Melbourne house prices are forecast to rise sharply over the next two years, with new KPMG modelling pointing to a six-figure lift in median values despite weaker investor activity. Picture: NCA NewsWire / Ian Currie
Melbourne’s median house price is forecast to jump by about $150,000 over the next two years, as the city’s housing recovery gathers pace despite weaker investor activity than other capitals.
New forecasts from consultancy giant KPMG suggest Melbourne house prices will rise a combined 14.1 per cent by the end of 2027, with growth of 6.8 per cent in 2026 followed by 7.3 per cent in 2027.
Based on PropTrack data showing Melbourne’s median house price at $1.012m in December, applying KPMG’s forecast growth would lift the median to roughly $1.16m, an increase of about $150,000
Applied to PropTrack’s median Melbourne unit value of $630,000, that would add roughly $83,000 over the two-year period.
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The outlook comes despite a pullback in visible investor activity, with Victoria’s land tax settings changing how the market operates rather than triggering a downturn.
KPMG’s Residential Property Market Outlook indicates Melbourne’s recovery is holding even as investor caution weighs more heavily in Victoria than other states, leaving the city’s housing market tighter and slower to turn over.
KPMG chief economist Dr Brendan Rynne says Victoria’s land tax settings have reshaped investor behaviour, moderating price growth without triggering a housing downturn.
KPMG chief economist Dr Brendan Rynne said land tax had become a structural feature of Victoria’s housing market, influencing investor behaviour and capital allocation
“Growth has still been relatively weak compared to other states, and that caution has been influenced by the land tax changes introduced a few years ago,” Dr Rynne said.
Dr Rynne said academic research cited by KPMG showed land tax had a statistically significant effect in moderating house price growth in Victoria, particularly compared with stronger gains in states such as Queensland and Western Australia.
At the same time, demand-side policies, including the expansion of the five per cent deposit scheme, had supported first-home buyer activity nationally, accelerating growth at the lower end of the market.
While Victoria did not experience the same surge as some interstate markets, KPMG’s forecasts suggest Melbourne’s lower price base has left it well positioned for further growth over the next two years.
Mortgage Choice Cheltenham broker Rhys Elmi says buyers are increasingly holding onto their first homes as investments rather than selling, tightening supply across Melbourne.
Mortgage Choice Cheltenham broker Rhys Elmi said the biggest shift he was seeing was not investors borrowing less, but buying differently.
“They’re buying differently, not necessarily borrowing less,” Mr Elmi said.
He said many clients were now converting their existing first home into an investment and upgrading into a new owner-occupied property later, rather than selling the first home to fund the move.
KPMG forecasts suggest Melbourne house prices could rise more than 14 per cent by the end of 2027, based on extrapolated growth applied to PropTrack median price data. Picture: Google Gemini
That behaviour reduces the number of properties cycling back onto the market, contributing to tighter listings and slower turnover even as buyer demand remains.
“If they don’t need to sell, they won’t,” Mr Elmi said.
NI Advocacy director and buyers’ agent Kevin Ni says investor activity has shifted off-market, with many deals now taking place away from public auctions and inspections.
NI Advocacy director and buyers’ agent Kevin Ni said investor participation had fallen sharply in public real estate listings, particularly at auctions and open inspections.
“Buyers’ agents are still transacting heavily for investors, it’s just not public,” he said.
Mr Ni said off-market transactions had become the predominant way investor deals were being done across Melbourne, driven by a desire to limit competition and secure clearer pricing.
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