February 2026 column
This month, we identify some of the key talking points about the market and provide context to help you discuss the relevance of each issue with your customers. Do share your feedback with us.
Interest rates
By late January it had become clear that inflation was too high and that it was likely the Reserve Bank was going to have to increase interest rates. At their board meeting earlier this month that’s exactly what they did, unanimously deciding to increase the cash rate by 25 basis points to 3.85 per cent.
It was the first change in the cash rate since it was reduced to 3.6 per cent in August 2025 and it was the first increase to the cash rate since November 2023.
If and when the data changes, market expectations for interest rates will shift but the Reserve Bank (RBA) has made it clear following their decision that inflation is too high and that they had little choice but to increase interest rates.
As it currently stands, market expectations are for at least one more 25 basis point increases in the cash rate this year and possibly two increases. If we get two 25 basis point increases in the cash rate that will see the cash rate return to its recent high of 4.35 per cent.
Data suggests that many households did not reduce their mortgage repayments last year as the cash rate reduced so they will largely be unaffected by any increases unless the cash rate goes higher than its previous peak.
The change in the cash rate provides those with a mortgage, whether it be an owner-occupier or an investor, a good opportunity to reassess their mortgages with a broker or lender to ensure they have the right structure and best rate.
I expect for those buyers that have a mortgage pre-approval there will now be some urgency to purchase because once the pre-approval expires, they likely won’t be able to borrow as much as they can right now.
For those without a pre-approval they aren’t going to borrow as much as they could before the interest rate change and this may have the effect of a slight softening of demand for housing.
With interest rates expected to rise further this year, it may also provide a decent buying opportunity right now given in many areas stock levels are quite high and competition for that stock may ease-off a bit.
Dwelling price growth remains slow across the market, especially compared to other states
According to the REIV, the Melbourne median house and unit price was unchanged over the month and was 3.8 per cent and 2.2 per cent higher respectively over the 12 months to January 2026.
Melbourne median house prices sit at $950,000 and median unit prices are $640,000. Melbourne continues to see much lower growth in prices than most other capital cities which in-turn is making the city much more attractive to investors given the lack of recent growth and relative affordability of the city which in a few years should become the most populous in the nation.
One of the reasons for the weaker price growth in Melbourne is the relatively higher volume of established stock for sale and relatively higher rate of new home building which we will touch-on in more detail later.
In regional Victoria, median house prices were recorded at $632,000 in January 2026 after a 0.3 per cent monthly increase and a 5.3 per cent annual rise. Regional unit prices were unchanged over the month and 4.8 per cent higher over the year and recorded a median price of $440,000.
Not only are regional house and unit prices each $200,000 or more cheaper than those in Melbourne but they are clearly seeing relatively strong demand which is pushing prices higher at a faster pace than those in the capital city. The lower price, lower cost of living and in many areas decent connectivity to Melbourne makes regional living attractive.
With housing prices relatively low throughout the state there is a strong affordability play for people looking to purchase in Victoria, especially if they are coming from interstate.
I believe that affordability will eventually lead to stronger price increases, Melbourne should not be cheaper long-term than Brisbane, Adelaide and Perth but, the next growth phases is unlikely to occur until the excess stock on-the-market for sale clears.
Rents pushed higher throughout the state in January 2026
The latest REIV data found that rents increased throughout Victoria in January and were higher than they were a year ago highlighting persistent rental pressures.
In Melbourne, the median house rent in January 2026 was $590 per week and the median unit rent was $600 per week. Melbourne house rents were 1.7 per cent higher over the month and year and unit rents were 3.4 per cent higher over the month and 4.3 per cent higher over the year.
In regional Victoria, house rents were 3.0 per cent higher over the month and 5.1 per cent higher over the year to reach $515 per week. Regional unit rents were $440 per week in January 2026 after increasing 4.8 per cent over the month and 10.0 per cent over the year.
Although rents have increased throughout the state over the month and year, rental growth has typically been softer than it has been in other states and the cost of renting, like purchase costs, are lower than elsewhere.
The lower rental costs and slower growth are as a result of relatively higher rental vacancy rates which were recorded at 2.5 per cent in January 2026 and 2.1 per cent in regional Victoria, both of which were unchanged over the year.
Rental vacancy rates remain below their long-term average but are much higher than the sub-1 per cent rates in some capital cities.
