Melbourne’s property market is entering a different phase. After several years of lagging other capitals, forecasts now point to renewed momentum through 2026, with price growth expected to lift by around 6% as interest rates ease, affordability improves and population growth resumes.
This backdrop is particularly relevant for professionals considering an upgrade or an additional investment while conditions remain relatively balanced.
Domain’s latest outlook suggests Melbourne is among the last capitals to complete its price recovery, with home values expected to reach new record highs by the end of 2026. Historically, markets that underperform during tightening cycles often respond more decisively once borrowing conditions turn supportive.
This relative reset is visible in pricing comparisons across the capitals, with Melbourne now materially cheaper than Sydney and broadly comparable with, or cheaper than, several other major markets.
Why Melbourne is regaining momentum
According to the forecast, Melbourne’s median house price is expected to reach around $1.17 million by the end of 2026, roughly $87,000 higher than current levels. This implies growth of about 6% and would mark a full recovery from the city’s earlier downturn.
The drivers are structural rather than speculative. Interest rates are lower following 75 basis points of cuts in 2025, household incomes are beginning to stabilise in real terms and Melbourne’s relative affordability compared with Sydney and Adelaide is improving buyer sentiment. Momentum is already visible in market activity, with auction clearance rates reaching 67% in October, one of the strongest spring results on record for the city.
Oliver Hume also points to Melbourne’s improved relative affordability as a key reason the market is regaining traction. The group notes that Melbourne now offers some of the best value among eastern seaboard capitals, with transaction volumes beginning to lift as buyer confidence returns.
In addition, interstate migration is turning positive. Domain reports that Victoria recorded its first net inflow since the pandemic in early 2025, adding pressure to both rental and purchase markets as population growth resumes.
National forecasts provide context, not the full picture
SQM Research expects national dwelling prices to rise between 6% and 10% in 2026, even under a base case where interest rates remain steady until mid-year before modest cuts. While Perth, Brisbane and Adelaide are forecast to post stronger headline gains than Melbourne, those markets are further advanced in their price cycles.
Oliver Hume suggests Melbourne is entering a different stage of the cycle. After several challenging years, the city is moving into a period of improving confidence, while markets that led growth between 2023 and 2025 are expected to ease into more sustainable conditions.
Melbourne’s projected growth of roughly 4%–7% reflects a city transitioning from stagnation into expansion. On that view, 2026 represents the early phase of a broader recovery rather than the end of a growth cycle.
Recent softness does not negate the outlook
PropTrack data shows Melbourne house prices rose by $59,300 over the past year to $1.015 million, though monthly growth slowed to 0.3% in November as listings increased through spring. Unit prices also recorded modest gains over the same period.
That moderation reflects increased choice rather than weakening demand. PropTrack senior economist Eleanor Creagh said higher listings and a pause in rate cuts had capped short-term momentum, while constrained supply and population growth continued to support prices into 2026.
This environment is often attractive to established buyers. Competition is less intense than in boom conditions, yet forecasts suggest upside remains as borrowing conditions gradually improve.
What this means for upgraders and investors
Upgrading households face a familiar calculation. Waiting may offer greater certainty around interest rates, but it also risks buying into a higher price point if forecasts materialise. Acting while growth is rebuilding can improve access to stock and support more measured negotiations, particularly while listings remain elevated.
Investors are seeing different dynamics. Domain expects Melbourne rents to rise gradually through 2026, with house rents forecast to reach around $595 per week. Vacancy rates remain higher than in Sydney or Perth, though renewed migration and limited new supply point to firmer conditions over time.
Oliver Hume highlights credit availability and population growth as key forces supporting Melbourne prices, even if interest rate expectations fluctuate. In that context, how finance is structured can be just as important as when a purchase is made.
Why lending strategy matters more than the headline forecast
Markets rarely move in straight lines. A 6% growth forecast assumes stable employment, modest income growth and no material tightening in credit policy. Small changes in borrowing capacity, loan structure or cash flow can materially affect outcomes, particularly for households managing school fees, existing property holdings and long-term investment plans.
Working with an experienced mortgage broker in Melbourne allows these variables to be modelled properly. A considered lending strategy, often developed with a home loan broker who understands complex incomes and portfolio structures, can create flexibility regardless of whether rates move sooner or later than expected. This is where Melbourne mortgage brokers focused on strategic advice, rather than transactional lending, add the most value.
If you’re weighing up whether buying ahead of expected growth makes sense for your situation, AXTON Finance can help. We’ll walk you through your borrowing options, the costs you need to factor in and the lending strategy that supports your next move. Call 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch today.