Melbourne Property Market Update March 2026: Flat Prices, Rising Supply and Rate Rise Caution

Published 23 March 2026 · Follio Research · 4 min read

The Melbourne property market has entered 2026 in a stable but cautious position. Unlike Perth and Brisbane, where prices are surging, Melbourne house prices have remained broadly flat, sitting at $826,000 in February 2026. Here is what the data shows.

Melbourne House Prices Essentially Flat in February 2026

Melbourne recorded near-zero monthly price growth in February 2026, a modest improvement on the negative readings seen in December 2025 and January 2026. Weekly data confirm the pattern: small positive gains in early January gave way to negative weekly movements from late January through to early March, with the largest single-week decline of -0.05% occurring in early March 2026.

Unlike markets such as Perth, Melbourne house prices are sensitive to interest rate changes. The February 25 basis point RBA rate rise weighed on buyer sentiment, and further rate rises expected in 2026 are likely to keep growth subdued in the near term. Melbourne’s relative affordability compared to Sydney does provide some buffer, as rising rates have a smaller impact on borrowing capacity at lower price points.

The Melbourne median house price is projected to remain broadly flat through to mid-2026, with a marginal decline possible. If further rate rises materialise, prices could soften below current projections, potentially creating buying opportunities for first home buyers and upgraders.

Melbourne Housing Supply: Auction Clearance Rates Declining

Melbourne auction clearance rates have trended downward since their peak of around 70% in Spring 2025, sitting at approximately 64% in recent weeks. The weakest reading of the period occurred in early March 2026 at just 59%. At the same time, weekly auction volumes have increased from an average of around 773 in mid-2025 to roughly 1,011 in recent months, meaning more stock is hitting the market while fewer properties are selling at auction.

Unsold properties have risen from around 234 per week between August and October 2025 to approximately 365 per week since November, confirming that the Melbourne market is clearing stock less efficiently. Despite this softening, clearance rates are still around 7 percentage points higher than the same period in 2024, indicating that underlying demand has not collapsed.

Melbourne Dwelling Approvals Trending Down

Victoria recorded 3,192 dwelling approvals in January 2026. On a three-month moving average basis, approvals have dropped sharply over the past two months, pointing to a declining pipeline of new housing supply. This is positive news for the oversupplied Melbourne market. Approvals and commencements track closely together in Victoria, suggesting that as approvals fall, new construction will follow, gradually reducing Melbourne’s housing oversupply over 2026.

Melbourne Rental Market: Stable Vacancy, Modest Rent Growth

Melbourne’s rental market has remained remarkably stable compared to other capital cities. The vacancy rate has stayed within a narrow range of 2.3% to 2.5% over the past year, averaging around 2.45%. Melbourne median weekly rent increased from $575 in March 2025 to $590 by January 2026, a rise of just 2.6% over ten months.

The stability reflects a rough balance between supply and demand in the Melbourne rental market. Fewer renters are transitioning into homeownership, keeping rental demand steady, while new and vacated rental properties are being absorbed without significant upward pressure on Melbourne rents.

Melbourne First Home Buyers and Investors: Steady Growth

Melbourne first home buyer loan numbers rose from around 9,100 in the March 2024 quarter to approximately 10,300 by the December 2025 quarter, a steady increase rather than the sharp surge seen in WA and Queensland. The expanded First Home Guarantee Scheme lifted the Melbourne purchase price cap to $950,000, making the scheme more accessible to Victorian buyers. Average first home buyer loan sizes have risen from around $516,000 in 2024 to $552,000 by December 2025, reflecting gradual price appreciation rather than the rapid escalation seen in Perth.

Investor activity in Victoria has increased more sharply, with new investor loans rising from 10,234 in March 2024 to 14,991 by December 2025. Notably, average investor loan sizes have remained relatively restrained, suggesting investors are entering the Melbourne market cautiously, recognising a potential bottom in the cycle rather than expecting rapid near-term capital gains.

Melbourne Property Outlook 2026: Rate Rises the Key Risk

Inflation reached 3.8% in January 2026, marking seven consecutive months above the RBA’s 2% to 3% target band. Financial markets were pricing in a 13% chance of a rate rise at the March RBA meeting, with a further 25 basis point increase expected by July 2026. A 1 percentage point rise in mortgage rates reduces borrowing capacity by 8% to 12%, which would place additional downward pressure on Melbourne house prices.

The Melbourne property market outlook for 2026 hinges on whether further rate rises materialise. If rates stabilise and approvals continue to fall, the market may gradually rebalance over the year, creating favourable entry conditions for patient buyers. If inflation remains sticky and the RBA tightens further, Melbourne property prices could soften modestly from current levels.

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