Melbourne Property Market – Prices, Trends, Forecast [February 2026]

Melbourne’s housing market has started the year on a steadier footing, with values edging higher after a soft patch late last year. Growth has been modest compared with several other capitals, reflecting ongoing affordability pressures and cautious buyer sentiment.

Even so, annual conditions remain positive, and the market continues to show resilience under tight supply. Melbourne’s median dwelling value sits at $830,371, and while prices are firmer than a year ago, values are still a little below the city’s previous record high, suggesting a slower, more grinding recovery rather than a sharp rebound.

Market Highlights

• Melbourne dwelling values rose 0.1% over the past month, signalling a mild return to growth after late-2025 weakness.
• Annual growth is 5.4%, with total returns around 9.0% when income is included.
• The median dwelling value is $830,371, keeping Melbourne more affordable than Sydney but still challenging for many buyers.
• Values remain about 0.7% below the prior peak, pointing to a market that is recovering but not overheating.
• Tight housing supply continues to support prices, even as demand is constrained by borrowing costs and cost-of-living pressures.

See how Melbourne’s property values have performed across houses and units over various timeframes, along with returns, yields, and median prices.

Watch CoreLogic’s December 2025 Housing Market Update for expert commentary on national and capital city housing trends, price movements, and key market drivers across Melbourne.

Melbourne Property Price Growth

Melbourne’s price growth has been positive but subdued, with dwelling values rising 0.1% over the month and 0.1% over the quarter. That marginal lift is important because it marks a stabilisation after slight falls late last year, but it also highlights how constrained conditions remain compared with stronger-performing capitals.

Over the past 12 months, Melbourne dwelling values are up 5.4%, supporting solid household wealth outcomes without the sharp acceleration seen in some smaller markets. Total returns are around 9.0% once income is factored in, showing that returns are being supported by both capital growth and holding income, even as yields remain relatively low by national standards.

Over a longer horizon, Melbourne’s growth has been steady rather than spectacular. Values have risen materially over the past five years, yet the city is still about 0.7% below its previous peak, leaving room for further gains if conditions improve, but also signalling that momentum is not broad or exuberant.

Melbourne Property Market Trends

Melbourne’s current market dynamic is best described as balanced-but-tight. Stock constraints are helping to keep prices supported, while affordability and serviceability limits are capping how far buyers can push values. This creates a market where competition persists for well-priced homes, but price growth stays measured.

Demand is also being shaped by “value-seeking” behaviour. Buyers are more sensitive to price and repayment costs, so activity tends to concentrate in segments that still feel attainable relative to incomes. That pattern can reinforce steadier conditions in middle and more affordable parts of the market, while premium areas may see slower turnover and softer momentum.

Rental settings add another layer. With vacancy conditions generally tight across most capitals and rents still rising, investors and would-be buyers have continued incentives to stay engaged. However, with yields comparatively modest in Melbourne, the investment case relies more heavily on expectations of gradual capital gains than on high income returns, which can temper speculative demand.

The table outlines CoreLogic’s Home Value Index as of 2nd February 2026, showing peak declines, five-year growth, and changes since the first rate cut in February.

Melbourne Property Market Forecast

Melbourne is likely to see a year of softer, uneven growth rather than a clear-cut boom or bust. The main constraint remains affordability, and any further lift in interest rates or sustained cost-of-living pressures would quickly reduce borrowing capacity and buyer confidence. Credit settings are also becoming more cautious, which can limit high-leverage activity and slow price momentum.

At the same time, the downside appears buffered by tight supply and a labour market that remains supportive of household balance sheets. Construction and listing constraints mean buyers may have limited choice, which tends to reduce the risk of sharp price falls unless economic conditions deteriorate meaningfully.

Overall, Melbourne’s outlook points to moderate gains, with the market more likely to “grind higher” than surge. If borrowing costs stabilise and confidence improves, growth could broaden gradually. If rates rise or sentiment weakens, Melbourne may simply track sideways for periods, with small month-to-month moves rather than a decisive trend.

The Reserve Bank of Australia’s ongoing adjustments to interest rates will likely play a crucial role in shaping market dynamics, as higher borrowing costs limit purchasing power for many buyers.

Here are some of the most recent forecasts by the big-4 banks in Australia:

• ANZ predicts a 5-6% increase in capital city property prices in 2024, with Brisbane expected to see the highest rise at 9-10%, Perth property values could go up by 1-11%, Sydney by 4-5%, and Melbourne prices by 2-3%.
• CBA forecasts a 5% rise in capital city prices, with some variations: Brisbane is anticipated to grow by 6%, Melbourne and Perth by 5%, Sydney by 4%, and Adelaide by 1%.
• NAB projects a 5.4% average increase across the capitals, with Brisbane expected to see a 6.5% rise, Perth and Adelaide by 6.2%, Melbourne by 5.5%, Sydney by 5%, and Hobart remaining flat.
• Westpac expects a 6% growth across the combined capitals, with Perth leading at 10%, followed by Brisbane at 8%, Sydney at 6%, Adelaide at 4%, and Melbourne at 3%

Oxford Economics recently released property forecasts predicting where house prices will be in three years.

Conclusion

Melbourne is moving forward, but carefully. Price growth has returned, annual gains are positive, and tight supply is providing an ongoing floor under values. Still, the pace is restrained by affordability ceilings and cautious sentiment.

For buyers and sellers, the practical takeaway is a market that rewards realism: well-priced, well-located homes can still attract competition, while overstretched expectations are less likely to be met quickly. Over the year ahead, Melbourne looks set for steady, modest growth with occasional pauses, rather than dramatic swings.

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