“We have two classes of forecasters: Those who don’t know – and those who don’t know they don’t know” – John Kenneth Galbraith – Economist
I’m in the former category – I don’t know with any certainty what will happen in the Melbourne market in 2026.
What I am certain of is that Melbourne property by its very nature is a long-term hold proposition.
BIG picture there are key cultural & structural factors that support long term Melbourne housing price growth.
- Australians will continue to see residential property as a relatively safe place to store & grow their wealth & will continue to prefer the emotional upside of owning rather than renting where they live. This underpins demand and adds to stability.
- Melbourne’s aggressive population growth – driven primarily by overseas migration – will continue, & with it the demand for housing. Australian federal governments regardless of which party have become reliant on immigration for economic growth. This underpins demand.
- Supply constraints – planning and regulatory choke points mean that Melbourne’s property supply is struggling to keep up with demand from population growth. This puts pressure on prices to rise.
- Building costs – labour and materials look unlikely to drop significantly & may potentially rise further. This puts pressure on prices to rise.
- Government, both state & federal attempts to help first home buyers (shared equity, 5% deposit, stamp duty concessions etc, etc) are increasing the pool of first home buyers and their capacity to spend. This puts pressure on prices to rise.
As with any year, interest rate movements will have an impact in 2026 – particularly in the sub $1m market.
However I suspect there needs to be at least two increases or cuts for it to have a material impact on pricing.
Given the BIG picture factors outlined above, inner city Melbourne property buyers can approach 2026 confident that it’s a good year to buy.
The most important question for astute buyers in 2026 is – where in Melbourne can I buy the right type of property, in the right suburb, in the right locality & afford to hold it long term?
Some things to be particularly aware of in 2026:
Price quoting legislation is changing.
Proposed legislation where vendors will be required to publish a property’s reserve price (the lowest price a vendor will accept) at least seven days before the auction or fixed date sale – is likely to came into effect mid 2026.
On face value this appears to be good for buyers but to me it seems to undermine the key tenet of auctions – for the vendor you get to put your property on the market and find out what it’s worth. And, for buyers, you get to see what a property is worth transparently.
Forcing vendors to disclose a reserve i suspect will cause them to nominate a high number to protect their upside and encourage Expression of Interest Campaigns (EOI).
Buyers strongly dislike, and are at a disadvantage with EOIs because of the lack of pricing transparency & a lack of clearly understood rules/protocols around the process & timelines.
Effectively one visibility problem may prove to have been swapped for bigger one which I suspect will end up with buyers yearning for the simpler & more transparent pricing days of auction campaigns.
The other challenge is that Consumer Affairs Victoria appears to be woefully under resourced re investigating breaches throughout the residential property industry whether it be underquoting or anything else.
The “shitification” of property information continues to gather pace.
The explosive growth in property information has come at the cost of accuracy, detail & context.
Algorithms have a bias towards emotive simplistic click bait and as this information increases in prevalence, so will broad simplistic misconception.
As a buyers advocate specialising in a very specific market – clients like that i have in-depth nuanced knowledge of inner-city Melbourne suburbs.
Suburbs & localities within suburbs are micro markets needing strong local insights e.g. cut through streets, sales results that are outliers – both over & under market value, or nearby developments that will affect prices – to name but a few.
Higher density projects in inner city suburbs are unstoppable & offer both risk & opportunity to buyers
As the state government needs to accommodate a forecast cast 1.2 million new residents arriving in Melbourne in the next circa ten years. Its town planning legislation seeks to accommodate this increased population primarily within the existing boundaries of Melbourne – with an emphasis on apartment development around inner-city transport hubs.
Prospective buyers need to be aware of the increased risk this poses to both the lifestyle & price performance of their prospective purchase.
What’s the possibility that the beautiful single story Victorian family house next door with a wonderful garden becomes a six-level apartment block?
Conversely as heritage houses in suburbs with strong heritage protection zones become even more scarce, its likely they will continue to enjoy strong consistent long term capital growth.
I don’t think it’s a coincidence that the three most expansive suburbs in Melbourne (on a $ per m2 of land basis ) East Melbourne, Middle Park & Albert Park – are characterised by consistent heritage architecture streetscapes with strong heritage protection.
One of the most frequent concerns I have heard from clients in 8 years as a buyers advocate is a concern that the property has a heritage overlay. Assuming we are in an area with a predominance of heritage architecture – with heritage protection – the heritage overlay is good news.
Interstate investors are back in inner city Melbourne
Not really surprising when over the last five years Melbourne has had the lowest pricing growth – by a wide margin of all Australian capital cities.
I’ve noticed a particular increase in investors from Sydney. Again not surprising when according to Cotality the gap between Sydney & Melbourne prices has n’t been this wide for circa 25 years.
A practical example being a client I bought a fully & beautifully renovated four-bedroom heritage house on a circa 300 m2 block which they effectively swapped for a two bedroom unrenovated unit with a sea “glimpse” in Mosman.
While the return of interstate investors is a good for existing Melbourne homeowners it’s not good news for prospective Melbourne home buyers who are increasingly going to be competing with interstate investors.
Always interested in discussing Melbourne property, don’t hesitate to reach out.
Cheers,
Scott
0457 513 124
