Downsizing remains financially viable, particularly for those moving into inner-suburb villas or apartments, which have seen recent price increases. While Melbourne’s median dwelling value stood at approximately $830,371 in January 2026 (Cotality), the financial outcome depends on the specific region and the property type purchased.
Buyers are currently cautious following the March 2026 rate hike, which contributed to flat growth in February 2026 (Cotality). However, the median house price gap between Melbourne and Sydney now exceeds $600,000, representing a historically wide discount that may attract future investment.
The value of smaller dwellings
Demand is shifting toward the affordable segment under $800,000, where apartment prices and inner-suburb villa units have been increasing (Context). This trend benefits downsizers who can unlock equity from a large family home to purchase a lower-maintenance property without sacrificing location.
Regional growth performance
Growth is not uniform across the eastern suburbs and the peninsula. For example, Frankston saw annual growth of 14.3% with a median of $856,746 (Cotality, January 2026), while Whitehorse East and Knox recorded growth of 8.6% and 7.6% respectively (Cotality, January 2026).
The cost of waiting
Market forecasts for 2026 are currently divergent. KPMG projected 6.6% growth for the year, but ANZ revised its forecast to -1.7% following the March 2026 rate hike. Those with positively geared properties may find holding costs offset by income, while others may prefer to wait for the recovery predicted for 2027 (ANZ, Domain).
The timing risk
The primary uncertainty is the immediate impact of the March 2026 rate hike against long-term structural drivers. While chronic undersupply and population growth support medium-term value appreciation, the short-term trajectory remains volatile.
| Region (January 2026) | Median Price | Annual Growth |
|---|---|---|
| Frankston | $856,746 | +14.3% |
| Whitehorse East | $1,239,067 | +8.6% |
| Knox | $965,300 | +7.6% |
| Kingston | $1,085,527 | +8.8% |
Frequently asked questions
Should I sell my house to downsize now or wait until 2027?
Current forecasts are mixed, with ANZ predicting a -1.7% adjustment following the March 2026 hike, but also forecasting a recovery in 2027 (ANZ, Domain). If your current home is high-maintenance or costs are outweighing income, selling now may be preferable to waiting for a projected 2027 rebound.
Are apartments in Melbourne a good investment for downsizers?
Yes, apartment prices and inner-suburb villa units have been increasing more recently (Context). This makes them attractive for downsizers looking to reduce their footprint while remaining in established areas, especially as some outer-suburb house prices show mixed results due to oversupply.
How do Melbourne prices compare to other capital cities in 2026?
Melbourne is currently at a historically wide discount compared to Sydney, with a median house price gap exceeding $600,000. Additionally, Melbourne’s median has recently dipped below Perth’s and sits only marginally above Adelaide’s, which is historically unusual for Australia’s second-largest city.
Which suburbs in Melbourne’s east are seeing the most growth?
Based on January 2026 data, Whitehorse East has seen annual growth of 8.6% with a median of $1,239,067, and Knox has grown by 7.6% with a median of $965,300 (Cotality). These areas remain strong options for those selling larger assets to downsize.
Questions to ask your agent
- How does the current demand for villa units in this specific pocket compare to full-sized family homes?
- Based on the March 2026 rate hike, what changes have you observed in buyer bidding behaviour at recent auctions?
- Which local property types are currently seeing the lowest days-on-market for buyers in the under $800,000 bracket?
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.