Melbourne home prices are forecast to dip even further before Christmas, resulting in almost $40,000 being knocked off the city’s median house value.
A new realestate.com.au report, released today, shows Victoria’s capital is expected to deliver the worst performance out of all Australia’s capital cities, with a 4 per cent decrease in prices by 2026’s end.
Realestate.com.au’s latest Property Market Outlook Report is forecasting that Melbourne’s home prices will fall by 4 per cent, before the end of 2026.
This would equate to Melbourne’s current $995,000 median house price falling by $39,800 to reach $955,200.
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In comparison, Sydney is predicted to experience a 3 per cent drop in typical home values with all other capital cities slated for positive growth.
The last time Melbourne experienced a comparable fall in prices, of circa-5 per cent, was 2022, the year in which the Reserve Bank raised rates eight times.
The latest REA.com.au forecast comes despite the RBA deciding to hold interest rates for June, on Tuesday.
REA Group senior economist Angus Moore said that so far this year, Melbourne home values had declined for three consecutive months.
REA Group senior economist Angus Moore says that changes announced to capitals gains tax in the federal government’s 2026 budget will weigh on investor demand.
He said this would likely continue for the rest of the year as higher interest rates, Australian government tax changes and the cost of living put the market under pressure.
“There actually has been quite a lot of stock on market in Sydney and in Melbourne and we’re expecting that will weigh on home prices at the margin in 2026 relative to Brisbane, Adelaide and Perth, where there’s been very little stock on market and so that’s been supporting home prices,” Mr Moore added.
He said Victoria had also seen home prices impacted by a spike in people moving to other states post-Covid, at the same time as a rising number of Victorians left the state.
The REA report revealed Melbourne’s market is set face supply constraints in the future, with more than 1 million new Victorian residents expected in the coming decade. Picture: NewsWire/Andrew Henshaw.
Ray White Victoria chief auctioneer Luke Banitsiotis said most Melbourne homeowners weren’t rushing to put their properties up for sale at the moment.
He said the that if interest rates remained on hold for a short time, prices could remain steady as market confidence increased.
“I don’t know if we’ll be in a position where prices are going to start climbing in the short to medium term, but I can probably see a scenario where they hold,” Mr Banitsiotis said.
Ray White Victoria chief auctioneer Luke Banitsiotis taking bids at an auction.
“A hold could look like a 0.2 per cent reduction or a 0.2 per cent rise, something like that, but that would still be holding – it’s not dramatically going one way or the other.”
He added that while it was impossible to perfectly time when to buy or sell, Melburnians who purchased now ahead of a potential increase in home values next year would be poised to enjoy capital growth in 2027.
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