Rate rises in February and March 2026 have created a two-speed market, shifting competition toward the affordable segment under $800,000. First-home buyers and investors are now primarily competing for entry-level houses in outer suburbs, which are outperforming the city median. Conversely, demand for inner-city high-density apartments has softened.
The rate hikes introduced in early 2026 have introduced new uncertainty following a strong recovery in 2025, where Melbourne median house prices increased approximately 11–14% (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026). We are seeing a clear divide in buyer profiles based on borrowing capacity.
The shift toward the affordable segment
Buyers are concentrating their activity on properties under $800,000, specifically villa units and entry-level houses in outer suburbs. These properties are currently outperforming the city median, supported by first-home buyer incentives and local infrastructure projects (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
Investor behavior in outer corridors
Investors are increasingly targeting house prices in outer suburbs to position themselves ahead of expected first-home buyer grant activity. While some affordable segments have seen price declines due to oversupply, the movement into outer-suburban houses remains a primary driver of growth in those corridors (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
The two-speed market dynamic
Demand is no longer uniform across the east. While affordable outer-suburban properties show strength, inner-city high-density apartments have encountered softer conditions as buyers adjust to higher interest costs (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
The rate trajectory risk
The primary uncertainty is whether the February and March rate hikes will trigger a broader market adjustment. There is a risk of a price correction similar to the 8–10% dip experienced between 2022 and 2023 when the RBA first began raising rates (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
Frequently asked questions
How do 2026 rate rises affect my property value?
Recent rate hikes in February and March 2026 have introduced uncertainty. However, the impact varies by segment; properties in the affordable category under $800,000 and those in outer suburbs are currently outperforming the city median, while high-density apartments are seeing softer demand (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
Are investors still buying in Melbourne’s east?
Yes, but their focus has shifted. Investors are moving into outer-suburban houses to get ahead of expected first-home buyer grant activity. Some affordable areas have seen reduced investor activity due to oversupply, but entry-level houses in outer corridors remain a target (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
Is it better to sell a house or an apartment right now?
Current data shows a two-speed market. House prices in outer suburbs are increasing, whereas inner-city high-density apartments have seen softer conditions. The affordable segment under $800,000 is seeing mixed results, with some price declines in oversupplied areas (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
How does Melbourne compare to other capital cities in 2026?
Melbourne maintains a historically wide discount, with the median house price gap between Melbourne and Sydney exceeding $600,000. While Melbourne recovered 11–14% in 2025, growth in Brisbane, Perth, and Adelaide is forecast to slow sharply from 2026–2027 (CoreLogic/Cotality, Domain, PropTrack, REIV, RBA, and ATO research, April 2026).
Questions to ask your agent
- What percentage of current buyers in my specific pocket are first-home buyers versus investors?
- How is the current activity in the under $800,000 segment impacting the comparable sales for my property?
- Given the two-speed market, is my property’s price trajectory aligning with the city median or the outer-suburban growth trend?
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.