October 2026 column
September saw the weak housing market conditions in Victoria persist with fewer sales, more properties for sale and price growth continuing to decelerate. Rental conditions also weakened with lower rental growth and relatively higher rental vacancy rates.
Importantly though, these conditions weren’t just prevalent in Victoria, they’ve been occurring throughout the country as higher interest rates and taxation changes to investment in property have led to a slump in housing market confidence.
We’ve also just seen significant changes to how auctions operate in Victoria. In a market where confidence is already quite low, seeing how the market adapts to these changes will be interesting. I think these new rules will see many vendors choosing alternate methods to sell properties other than auctions.
Over the past month, there’s been new data on inflation, another RBA Monetary Policy Board meeting where interest rates were increased, and new Building Activity data for the June 2026 quarter.
Let’s take a look at what we’ve seen in the data of late.
Inflation is both elevated and persistent
The latest ABS data shows inflation remains both persistent and too high.
In August 2026, headline inflation increased by 0.4 per cent over the month to be 1.4 per cent higher over the quarter and 4.0 per cent higher over the year. The RBA’s preferred measure of underlying inflation was 0.2 per cent higher over the month, up 1.0 per cent for the quarter and 3.6 per cent higher over the year.
Both measures remain well above the RBA’s target range of 2 to 3 per cent, which contributed to the RBA lifting the cash rate in late September.
Although the war in the Middle East is adding to inflation, pressures are mostly domestic with tradeable (international) inflation 2.9 per cent higher over the year, while non-tradeable (domestic) inflation was 4.5 per cent higher.
Housing continues to record the highest annual inflation of all CPI groups, up 5.7 per cent over the year.
Annual inflation in Melbourne was the lowest of all capital cities, but still too high, at 3.5 per cent.
Overall, inflation is uncomfortably high and, as long as it stays elevated, the risks are tilted toward further interest rate increases.
The RBA lifts the cash rate for the fourth time this year
At its Monetary Policy Board meeting in late September, the RBA decided to lift the cash rate by 25 basis points to 4.6 per cent. It was the fourth interest rate increase this year and took official interest rates to their highest level in 15 years.
In its statement following the announcement, the RBA noted that inflation remains elevated and some of the upside risks it had previously flagged are materialising.
The cash rate is not particularly high by historical standards, but for people who took on debt at the historic lows during the pandemic, it is now 450 basis points higher, significantly increasing mortgage repayments.
This increase also took the cash rate above its post-pandemic peak, so even those who didn’t reduce their repayments when the RBA reduced rates in 2025 are now facing higher mortgage repayments.
With housing affordability already stretched and inflation persistently high, it’s likely this interest rate increase will weigh further on buyer sentiment in the housing market.
Dwelling commencements and the number of dwellings under construction jump over the June 2026 quarter
The latest Building Activity data for the June 2026 quarter was released over the past month and there was some positive news for Victorian housing construction.
The data found that there were 16,239 dwellings commenced over the quarter, which was 14.9 per cent higher than the March quarter and 16.8 per cent higher than the same quarter last year. It was the greatest volume of commencements since March 2023 and the greatest annual rise in commencements since March 2022.
Although there was an increase in commencements and a large volume of stock under construction, completions were lower over the quarter but higher over the year. The 14,191 dwelling completions over the quarter were 2.3 per cent fewer than the previous quarter but 11.1 per cent more than the same quarter last year.
The number of dwellings under construction at the end of the June 2026 quarter in Victoria rose to 63,375, which was the highest volume since March 2024. Unsurprisingly, 65 per cent of what was under construction was other dwellings (units, townhouses etc.).
The volume of construction being commenced is quite strong and there is a high volume of stock under construction; the challenge in Victoria right now is getting the stock completed in a timely manner. This reflects the shortage of trades, high construction costs and higher interest costs, all of which are weighing on construction feasibility.
These conditions are being replicated across most states and territories right now too.
With another interest rate hike and established housing prices easing, it’s likely the number of commencements will slow over the coming quarters, but the strong pipeline of stock under construction could lift completions.
Prices rise over the month but are lower over the year in Melbourne
Monthly median price data is proving a bit volatile, but in Melbourne we are seeing lower prices than a year ago.
The latest REIV median price data shows the median house price in Melbourne in September 2026 was $970,000, which was 5.4 per cent higher over the month but 2.2 per cent lower than at the same time last year.
Similarly, the median unit price in Melbourne was 0.8 per cent higher over the month at $640,000; however, it was 1.9 per cent lower than a year ago.
Prices falling in Melbourne over the past year is not a surprise when you consider the number of properties for sale is higher and borrowing costs are now 100 basis points higher than a year ago, which has thinned out buyer demand.
Median prices in regional markets are still rising but they are doing so at a slower pace.
The median house price in regional Victoria was 1.5 per cent higher over the month and 4.7 per cent higher over the year to reach $670,000.
