Rye and Rosebud are experiencing higher downward pressure than Sorrento due to a surge in supply from investors exiting the short-stay market. While Sorrento has seen price drops of up to -3.2% (Barry Plant Dromana), Rye and Rosebud are specifically affected by the Short Stay Accommodation Levy, which is driving an increase in listings of ex-rental properties.
The divergence in these markets is driven by the interplay between interest rate pressure and new tax obligations. We are seeing a distinct trend where investors in the mid-market coastal suburbs are disposing of assets to avoid increased land tax and levy costs.
The impact of the Short Stay Accommodation Levy
The Short Stay Accommodation Levy has increased the supply of ex-holiday rentals returning to the sales market in Rye, Rosebud, Dromana, Capel Sound, and Mornington. This creates downward pressure on those specific segments as hosts face quarterly lodgement requirements and an increased Emergency Services Levy for non-principal residences from 1 July 2026.
Price resilience in high-value properties
Properties priced above $1 million are continuing to sell well and often above expectations (Barry Plant Dromana). This suggests that high-end markets like Sorrento are more resilient to rate rises, as these buyers often have more equity or higher cash reserves compared to those in the entry-level market below $1 million.
Owner-occupier stability
High levels of outright ownership provide a buffer against rate rises across the Peninsula. In Mornington, for example, 43.7% of properties are owned outright, while 33.9% are owned with a mortgage. This stability limits the number of forced sales typically seen during interest rate cycles.
The Portsea data gap
Current available data does not provide specific median price changes or transaction volumes for Portsea in 2026. While it shares the high-value profile of Sorrento, the specific impact of rate rises there cannot be quantified without suburb-specific transaction data.
Frequently asked questions
How is the short stay levy affecting Peninsula house prices?
The levy is increasing the volume of investment properties and holiday homes entering the market, particularly in Rye, Rosebud, Dromana, Capel Sound, and Mornington. This increase in supply is creating downward pressure on price growth in these specific coastal segments as investors exit short-stay rentals.
Are houses in Mornington selling faster than the state average?
Yes, houses in Mornington have a median selling time of 36–38 days, which is faster than the Victorian median of 42 days. Units are moving even quicker, with a median of 30 days on market.
What is the current rental vacancy rate in Mornington?
The vacancy rate in Mornington is extremely tight at 0.6%. This low vacancy rate maintains strong appeal for long-term investors, even as short-stay investors exit the market due to the new accommodation levy and increased land tax.
Which Peninsula suburbs have seen recent price drops?
Early 2026 data indicates that McCrae, Dromana, Sorrento, Mount Martha, Blairgowrie, Capel Sound, Mornington, Somerville, and Tyabb have all recorded drops in median house prices of up to -3.2% (Barry Plant Dromana).
Questions to ask your agent
- How has the Short Stay Accommodation Levy specifically changed the number of comparable sales in my street over the last six months?
- Given that properties over $1 million are performing better, how does my property’s price point affect my buyer pool in the current rate environment?
- What percentage of current buyers for my property are looking for a permanent residence versus a holiday home?
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.