The higher rental vacancy rates limit the scope for investors to push rents higher and it affords would-be renters more choice than they have in other cities.
With inflation and the cost of living elevated, property managers are now increasingly cautious about rent increase as renters may not have the capacity to pay much higher rents and instead choose more affordable options.
Property listings in Melbourne are lower than recent highs but remain elevated
The latest data from SQM Research on property listings in Melbourne found that in January 2026 there were more new listings over the month than a year ago but fewer total listings.
In January 2026 there were 11,652 new listing in Melbourne which was the highest volume of any capital city and 10.9 per cent more new listings than in January 2025.
Melbourne has 35,980 total property listings in January 2026, also the highest of any capital city however, new listings were 5.0 per cent lower than a year ago. Total listings are lower than their recent highs but remain above long-term average levels.
With stock levels remaining elevated and a high volume of stock coming to market it is imperative that when selling a property, you do whatever you can do to separate yourself from the competition. It’s also important to listen to buyer feedback on price expectations and set realistic prices.
For buyers there is quite a lot of choice in the market so there is less urgency to purchase. In saying that, quality properties that are appropriately priced continue to see strong demand and sell quite quickly.
Days on market
The latest days on market data for private sales shows that properties across the state are selling quicker than they were a year ago, reflecting the uptick in demand occurring.
In Melbourne, the median days on market in January 2026 was 36 days which was unchanged over the month, down from 41 days at the same time last year.
In regional Victoria, properties are taking longer to sell than they are in the capital city, which is often the case. In January 2026 the median days on market was 50 days which was unchanged from the previous month but down from 61 days in January 2025.
Although the volume of stock for sale remains elevated when properties are appropriately priced and vendors are willing to adjust prices to meet to market expectations, those properties are selling quickly.
This highlights the importance that vendors set realistic prices and listen to market feedback and that buyers still need to act quickly for quality housing stock in this market.
Mortgage Lending
According to data from the Australian Bureau of Statistics there were 26,105 new loans to owner-occupiers over the December 2025 quarter with a total value of $17.487 billion. It was the largest quarterly volume of owner-occupier loans since June 2022 and the highest value of these loans since March 2022.
These loans to owner-occupiers were split between 15,798 loans to owner-occupier non-first home buyers worth $11.740 billion and 10,283 loans to owner-occupier first home buyers worth $5.676 billion.
Although there were new incentives to first home buyers available and the number of loans nationally was 6.8 per cent higher over the quarter and the value was 15.5 per cent higher, the lift in Victoria was much more muted at just 3.5 per cent and 7.7 per cent respectively. In saying that, the volume and value of all new loans to owner-occupier first home buyers in Victoria at 25.0 per cent and 21.3 per cent was comfortably higher than the 21.3 per cent and 17.9 per cent share nationally.
Investors accounted for 14,991 new loans over the quarter worth a total value of $9.227 billion. It was the highest quarterly volume of loans to investors over any quarter since September 2019 (no data is available before this time) and it was the largest quarterly value of loans to investors on-record.
Over the quarter, investors accounted for 36.5 per cent of the volume of new loans in Victoria and 34.5 per cent of the share based on value. It was the highest share of volume on record and the highest share based on value since June 2017.
The data shows that first home buyers are out in force across the state, this was the case before the Home Guarantee Scheme was introduced and remains so now. These are inexperienced buyers so they are likely to need more assistance and guidance through the property purchasing process.
Investors are clearly becoming more active in the state, lured by more attractive rental yields and affordable prices. That is also likely to mean more competition with first home buyers for that stock.
Final thoughts
Overall, the Victorian housing market is seeing quite steady conditions. Prices are rising at a moderate pace but the state enjoys strong affordability relative to other states and relative to other capital cities in particular.
For vendors it’s imperative that when you are advertising your property you focus on what sets it apart from other homes on the market, especially where there is a lot of competing stock. Listen to market feedback and focus on features that may attract investors who are increasingly active in the market.
Buyers have quite a lot of choice but quality stock is still transacting quickly. There is still a significant benefit for buyers that have their finance in place, can offer appealing conditions and help the seller to get a deal done quickly and smoothly.
Investors continue to see strong demand for rental properties but the ongoing increases in taxation of investors by the Victorian government continue to pile-up and encourage some to exit. For those holding properties or entering the market, be cautious about how much you try to increase rents because renters have less capacity to pay higher rent in this economic environment.
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.