Michael Yardney , Founder
Following subtle declines through December and January, Melbourne’s housing market remained flat (0.0%) in February. The sluggish performance has dragged the market 0.4% lower over the rolling quarter, making Melbourne one of the less resilient capital city markets following the February interest rate hike and a noticeable softening in buyer sentiment.
The current growth is highly segmented, with a clear “two-speed” trend emerging. While affordable properties are outperforming the premium sector, demand is concentrating at lower price points as borrowing power continues to erode under higher interest rate settings.
Melbourne Market Performance
While the overall quarterly trend remains negative, the gap between the upper and lower quartiles is widening as serviceability constraints bite harder at the top end of the market.
| Segment | 3-Month Value Change | Performance Trend |
|---|---|---|
| Lower Quartile (Houses) | +1.0% | Resilient due to affordability-led demand. |
| Upper Quartile (Houses) | -1.4% | Sharpest decline as serviceability bites at the top end. |
| Unit Sector | -0.5% | Values softening across the board. |
Source: Cotality, March 2026
Affordability and Serviceability Constraints
The primary challenge for the Melbourne market is the combination of higher barriers to credit access and softening consumer sentiment. Inflation and cost-of-living pressures are cooling buyer enthusiasm, particularly in the premium house segment which saw a 1.4% slide.
The 1.0% gain in the lower quartile house values shows that competition remains for entry-level stock, but increasingly restrictive macroprudential measures and lower borrowing capacities are acting as a ceiling for the broader market.
Supply Dynamics and Future Outlook
A key factor dampening price growth is the significant lift in advertised stock. Freshly advertised listings have surged as vendors look to sell ahead of a further potential softening in market conditions, shifting leverage toward buyers.
| Metric | Status / Figure |
|---|---|
| Fresh Listings (vs. Last Year) | 18% Higher |
| Fresh Listings (vs. 5-Year Average) | 12% Above Average |
| Market Sentiment | Cautious due to rate hikes and supply surge |
Source: Cotality, March 2026
The outlook for Melbourne through 2026 remains cautious. While high employment levels act as a stabilizer, the surge in new listings expected toward Easter will likely provide buyers with more negotiation power. Sellers will need to remain realistic about pricing expectations as the market moves through this period of uneven growth.
