Units and townhouses are not tracking identically to houses. While Melbourne house prices saw annual growth of 11–14% over 2025, the affordable segment—largely comprising apartments and entry-level houses—has shown mixed results, with some price declines due to oversupply and reduced investor activity.
The divergence in performance is most evident in the affordable segment under $800,000. While some villa units in inner suburbs and properties benefiting from first-home buyer incentives have increased in value, other apartment stocks have faced downward pressure.
South East regional growth performance
Growth in the South East remains strong for houses, with Frankston leading Melbourne’s highest-growth regions for six consecutive months at +14.3% annual growth (Cotality, January 2026). Buyers are increasingly targeting these corridors as affordability constraints bite in other capital cities.
The apartment and villa unit divergence
Recent data shows apartment prices in Melbourne have been increasing, particularly for villa units in inner suburbs. However, this is not universal; oversupply and lower investor appetite have led to price declines in specific pockets of the affordable segment (Cotality, January 2026).
Impact of 2026 interest rate moves
Rate hikes in February and March 2026 have introduced new uncertainty across all dwelling types. This is reflected in the March 2026 quarter, where Melbourne property values dropped 0.6% (PropertyUpdate/Cotality).
The oversupply risk
The primary risk for unit and townhouse owners is the concentration of stock in the under $800,000 bracket. Where supply exceeds buyer demand, price growth stalls regardless of the broader house market’s performance.
| South East Region | Median Price (January 2026) | Annual Growth |
|---|---|---|
| Frankston | $856,746 | +14.3% |
| Kingston | $1,085,527 | +8.8% |
| Dandenong | $794,550 | +8.5% |
| Knox | $965,300 | +7.6% |
Frequently asked questions
Are apartment prices rising in Melbourne?
Results are mixed. While some apartments and inner-suburb villa units have seen recent increases, other areas in the affordable segment (under $800,000) have experienced price declines. These declines are primarily attributed to oversupply and a reduction in investor activity (Cotality, January 2026).
How have interest rates affected Melbourne house prices in 2026?
Rate hikes in February and March 2026 have created market uncertainty. Following a strong 2025 recovery where prices grew 11–14%, Melbourne property values dropped 0.6% in the March 2026 quarter and remain 1.3% below the March 2022 peak (PropertyUpdate/Cotality).
Which South East suburbs are seeing the most growth?
Frankston is currently the highest-growth region in Melbourne, with annual growth of +14.3% and a median of $856,746 (Cotality, January 2026). Other strong performers in the South East include Kingston (+8.8%), Dandenong (+8.5%), and Knox (+7.6%) (Cotality, January 2026).
Is the Melbourne market still discounted compared to Sydney?
Yes. The median house price gap between Melbourne and Sydney exceeds $600,000 (Cotality, January 2026). This represents a historically wide discount, though Melbourne’s median has recently dipped below Perth’s and sits only marginally above Adelaide’s.
Questions to ask your agent
- How does the current supply of similar units in my street affect my property’s price competitiveness?
- Which specific buyer demographics—first-home buyers or investors—are currently most active for townhouses in this suburb?
- How have the February and March 2026 rate hikes specifically changed the number of qualified buyers at open for inspections?
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.