August 2026 column
The slowdown in the Victorian housing market is evident in the data released over the past month. Price growth continues to slow with some declines, days on market continues to rise and according to SQM Research, the number of properties for sale in Melbourne is at a record high. Since the last column, we’ve also had new data on inflation, an RBA rate decision and quarterly mortgage lending statistics.
Let’s look at the key data over the past month.
Inflation remains elevated and is expected to remain so for some time
Inflationary pressures remain elevated and this is likely to see interest rates remain at an elevated level for longer. In fact, the RBA just published its latest forecasts and they currently aren’t expecting inflation to return to the 2 per cent to 3 per cent target range until late in 2027 and to return to the 2.5 per cent target until the first half of 2028.
These forecasts are predicated on it being more likely than not that the RBA will lift the cash rate by another 25 basis points.
In June 2026, headline inflation was 3.8 per cent higher over the year, down from 4.0 per cent the previous month and the RBA’s preferred measure of underlying inflation was unchanged at 3.6 per cent. Both of which remain too high and outside of the target range and above the 2.5 per cent target.
Housing inflation continued to accelerate and was 6.8 per cent higher over the year, up from 6.5 per cent the previous month and continuing to see the largest rise of any CPI group.
Perhaps on the positive side of things, amongst the capital cities Melbourne has continued to see the slowest annual rate of inflation at 3.2 per cent and the rate of growth has continued to slow.
Persistent high inflation is a challenge for everyone, the goods and services we all consume cost more leaving us with less money to save and less money to spend on the things we’d like. The subsequent higher interest rates for longer reduce borrowing capacities and create pressure on rents.
The RBA left the cash rate on-hold in August but hasn’t ruled out future rises
At their Monetary Policy Board meeting the RBA decided to keep the official cash rate on-hold for the second consecutive meeting at 4.35 per cent.
The meeting coincided with the release of the RBA’s latest economic forecasts which were based on the assumption that it was more likely than not that the cash rate would increase another 25 basis points.
These forecasts have inflation remaining elevated and as previously noted not returning to the 2 per cent to 3 per cent target range until late next year and to the mid-point of the range until the first half of 2028.
It was quite interesting in the press conference following the decision that the RBA Governor was quite candid and indicated that she believed the risks were strongly tilted to higher inflationary pressures necessitating further interest rate increases.
Mortgage lending in Victoria continues to slow
The latest lending indicators data for the June 2026 quarter found that for the second consecutive quarter new mortgage lending continued to slow.
Over the quarter there were 36,122 new mortgages in Victoria which was the second consecutive quarterly fall. New loans were 8.8 per cent lower over the quarter, their largest fall since December 2022, but 0.7 per cent higher than the same quarter last year.
The number of loans to investors fell sharply, down 14.2 per cent over the quarter which was the largest fall since June 2020.
There was a 6.9 per cent quarterly fall in the number of loans to owner-occupier non-first home buyers, the largest fall since December 2022.
New loans to owner-occupier first home buyers were also lower over the quarter, down 3.3 per cent but this was a smaller decline than over the previous quarter.
It’s clear from this data that mortgage demand in Victoria is falling despite the fact that on a relative basis housing in the state is now much more affordable than most other states and territories.
The decline in lending is a combination of the ongoing weak home value growth which is now turning into declines and the tax changes around investment properties which were announced in the federal budget, with the quarterly decline in new loans to investors much larger than loans to owner-occupiers.
Importantly, the federal budget was only announced half-way through the quarter and then the changes to SMSF lending for residential didn’t go live until early August so the September quarter may show a bit of a rush from these types of investors.
I believe it is quite likely that the next few quarters will see an even larger fall in lending to investors throughout the state.
Obviously fewer investors will mean fewer rental properties which is likely to lead to a tightening of rental supply and potentially higher rents.
Prices slip over the past few months for houses in Melbourne
The latest data from REIV found that median house prices in July 2026 were $900,000 in Melbourne and median unit prices were $638,000.
Median house prices were lower for the second consecutive month, falling 4.3 per cent yet they were still 2.9 per cent higher over the year but that annual rate of growth continues to slow.
Melbourne’s median unit price lifted by 1.3 per cent over the month and has also risen at a fairly slow pace of 2.9 per cent over the past year.
Melbourne is showing strong affordability relative to other capital cities but weak sentiment and a large volume of stock available for sale is seeing house values fall over recent months and relatively weak annual growth for houses and units.
The regional Victoria market is also quite mixed with the median house price at $670,000 in July 2026 and the median unit price $465,250.
Median house prices were 1.5 per cent higher over the month and 8.9 per cent higher over the year, rising at a much faster pace than those in Melbourne.
Regional Victoria’s unit prices were 0.4 per cent lower over the month which was the third consecutive monthly fall, although they were still 10.8 per cent higher than a year ago and like houses, are much cheaper than Melbourne units.
