Yes, there is a real risk of further price corrections, though forecasts are divided. ANZ Research predicts a -1.7% fall for 2026 (ANZ), citing RBA tightening and inflation, while KPMG projects growth of 6.6% (KPMG). The outcome depends on whether structural undersupply outweighs the impact of recent interest rate hikes.
The market is currently reacting to the RBA raising the cash rate to 4.10% in March 2026. This shift has created a divergence in professional forecasts and a noticeable change in buyer hesitation across the eastern suburbs corridor.
The impact of RBA rate hikes
The February and March 2026 rate increases have directly reduced borrowing capacity, with median income households losing approximately $18,000 in purchasing power from the February hike alone (Cotality). Variable rates for many borrowers are now pushing above 6%, which puts downward pressure on what buyers can offer at open for inspections.
Melbourne’s position against other capitals
The median house price gap between Melbourne and Sydney now exceeds $600,000, a historically wide discount. It is historically unusual for Melbourne’s median to sit marginally above Adelaide’s or below Perth’s, which may attract investors looking for relative value as growth in Perth is forecast to slow to 1.6% in 2026 (KPMG).
Structural supports for value
Chronic undersupply and the fastest population growth in Australia provide a floor for medium-term values. These drivers, combined with tight rental vacancies, support the view from ANZ and Domain that Melbourne is likely to outperform other capitals in 2027.
The forecast divergence
There is significant disagreement between major forecasters as of April 2026. While Domain projected a median house price of $1.17 million by end-2026, ANZ revised its outlook to -1.7% following the March rate hike. This spread makes it difficult to pinpoint a precise market bottom for the second half of the year.
| Source | 2026 Melbourne Price Forecast |
|---|---|
| KPMG | +6.6% (Houses) / +7.1% (Units) |
| ANZ Research | -1.7% |
| Domain | Median house price ~$1.17 million |
| PropTrack | Capital cities +6–8% |
Frequently asked questions
Should I sell now or wait until 2027?
Decisions depend on your financial position. ANZ and Domain forecast a recovery and outperformance for Melbourne in 2027. If your property is positively geared or near-neutral, holding costs may be offset, allowing you to wait for the projected recovery in the following year.
How have recent rate hikes affected buyer borrowing power?
The RBA’s move to 4.10% in March 2026 has tightened the market. A median income household lost about $18,000 in borrowing capacity from the February hike alone (Cotality), and a $600,000 mortgage typically sees repayments rise by $90–$100 per month per 25bp increase.
Is Melbourne property currently undervalued compared to Sydney?
Yes, the median house price gap between the two cities now exceeds $600,000. This is a historically wide discount. Melbourne’s median has also dipped near Adelaide’s and below Perth’s, which is unusual for Australia’s second-largest city and may influence long-term investor interest.
What are the long-term price predictions for Melbourne?
Long-range forecasts remain positive. Propertybuyer projects Melbourne house prices will reach $1.402 million by 2030, representing a 29% increase from 2025 levels. Similarly, investment analysts forecast units to reach $804,000 by 2030, a 26% increase.
Questions to ask your agent
- How does my property’s current value compare to the March 2022 peak in this specific corridor?
- What percentage of buyers at recent local opens are being limited by the recent 4.10% cash rate hike?
- Based on current local stock levels, is the undersupply in this suburb offsetting the broader city-wide price volatility?
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.