March 2026 column
In this month’s update I’m taking a look at inflationary pressures, interest rate decisions, home prices, rental costs, listings supply, days on market for properties selling and approvals to build homes.
Inflation remains too high
The latest inflation data for January 2026 shows that the consumer price index (CPI) was 1.3 per cent higher over the past three months and 3.8 per cent higher over the year which was well above the 2.5 per cent target.
Even if you look at the Reserve Bank’s (RBA) preferred measure of underlying inflation, it was 0.8 per cent higher over the three months and 3.4 per cent higher over the year.
Looking at individual capital city inflation data, over the three months to January 2026, inflation in Melbourne was 1.4 per cent and over the year it was 3.3 per cent which was lower than each of the other major capital cities but still too high.
With inflation at an elevated level and well above the RBA’s target this greatly increases the likelihood of increases to the interest rates.
For those looking to buy and those with mortgage debt, higher interest rates will increase mortgage repayments and reduce their borrowing capacity. At the same time higher inflation means that the cost of living for households is also rising rapidly leaving less income for spending. This can severely impact lower income households, especially rental households.
Interest rates
After interest rates were increased in February by 25 basis points, the RBA delivered another 25-basis point increase in March to take the cash rate to 4.1 per cent.
The cash rate is now only one 25 basis point increase away from reaching the highs recorded post-pandemic. Market expectations are that there will be at least one more 25 basis point increase this year and it is more likely than not there will also be a second. Should that second increase come to fruition, the cash rate will reach the highest level it has since October 2011.
It is interesting to note that the decision was not unanimous with 5 members voting to increase the cash rate whilst 4 members voted to keep it on-hold.
What the RBA’s statement following their decision made clear is that the RBA board expects inflation to remain above target for some time and that risks are now tilted to the upside, thus necessitating this increase.
Many households didn’t reduce their repayments as interest rates declined last year and many borrowers are ahead on their mortgage repayment so may not yet be affected.
Those that did adjust their repayments or have purchased recently will be experiencing higher mortgage repayments.
I expect that buyers with a mortgage pre-approval will have greater 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 be able 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.
With prices already growing at a slow pace in most of Victoria, this rate increase and the prospect of further increases this year, may lead to softer demand for housing and some moderate declines in prices.
Dwelling prices nudge higher but continue to grow at a slower pace than the other states
The latest data from the REIV shows that in February 2026, the median house price in Melbourne was $955,000 and the median unit price was $645,000. House prices rose 0.5 per cent over the month and 4.4 per cent over the year whilst unit prices were 0.8 per cent higher over the month and 3.2 per cent higher over the year.
While Melbourne housing prices are rising, they continue to rise at a slower pace than most other capital cities despite now having a lower median price and showing strong relative affordability.
Melbourne continues to see an elevated volume of established homes on the market for sale and relative to other capital cities, new housing supply is much stronger. This affords buyers more choice and reduces the likelihood of purchase prices being driven much higher.
Regional Victoria has experienced stronger price growth than Melbourne over the month and year however, compared to other regional markets growth has also been somewhat slower.
The median house price in regional Victoria is $640,000 and has increased by 1.1 per cent over the month and 6.7 per cent over the year. The median unit prices sit at $445,000 after prices increased by 1.1 per cent over the month and 6.0 per cent throughout the past year.
For those looking to purchase, price rises are generally quite moderate and reflect the fact that unless a property is well presented and well-priced there is not significant urgency to submit an offer.
Given this it is imperative that agents are constantly providing vendors with market feedback and urging them to firstly be realistic with their list price and secondly make adjustments when the property is not showing appeal to the market.
Rental growth stalled in February with rents only marginally higher over the year
It’s not unusual to see rental demand surge in January when many leases expire and demand for new leases escalates but it usually doesn’t mean rents fall like they have in Victoria throughout February.
In Melbourne, the median rent is $580 per week for a house and $600 per week for a unit. Over the past month house rents fell 1.7 per cent and they are unchanged over the year while unit rents were unchanged over the month and 3.3 per cent higher over the year.
The weak rental growth reflects a relatively high rental vacancy rate in the city of 2.6 per cent which was up from 2.5 per cent in January and 2.4 per cent in February 2025.
In regional Victoria, median house rents in February 2026 were $500 per week which was 2.9 per cent lower over the month but had increased by 2.0 per cent over the year. Regional unit rents were 4.5 per cent lower over the month but 5.0 per cent higher over the past year taking them to $420 per week.
The rental vacancy rate in regional Victoria was also relatively higher than many other rest-of-state markets and was recorded at 2.2 per cent in February 2026, up from 2.1 per cent in both January 2026 and February 2025.
Even though the cost of renting in Victoria is relatively affordable compared to rental costs in other states, the comparatively higher supply of stock for rent, as highlighted by the vacancy rate, is leading to weaker increases in rents.
