Which properties are performing best right now?
Affordable properties and those in outer-suburban corridors are outperforming the broader city median. This is largely due to activity from first-home buyers and investors. Inner-city apartments and high-density dwellings are seeing softer demand and increased supply due to investor divestment (Bamboo Routes, January 2026).
Why are so many investors selling in Victoria?
Victoria currently has Australia’s heaviest property tax burden. Investors are reacting to stacked land tax increases, the VRLT, the Short Stay Accommodation Levy, and tenancy law reforms that have reduced landlord flexibility, which has sharply reduced net yields across the state.
Questions to ask your agent
- What percentage of current buyers in this specific corridor are owner-occupiers versus investors?
- How have comparable properties in the immediate area responded to the March 2026 rate hikes?
- Is the current volume of listings in this suburb driven by organic turnover or investor divestment?
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.