Melbourne’s property market has softened further through April, with dwelling prices falling 0.7% – the largest monthly decline of the year. The cumulative impact of three consecutive RBA rate rises is now clearly working through demand, with borrowing capacity under pressure and buyer sentiment weakening.

The 12-month rolling growth rate has declined in an almost linear fashion since February, reinforcing the view that higher interest rates are steadily weighing on the market. Weekly price data confirm the trend is accelerating rather than stabilising.

Auction clearance rates have tracked in the high 50s to low 60s through March and April – consistent with a market where supply is beginning to exceed demand. Volumes have remained solid, suggesting the imbalance reflects weaker demand rather than a contraction in stock.

Melbourne’s rental market remains relatively balanced, with vacancy rates between 2.3% and 2.6% and modest rent growth of around 2.6% over the past year – well below the pressure seen in other capital cities.

The near-term outlook remains challenging. With inflation at 4.6%, the cash rate at 4.35%, and unemployment edging higher, further price softness is possible. However, Melbourne’s cyclical position is worth watching. For buyers with stable employment and access to finance, the current phase of the cycle may present a genuine entry point.

Prepared by Ryan Brierty, Chief Economist, Follio.