Victoria’s track-record of building more new housing and its relatively higher level of first home buyer activity is also contributing to weaker rental growth.
Renters are clearly happy that they have more options and can pay less for rent in Victoria than in other states. For landlords they must be cautious not to try and push up rents too much or else they run the risk of current tenants leaving and finding it difficult to replace them.
The supply of housing stock for sale in Melbourne remains at historically high levels
According to SQM Research, the number of new properties listed for sale in Melbourne in February 2026 was 73.9 per cent higher over the month and 18.2 per cent higher than in February 2025.
To put these figures in context, nationally new listings were 48.6 per cent higher over the month but were 0.1 per cent lower than a year ago.
Of all capital cities, Melbourne has seen the largest annual increase in new listings and has the highest number of new listings with 20,258 properties put up for sale over the month.
It’s a similar story when we look at the overall volume of properties for sale with the 41,036 properties for sale in Melbourne the highest number of any capital city.
Total property listings in Melbourne were 14.1 per cent higher over the month and 2.7 per cent higher over the year. By comparison, nationally total listings were 4.6 per cent higher over the month but 9.1 per cent lower compared to a year ago.
Melbourne is seeing many new properties coming to the market at the same time that there are already a lot of properties sitting on-the-market unsold.
Quality stock that is well priced is still selling but the large volume of choice gives buyers the freedom to be quite discerning when purchasing a property.
It can be hard to get buyers to commit in this environment especially if there is little or no competition. It’s why it is important to get the initial listing price right and make sure the property is as appealing as possible.
For agents it’s really important to communicate with your vendors and if a property is not attracting offers to re-think the sales strategy and try to convince the vendor to make appropriate changes.
Despite more stock for sale those properties that are selling are transacting quicker
According to the REIV, private sales that occurred in February 2026 were selling in a shorter number of days than they were a year ago.
For those properties in Melbourne sold during February 2026, the median days on market was 34 days compared to 36 days in January 2026 and 43 days in February 2025.
In regional Victoria, the median days on market was 51 days in February 2026 which was slightly higher than the 50 days in January but lower than the 66 days a year earlier.
You might think this data runs counter to logic given that there is more stock available for sale now than there was a year ago. Remember, this is the median value so as many properties are taking longer to sell than are selling quicker.
To me, this data says that well priced and presented properties coming to the market are seeing ample demand with many selling quickly while those that aren’t run the risk of sitting on the market for a long time.
For an agent I would say it is important to understand a vendor’s motivation to sell and reconsider those that aren’t highly motivated.
For vendors, the property needs to have as much appeal as possible and be appropriately priced in order to provide the best chance of a fast sale.
For buyers, less attractive properties may be able to eventually be secured for a discount but the negotiation is likely to take some time. For quality, sought-after properties it is still important to submit competitive offers quickly.
Home building approvals continue to significantly undershoot required volumes
The latest data for January 2026 found that in Victoria there were 1,728 new house approvals over the month and 526 other dwelling approvals.
It was the lowest monthly volume of house approvals since January 2013 and the lowest monthly volume of other dwelling approvals since January 2007.
We know that approvals can be volatile month-to-month but approvals even on an annual basis are not sufficient to hit government targets.
Over the 12 months to January 2026 Victoria recorded 32,610 houses and 20,247 other dwellings approved for construction. Although this was a higher volume than any other state or territory, it was 3.5 per cent lower and 1.2 per cent lower respectively than 12 months ago.
While excess supply of established housing stock can lead to weaker price growth for a period, over the longer-term if Victoria can’t build enough new housing to cater to its growing population this will put pressure on prices of properties to purchase and those to rent.
Final thoughts
The Victorian housing market remains steady but underperforming most of the other states and territories. There is a relatively high volume of properties advertised for sale which is leading to slower price growth despite the fact that relative to other states and territories Victoria is looking quite affordable.
Vendors need to understand their competition when they are bringing their property to the market and really focus on what sets their property apart. Attracting buyers from the outset is really imperative. Vendors also need to listen to feedback from the market and agent if they want to achieve a sale.
Buyers have a lot of choice but well priced properties coming to the market are still transacting. When there is a lot of competition for a quality property they still need to act quickly. For properties that have been on the market longer there may be more scope to negotiate but they also need to understand the vendor’s true desire to sell.
Rents continue to climb but vacancy rates are generally somewhat higher than elsewhere. With the cost of living continuing to escalate landlords still need to be intelligent about when they increase rents and by how much.
For agents whilst there may be a lot of properties to list which is always the environment you want, I would suggest be cautious about which properties you list and try to understand exactly how motivated to sell the vendor is. While you may be able to list properties in this environment, selling them can be quite the challenge if the vendor doesn’t have urgency or a willingness to meet the market.
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.