Michael Yardney , Founder
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Melbourne’s housing market showed a marginal recovery at the start of 2026, with home values inched 0.1% higher in January. This subtle uptick partially reversed the 0.2% decline recorded in December, though the city continues to trail the stronger growth seen in mid-sized capitals. Despite the slight gain, Melbourne values remain 0.7% below the record highs established back in March 2022.
The market is currently characterized by a notable divergence between housing types. While house values have shown more resilience, the unit sector continues to be a drag on overall performance, reflecting a shift in buyer preferences and supply dynamics within the high-density segment.
Melbourne Market Performance
The softer conditions in Melbourne have resulted in relatively healthier affordability compared to other major capitals, with the median house value still sitting below the $1 million mark.
| Segment | Monthly Change (January) | Annual Change | Median Value |
|---|---|---|---|
| All Dwellings | 0.1% | N/A | $780,000 (Approx) |
| Houses | Rising | 6.5% | $990,000 |
| Units | -0.2% | 2.7% | $640,000 |
Source: Cotality, February 2026
Divergence in Housing Types
The unit sector remains the primary weak point for Melbourne, with values falling 0.2% over the month. In contrast, house values have grown by 6.5% over the past 12 months, more than double the annual growth rate of units (2.7%). This widening gap highlights the sustained demand for detached housing, even as affordability constraints push some buyers toward lower price points.
Overall, while downside risks are significant, persistently low supply across both the established and new housing sectors is expected to continue outweighing these factors. Home values are projected to continue their rise through 2026, though the pace of gains is likely to slow as affordability constraints impose a natural ceiling on prices. For prospective buyers, the “silver lining” of these softer outcomes is a more accessible entry point.
Melbourne’s median house value of $990,000 and unit value of $640,000 provide a relatively more affordable alternative to Sydney, where median prices are significantly higher.
Supply and Demand Factors
Supply remains a critical factor in stabilising prices. Across the broader national market, and reflected in Melbourne’s conditions, advertised stock levels are tracking significantly below historical averages.
| Metric | Current Market Condition |
|---|---|
| Advertised Stock (National) | 25% below 5-year average |
| New Completions | Tracking well below average |
| Labor Market | Resilient; supporting mortgage serviceability |
Source: Cotality, February 2026
Outlook for 2026
The Melbourne market is expected to face continued headwinds throughout the year.
The RBA’s decision to raise the cash rate by 25 basis points in February, combined with the introduction of APRA’s debt-to-income limits, is likely to dampen borrowing capacity further.
However, the combination of low supply and a resilient labour market is expected to act as a buffer, preventing a sharp downturn. The city is likely to see “softer and more uneven growth” as it navigates these complex economic conditions.