With recently announced tax changes for investors along with inflation and interest rates remaining elevated, I expect growth in the market will continue to slow and lead to some declines in values, with these likely to be more prevalent in Melbourne than in regional areas.
Properties are taking longer to sell than a year ago in Melbourne but regional properties are selling quicker
In July 2025, private sales in Melbourne had a median time on market of 37 days, in July of this year that had risen to 46 days. The 46 days figure was also higher than the 43 days in June 2026.
Across each of the inner, middle and outer rings of the city days on market is higher over the year with the inner region seeing properties sell quickest and the outer region seeing properties take the longest to sell.
In regional Victoria, properties were typically taking 49 days to sell in July 2026, compared to 48 days in June 2026 and 58 days in July 2025.
Melbourne buyers are faced with a lot of stock to choose from and much less competition to buy so it is no surprise that days on market is trending higher and the increasing trend is likely to continue.
In regional Victoria stock levels are tighter and demand is holding up better than it is in Melbourne but I still wouldn’t be surprised if days on market continues to rise over the coming months, especially if spring brings a lot more stock for sale.
Given the high volume of stock for sale and rising days on market it is important that vendors that bring stock to market are actually motivated to sell. Price expectations may also need to be tempered due to the high volume of stock for sale and adjusting and meeting market price expectations will be essential if you want to sell in this market.
The total number of properties advertised for sale in Melbourne reaches an historic high
According to data from SQM Research, there were 18,230 newly listed properties for sale in Melbourne in July 2026. This represented a 15.5 per cent monthly increase and a 30.2 per cent year-on-year increase, the largest of any capital city.
This large surge in new listings happened before the Spring Selling Season and may rise further in the coming months.
Total property listings for the city reached an historic high of 50,867 listings and was 15.5 per cent higher over the month and 42.8 per cent year-on-year with the annual increase the largest of any capital city.
Interestingly, it has been houses that have seen a significant rise in total listings.
There has also been a significant increase in total listings across regional Victoria.
A high volume of stock available for sale is resulting in properties taking longer to sell and weaker growth in property prices.
This is affording buyers plenty of choice at a time when the number of active buyers has reduced. As a result, selling conditions which were already tough are getting tougher and it seems likely they will worsen.
Rents continue to rise but only at a moderate pace
As of July 2026, the median house and unit rent throughout Melbourne was $600 per week. Compared to most other capital cities the cost of renting is relatively lower.
House rents in Melbourne were 0.8 per cent higher over the month and 3.4 per cent higher over the year and unit rents were unchanged over the month but 4.3 per cent higher than in July 2025.
Melbourne is also experiencing relatively higher rental vacancy rates than most other capital cities, with REIV reporting the vacancy rate in July 2026 was 2.6 per cent, up from 2.5 per cent a year ago.
Predictably, median weekly rents are cheaper in regional Victoria at $530 per week for houses and $420 per week for units. These markets have also seen stronger rental growth over the year with house rents up 6.0 per cent and unit rents 5.0 per cent higher. However, over the past month, regional house rents rose 1 per cent while unit rents fell 2.3 per cent.
Regional Victoria is seeing rental vacancy rates also trend higher with the REIV reporting a vacancy rate of 2.5 per cent in July 2026, up from 1.9 per cent a year ago.
Final thoughts
The national market is seeing weaker growth in dwelling values and Victoria is not immune. Although prices are still higher over the past year, the growth is stalling and higher interest rates for longer and recent property taxation changes are likely to further contribute to a housing slowdown.
Victoria has seen much weaker price and rental growth than other states over recent years yet the market is still seeing an historically high volume of stock available for sale which is likely to see the market continue to slow.
Rental conditions are somewhat similar with relatively high rental vacancy rates and quite slow rental growth despite rents being much cheaper than in other states and territories.
Although rental growth has been slower, the ongoing weakness in price growth has improved rental returns and with the tax changes making investment income more of a focus than capital growth, this may attract more investment into the Victorian housing market.
Overall, the market is characterised as one with a fairly low level of demand for housing right now which is highlighted by rising stock on market and increasing days on market. As discussed, the amount of stock for sale is historically high
The buyers that are active in the market have a lot of choice and a lot less competition from other buyers. These are conditions where it is essential that if you are putting a property to market you are truly motivated to sell, otherwise there is no point.
If you are motivated, you need to set a realistic price and listen to market feedback on price otherwise you’ll also end up not selling.
About Cameron Kusher
Over the last 20 years Cameron has worked as a property researcher for major businesses such as PRDnationwide, CoreLogic (now Cotality) and REA Group.
Cameron spent 12 years at CoreLogic as the Head of Research for Australia and 5.5 years at REA Group as the Director of Economic Research. Over the past 17 years he has become a well-regarded thought-leader on the residential property market and delivered thousands of presentations to the industry, customers and consumers.
He is passionate about taking complex economic and property insights and making them easy for anyone to understand, free of the jargon that most economic and property presentations tend to contain.