Two hikes.
Below 60%.
What it means.
Two rate hikes in eight weeks. Clearance below 60% for the first time in 2026. The $1M median has slipped. This is Fletchers’ read on where things actually stand, and what it means for buyers and sellers right now.
What happened and what’s coming.
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.
“Inflation was already too high, reflecting the fact that demand is outstripping supply.”
RBA Governor Michele Bullock, March 2026For 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 trades at 2 to 3 times the Melbourne median and 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 Easing Era
Three RBA cuts take the cash rate from 4.35% to 3.60%. Melbourne begins its overdue recovery. Clearance rates push above 70% in Fletchers’ eastern suburbs. Upgrade buyers re-emerge.
First Hike: 3.60% to 3.85%
Inflation “picked up materially” in H2 2025. Trimmed mean revised to 3.7%, well above the 2 to 3% target. Clearance rates begin softening from 63–64% in January. Premium buyers pull back.
Second Hike: 3.85% to 4.10%
Voted 5 to 4. Strait of Hormuz disruption amplifies fuel-driven inflation. Melbourne clearance falls through 60%. Median house prices slip below $1M for the first time this cycle.
Third Hike Forecast: to 4.35%
All four major banks forecast +25bp in May. This would match the November 2023 cycle peak. CBA sees this as the ceiling. If so, a gradual recovery begins in H2 2026.
Westpac’s Bear Case: Peak 4.85%
Westpac forecasts June and August hikes, a peak 50bp above 2023 highs. If realised, SQM’s Scenario 2 triggers: Melbourne price declines of -4% to -9%. Premium suburbs absorb the deepest cuts.
What the numbers actually show.
The auction clearance rate is the most current real-time proxy for market sentiment. Melbourne’s fall through 60% 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.
“Clearance rates below 60% for consecutive weeks have historically foreshadowed price declines of 3 to 8% over the following twelve months.”
Dr. Andrew Wilson, Chief Economist, My Housing MarketMelbourne’s most expensive suburbs. A market under pressure.
The luxury end of Melbourne’s property market is the most rate-sensitive segment in the city. With medians from $2.5M to $5M+, even a marginal compression in borrowing capacity translates into a smaller pool of buyers who can actually qualify.
Nationally, the top end of Melbourne’s market saw values fall 1.7% over the past three months, the steepest decline of any price tier, while the lower quartile showed resilience with modest gains. The higher the price, the fewer buyers who can absorb a rate rise.
The long-term case for premium Melbourne is intact. The short-term is harder. Melbourne luxury is still deeply discounted relative to Sydney. Comparable trophy properties in Sydney’s Mosman or Vaucluse are trading at 40 to 60% premiums to Melbourne equivalents. For interstate buyers and overseas investors, Melbourne premium real estate has rarely represented better relative value.
The two-speed suburb story.
| # | Suburb | Median | Annual | Trend |
|---|---|---|---|---|
| 01 | FrankstonSouth East | $857k | +14.3% | |
| 02 | BrimbankWestern entry | $731k | +10.0% | |
| 03 | WhittleseaNorthern corridor | $782k | +7.7% | |
| 04 | KnoxOuter east | $965k | +7.6% | |
| 05 | Balwyn NorthBoroondara E | $2.1M | +2.8% | |
| 06 | DoncasterManningham | $1.45M | +1.9% | |
| 07 | CamberwellInner East | $2.1M | -1.5% | |
| 08 | HawthornInner East | $2.65M | -2.1% | |
| 09 | KooyongStonnington | $3.68M | -6.3% | |
| 10 | ToorakSouth Yarra border | $4.85M | -14.5% |
Source: Fletchers/Cotality January 2026. Growth leaders and laggards by annual change.
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.
What it costs in real dollars.
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. 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.
P&I basis. Rates shown are indicative (cash rate + 1.80% spread). Not financial advice.
Three scenarios for the rest of 2026.
Bull, base, and bear — the major bank positions on the rate path and what each means for Melbourne property through to year end.
What this means for buyers and sellers.
- Listings are 12% above the 5-year average. You have more choice than at any point since 2022, and vendors know it.
