Melbourne Property Report – April 2026

In February 2026, the RBA ended what many home owners had hoped would be a prolonged easing cycle. After delivering three cuts across 2025, dropping the cash rate from 4.35% to 3.60%, inflation re-accelerated sharply in the back half of the year. Persistent services inflation, wages growth running above 4%, and an oil price shock from the Middle East conflict pushed fuel costs higher and lifted inflation expectations.

The result: back-to-back 25bp hikes in February and March, bringing the cash rate to 4.10%. The March vote passed by a single vote, 5 to 4, signalling a deeply divided Board. But the majority line is clear: demand is outpacing supply, and inflation expectations must be anchored before easing can resume.

For Fletchers’ core markets across Melbourne’s eastern suburbs, inner ring and peninsula precincts, this double-hike arrives mid-recovery. The premium end of the market, which trades at 2 to 3 times the Melbourne median, is bearing a disproportionate share of the pressure. Borrowing capacity, not desire, is the real limiting factor for aspirational buyers who were mid-upgrade cycle when rates reversed.

The auction clearance rate is the most current real-time proxy for market sentiment. Melbourne’s fall through 60%, the traditional waterline between buyer and seller markets, is not a one-week blip. March averaged 57%, the lowest since January 2025, moving in step with the worsening rate picture.

The year-on-year comparison is stark: the same week last year, Melbourne was recording 66.8% at the height of the easing cycle. That is a near-10 percentage point drop in twelve months.

Volume is falling too. Just 822 homes were listed for auction in the week ending April 11, against 1,363 for the equivalent 2025 week. Vendors are withdrawing before campaigns begin, and many sellers who could sell are choosing to wait. The vendors who do proceed are increasingly meeting the market on buyers’ terms.

The cheaper end of the market is holding up exactly as you would expect. Frankston’s 14.3% annual gain and Brimbank’s 10% rise reflect a shift in where buyers are looking. Priced out of the eastern core, many are finding value in outer corridors with good infrastructure and tight rental conditions.

Meanwhile, the inner east tells the opposite story. Hawthorn and Camberwell clearance rates are running near 55%, well below the city average. The aspirational upgrader who drives this segment is the buyer most exposed to the borrowing capacity compression that two rate hikes create. In borrowing capacity terms, they can spend roughly $40,000 to $70,000 less than they could in January.

The more expensive the property, the more rate-sensitive the buyer pool. A $3M home in Hawthorn has a buyer pool that is 10 times smaller, 100 times more rate-sensitive, and far more patient about waiting for conditions to improve before committing.

The phrase “25 basis points” is abstract. Applied to a $1.2M mortgage at 25 years, the two hikes together add $276 to your monthly repayment. Across the life of the loan, that represents over $82,000 in additional interest. But the more important number is how much less buyers can borrow.

Each 25bp hike reduces the maximum qualifying loan for a typical household by approximately 2 to 3%. For a Fletchers buyer targeting a $2M property, two hikes mean the bank now says $1.88M, before applying the additional 3% serviceability buffer that regulators mandate.

If May’s forecast third hike to 4.35% materialises, the cumulative 75bp from the November 2025 trough will represent approximately $45,000 to $75,000 in lost borrowing capacity for Melbourne’s median-to-premium buyer.

The calculator at right lets you model your precise exposure. Note: actual mortgage rates run approximately 1.7 to 1.9 percentage points above the cash rate. The numbers shown use this spread for a realistic estimate.