In regional Victoria, the median unit price in September was $450,000, having fallen 2.2 per cent over the month but risen 4.7 per cent over the year.
The conditions prevalent in Victoria are being replicated in most other states too. Most markets have seen prices fall over recent months and the annual rate of growth is decelerating rapidly as market confidence deteriorates.
Even though Victoria is showing strong affordability relative to other states, the latest interest rate increase along with a significant reduction in buyer numbers is likely to slow the market further and lead to more price declines.
New listing volumes in Melbourne are much lower than a year ago
According to data from REA Group, the number of newly listed properties for sale in Melbourne increased by 7.0 per cent in September relative to August, as the usual seasonal uplift in new listings occurred. This increase was lower than the 13.6 per cent increase across the nation.
Although new listings were higher over the month, they were 13.9 per cent lower than at the same time last year. This reflects some vendor reluctance to bring properties to the market given overall market conditions and the volume of stock already available for sale.
Nationally, new listings were 1.2 per cent lower than a year ago highlighting how Melbourne is seeing much less new stock come to market, relative to a year ago, than most other capital cities.
The total number of properties listed for sale remains elevated and is higher again over the month and year.
Total listings in Melbourne increased by 1.0 per cent over the month, compared to a 3.7 per cent rise nationally and they were 1.2 per cent higher than at the same time last year compared to a 9.7 per cent increase nationally.
The data suggests vendors are becoming more cautious about bringing properties to market nationally, nut particularly in Melbourne and Sydney where new listings are much lower than a year ago, despite this being the time of year when you typically see large increases in new listings.
For agents, you want new listings and you will generally back yourself to get these properties sold, but I still think it is important in this market, with elevated stock levels, to be selective about which listings you take on.
Buyers are really in the driver’s seat right now with lots of choice and less competition to purchase.
Time on market has risen over the year but has been quite steady in recent months
The latest time on market data found that the median days on market for private sales in Melbourne fell from 47 days in August to 45 days in September; however, it was up from 35 days a year earlier.
Both the inner and middle suburbs recorded a fall in days on market over the month while the outer suburbs have the highest days on market, which continued to climb. Compared to a year ago, days on market in the inner suburbs is unchanged, it’s moderately higher in the middle suburbs and much higher in the outer suburbs.
In regional Victoria, time on market for private sales was unchanged over the month at 54 days; however, it was up from 48 days in September 2025.
The elevated volume of stock for sale in Victoria at a time when sales volumes have fallen has pushed days on market higher.
For vendors, it’s important to understand these conditions: with more choice and fewer buyers, only the most motivated sellers should be bringing stock to market now, and they need to accept that in most instances it will take some time to sell.
Rents are still higher over the year but the rate of growth has slowed
The cost of renting in Melbourne and regional Victoria is typically lower than in most other capital cities and rest of state areas but that hasn’t stopped rental growth from slowing.
The median rent for both a house and a unit in Melbourne in September 2026 was $600 per week and both were unchanged over the month. Compared to a year ago, house rents were 3.4 per cent higher and unit rents were 4.3 per cent higher.
In regional Victoria, the median house rent was $530 per week, unchanged over the month and 6.0 per cent higher over the year. Regional Victoria units saw rents increase by 2.4 per cent over the month, taking them to $420 per week, the same as they were a year ago.
Victoria continues to have relatively higher rental vacancy rates, which are contributing to the weaker rental growth.
Melbourne’s rental vacancy rate was unchanged over the month and year at 2.5 per cent. Regional Victoria also has a 2.5 per cent rental vacancy rate which was unchanged over the month but up from 1.9 per cent a year ago.
Final thoughts
The Victorian market is continuing to see weakness with elevated stock for sale, fewer sales and price growth moderating. These conditions are also being replicated across most parts of the country right now.
Although rents are higher over the year, rental growth has moderated in Victoria which again, is a national trend right now.
Victoria maintains the advantage that relative to other states and territories, housing and rental costs are quite affordable, but that isn’t yet translating into stronger sales and higher prices.
Buyers in this market remain cautious and there are fewer of them given prices have been falling and interest rates have now increased by 100 basis points so far this year with the prospect that rates may increase even further.
For agents, it’s tough right now: there are fewer people looking to buy, and those who are looking to purchase have much less competition, more time to make a decision and a lot more choice.
As mentioned earlier, carefully selecting which listings you take on is really important. You only get paid on success, so if you don’t think there is a reasonable chance of success and you don’t believe a vendor is willing to adjust their price expectations to meet the market, then think twice about taking on that listing.
If you’re a property manager, there’s likely to be quite a lot of pressure from landlords to lift rents to offset the impact of the tax changes. The reality in Victoria though is that there is much more rental choice in this market and at the same time renters’ budgets are stretched by persistently high inflation. Landlords should be careful about how much they try to increase rents.
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.