The Albanese government’s May federal budget has exacerbated a housing market correction in Melbourne that is now threatening to be the worst in at least a decade.
Melbourne’s housing market crunch is on track to be its worst in at least a decade with 93 per cent of suburbs losing value in the past three months.
Experts have also warned federal budget changes to negative gearing and capital gains tax benefits for investors have already made the correction worse and are likely to continue weighing on homeowners in the months ahead.
PropTrack’s latest Quarterly Home Values report has revealed a shocking 380 suburbs lost ground in the June quarter – out of a total of 409 areas with a reported median house value.
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There are now just 29 suburbs where the typical house value is growing, and only 18 of them recorded a gain of more than 0.5 per cent.
Romsey and Lancefield head the list of doom-defying suburbs with an 8 per cent increase in their median house prices to $870,368 and $787,405 respectively.
SEE IF YOUR SUBURB GAINED OR LOST VALUE HERE.
Of the remaining growth spots, 26 had a median house price below $950,000, with market watchers indicating it was likely they were being kept afloat by first-home buyers supported by the federal government’s 5 per cent deposit scheme.
For those in decline, the share is the worst recorded in past editions of the report.
Lancefield is one of the few parts of Melbourne where home values rose in the June quarter. This four-bedroom house sold for $995,000 in June.
It is already beyond December 2022 when the report revealed 359 out of 419 suburbs had a decreased median house value, more than 85 per cent, after the Reserve Bank raised interest rates from 0.35 per cent to 3.6 per cent in the span of eight months.
Even in September, 2024, when large numbers of homeowners who had fixed rates at lower levels were swapped onto higher variable rate loans as the nation went over a mortgage cliff, only 89 per cent of suburbs were in decline.
Melbourne units did slightly better in the latest data, with those in 79 suburbs gaining in the past three months.
Melbourne’s doom-defying house markets
| Suburb | Median value | Quarterly change |
| Romsey | $870,368 | 8% |
| Lancefield | $787,405 | 8% |
| Portsea | $3,054,375 | 7% |
| Lower Plenty | $1,419,863 | 2% |
| Tullamarine | $807,467 | 2% |
| Maddingley | $654,861 | 2% |
| Darley | $698,971 | 2% |
| Bacchus Marsh | $655,584 | 2% |
| Kealba | $750,246 | 1% |
| Kings Park | $665,456 | 1% |
Source: PropTrack June 2026 AVM
But they were still heavily outnumbered, with 204 going backwards, about 72 per cent.
PropTrack senior economist Anne Flaherty warned there was still a chance for another interest rate hike in August, a “lot of uncertainty” ahead and a likelihood the federal budget’s changes to tax settings could make their already negative forecast for Victoria’s capital even worse this year.
Combined, the economist said the current downturn could be Melbourne’s “worst in a decade”.
Economist Anne Flaherty says Melbourne’s housing market could be headed to its toughest correction in a decade.
While PropTrack anticipates Melbourne would grow again in the next 18 months, Ms Flaherty said she believed there would be more suburbs with median house prices being caught up in declines now than in the past.
“So I don’t think it will necessarily be shallower, and it might be deeper than past corrections in the most recent decade,” Ms Flaherty said.
“There’s some pretty strong signals that prices are likely to fall further than we did expect pre-budget.
“The declines that have happened across Melbourne, there’s not really any doubt that the budget has been an exacerbating factor.”
However, with Melbourne being relatively affordable to other capitals, she said there would be a floor under any market correction.
“And with Melbourne’s population growing, prices can’t go into free fall, people will still need somewhere to live and that will limit the depth,” she said.
“But I do think there’s absolutely potential for this to go deeper than past corrections.”
The Albanese government’s May budget made major changes to investor tax benefits around negative gearing and capital gains tax and has caused a variety of knock on impacts to housing markets — including Melbourne house values. Picture: Getty Images.
However, the economist said the time was perfect for first-home buyers, and those considering upsizing who faced a “reasonably good chance” that in dollar terms, they would wind up getting a bigger discount on the home they bought than they would have to lose to get their home sold.
Prominent buyer’s agent Nicole Jacobs said it wasn’t surprising to see more affordable areas dominate the suburbs with the highest growth at present.
“We have just had three months of some of the best opportunities as a buyer,” Ms Jacobs said.
“And the market will continue to be a great buyer platform. So it is a terrific time to upgrade, because the difference between what you are selling for and buying at will be much bigger.”
The buyers’ advocate added that the other major benefit for potentially selling for less today, and buying for less as well, would be a smaller mortgage than you would face if you waited for rates to be cut and the market to pick up speed.
Houses in Kealba were also among those to escape the downturn, with this three-bedroom residence earning $755,000 in June.
Jellis Craig chief executive Andrew McCann said homes under $750,000 or at most $1m, were the “most productive and most stimulated market in the country” thanks to its relative affordability and a federal government scheme for first-home buyers allowing them to buy up to $950,000 in Melbourne with a 5 per cent deposit.
“But buyers in the more premium areas are either on hold, or shoving their hands in their pockets,” Mr McCann said.
“So our prediction is that there is not going to be significant volume in the quality and premium segment of the market, and that will hold up and balance itself as an undersupply hits the market — so the best houses in the best areas will remain competitive.”
Melbourne’s doom-defying unit markets
| Suburb | Median value | Quarterly change |
| Roxburgh Park | $512,201 | 7% |
| Delahey | $565,441 | 7% |
| Mernda | $580,451 | 6% |
| St Kilda West | $583,496 | 6% |
| Spotswood | $730,612 | 5% |
| Campbellfield | $492,489 | 4% |
| Albion | $419,542 | 4% |
| Ivanhoe East | $799,427 | 4% |
| Kingsville | $499,640 | 3% |
| Wollert | $551,293 | 3% |
Source: PropTrack June 2026 AVM
Mr McCann added that there was also a bit of a renaissance for more regional or almost-regional markets at the moment, though they had undergone more significant softening in the past two years after hitting peaks during Covid.
“There’s more of a lifestyle demand to get out of the helter-skelter and the rat race when things are a bit more suppressed,” Mr McCann said.
Ray White agent Joshua Reeves said Romsey and Lancefield were benefiting from being just far enough away from major arterials that they were “undiscovered gems” and probably undervalued for the lifestyle they offered.
Roxburgh Park’s unit market was one of the city’s best performers, with a three-bedroom residence on The Ridge scoring a $520,000 sale last month.
“It’s not as expensive as other parts of the Macedon Ranges, even though you can still live in a country town that has it all,” Mr Reeves said.
The addition of a Coles to Romsey about a year ago had also changed the narrative for buyers, who could now see that key amenity and were responding to its presence.
“And there’s a big culture shift away to working from home, but people would rather have space around them — they don’t want work from home in a shoebox,” Mr Reeves said.
With that in mind, he said he was expecting to see Romsey and Lancefield continue to defy the odds.
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