- Properties passing in at auction in the inner east are negotiable afterwards. Unconditional buyers with pre-approval are in a good position to work 3 to 6% below reserve.
- Lock in pre-approval before May’s forecast hike reduces your qualifying amount further. Stress-test your budget against 4.85% before committing above $2M.
- Fletchers’ Balwyn North, Doncaster, and Warrandyte offices are seeing steady demand in the $1M to $1.8M range. This mid-tier is least disrupted by the hike cycle and offers strong long-term value relative to inner-east prices.
- Consider fixing a portion of your loan for 2 years if you believe the bear scenario is possible. Rate futures currently price 68% probability of the May hike, but what happens beyond May is genuinely uncertain.
- Do not buy on marginal finance. If the bear scenario plays out, patience rewards buyers more than any short-term urgency. Melbourne’s long-term fundamentals are sound, but the near-term correction may have more to run.
- If you are planning to sell this year, sooner is better. A May campaign launched before the rate announcement gives you a bigger buyer pool than one starting in July, particularly if rates go higher than expected.
- More vendors are pulling out before going to market. Properties that pass in and sit unsold for two months are being cut 5 to 9% from reserve. Pricing it right from day one is far better than chasing the market down.
- Price to the current market. Your agent’s comps should be 60 days maximum. Anything pre-February 2026 reflects a different interest rate environment.
- Above $1.8M, budget for a 4 to 6 week campaign and strong pre-auction marketing. Buyer depth is thinner. Consider private treaty alongside auction in this price band under current conditions.
- Melbourne is still 1.3% below its March 2022 peak with solid population growth and tight rental vacancy underpinning demand. This is a soft patch within a longer recovery, not a collapse.
- Melbourne luxury is still well below Sydney on equivalent properties, and interstate buyer enquiry through Fletchers’ network has been steady. Factor that into your campaign.
Rental market. The other story.
Vacancy at 1.7% and rents up 5.2% year on year. While prices are softer, the rental side of the ledger is holding up well. Net migration is keeping underlying demand firm across Fletchers’ core precincts. Inner ring units on tram and train lines are some of the hardest stock to keep vacant in the city.
Units and apartments are the relative winners in this rate environment. Rental yields on Melbourne units currently outperform houses at comparable price points. Investors targeting positive cashflow should focus on inner-ring, high-transport-access units in the $500k to $850k bracket, particularly across Boroondara, Stonnington, and Yarra.
The April 2026 read.
Better for buyers than it has been in years. Harder for sellers than it was six months ago.
Melbourne in April 2026 is not falling off a cliff, but it is clearly softening. Two rate hikes, rising stock levels, and clearance rates below 60% have given buyers more leverage than they have had since 2022. For Fletchers clients across the eastern suburbs, inner ring, and peninsula precincts, buyer choice is better than it has been in three years, vendors in the premium tier are more negotiable than they look, and Melbourne still trades at a significant discount to Sydney at the top end. Sellers who price realistically and launch before the May decision will get better results than those who hold out.
- RBA May 6 decision: sets the tone for the next 6 months
- Q1 2026 CPI (late April): inflation data determines if RBA pauses
- Middle East fuel prices: the external wildcard in every scenario
- Melbourne still 1.3% below its 2022 peak, with room to recover
- Net migration keeping underlying demand firm across the city
- Melbourne luxury still well below Sydney equivalent prices
- Cash rate above 4.5% triggers SQM’s -4% to -9% bear case
- Victoria land tax uncertainty suppressing investor appetite
- Premium inner-east segment most exposed to further rate compression
Know where you stand in this market.
Fletchers agents across Melbourne’s eastern corridor provide complimentary property appraisals. No obligation.
Sources: RBA · My Housing Market (Dr Andrew Wilson) · Cotality/CoreLogic · SQM Research · KPMG · ANZ Research · CBA Economics · Westpac IQ · Domain · Canstar · Metropole · OpenAgent · Fletchers Real Estate. © Fletchers Real Estate 2026. Published April 2026 · fletcherslocal.au/melbourne-property-report-april-2026