Melbourne Property Market Update April 2026: Prices Soften, Opportunities Emerge for Patient Buyers

Published 29 April 2026 · Follio Research · 4 min read

Melbourne’s property market has continued to soften through the first quarter of 2026, with consecutive monthly price declines driven by back-to-back interest rate rises and subdued buyer sentiment. However, with the median house price remaining well below other major capitals and supply dynamics beginning to shift, Melbourne may be approaching a genuine entry point for well-positioned buyers.

Melbourne House Prices Fall for Third Consecutive Month

Melbourne dwelling prices fell 0.2% in March 2026, following declines of 0.3% in February and 0.2% in January. The median house price now sits at approximately $822,000, down marginally from $826,000 at the start of the year.

The 12-month rolling average of price growth peaked at around 5.2% in mid-February before declining sharply to approximately 3.6% by the end of March, a direct response to the RBA’s back-to-back cash rate increases in February and March. Weekly price data confirm the pattern, with negative readings dominating through the quarter and a sharp 0.11% decline recorded in the final week of March.

Unlike Perth, Melbourne’s housing market has demonstrated clear sensitivity to interest rate movements. Higher borrowing costs reduce purchasing capacity and weigh on buyer confidence, and with financial markets pricing a greater than 60% probability of a further 25 basis point increase in May, near-term price pressure is likely to persist.

Melbourne Auction Market: Clearance Rates Signal Softer Conditions

Melbourne’s auction market has shifted noticeably from the stronger conditions seen in Spring 2025. Clearance rates averaged around 58-59% across the four weeks of March 2026, with a low of 57% recorded in mid-March, roughly six percentage points below the same period in 2025.

At the same time, auction volumes have remained elevated, with several weeks exceeding 1,100 auctions and reaching more than 1,300 in the final week of March. More stock hitting the market while fewer properties are clearing at auction confirms that buyers are becoming more selective and taking longer to commit.

A sustained return of clearance rates toward 70% would signal that demand is once again absorbing supply efficiently. For now, Melbourne remains a buyer’s market.

Melbourne Housing Supply: Oversupply Persists but Pipeline is Easin

Melbourne’s oversupply challenge is rooted in the pandemic era, when a net loss of more than 80,000 Victorians to other states significantly reduced housing demand while construction continued. Although overseas migration has surged since borders reopened, the additional demand has not yet fully absorbed the excess stock.

In the September 2025 quarter, Victoria completed 13,639 dwellings against migration-driven demand for approximately 9,809 homes, leaving an estimated surplus of around 3,830 dwellings for the quarter alone.

However, there are early signs the pipeline is tightening. Victoria’s three-month moving average of dwelling approvals has declined over recent months, sitting at around 4,302 in February 2026. Fewer approvals today means less new stock entering the market in 12 to 18 months, which should gradually support price stability as the oversupply is absorbed.

Melbourne First Home Buyers and Investors: Signs of Positioning

First home buyer activity in Victoria has grown steadily over the past two years, with new loans rising from 7,753 in March 2023 to 9,860 in the September 2025 quarter, an increase of 27%. Melbourne’s relative affordability compared to Sydney and Perth continues to support accessibility for new buyers, particularly as reduced investor competition lowers pressure at entry-level price points.

Investor activity tells an interesting story. The December 2025 quarter recorded an uptick in both the number and average size of new investor loans, suggesting some investors may already be positioning for a market recovery. Average investor loan sizes have remained relatively restrained, indicating cautious rather than speculative entry.

Melbourne Property Market Outlook 2026: Softness Creates Opportunity

The near-term outlook for Melbourne property remains subdued. Further rate rises, persistent inflation, and rising unemployment all trending toward what Follio’s Chief Economist describes as the “three fives” scenario will continue to weigh on buyer sentiment and borrowing capacity through 2026.

However, Melbourne’s cyclical position is worth noting. The city remains one of Australia’s most liveable and economically significant markets. With prices at their most accessible relative to other capitals in years, reduced investor competition, and a construction pipeline that is beginning to ease, the conditions for a medium-term recovery are gradually forming.

For buyers with capacity to act during a period of softness, Melbourne may represent the most compelling entry point of the current cycle.

Disclaimer: This article is for general informational purposes only and does not constitute financial or investment advice. Source data: Cotality, Domain, REIV, ABS, RBA.