Melbourne Property News Monthly Wrap – January 2026
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Interest rates go up. Home values too.
Over January’s five weekends the Real Estate Institute of Victoria (REIV) recorded more than 1,042 auctions. 832 properties sold. 626 at auction, with 210 passed in. 205 properties were sold before auction & 1 property sold after auction. The clearance rate averaged 79%. 3,774 homes sold by private sale.
How the new interest rate will effect home sales
The Reserve Bank raised the interest rate by 25 basis points on February 3, from 3.60% to 3.85%. On the average Australian mortgage of $694,000, monthly payments will increase by $109, to $4025.
The hike will reduce borrowing capacity, with a median income Australian household losing around $18,000 from their mortgage limit. If current inflation levels persist and more rate rises follow, a good deal of buyers will shift focus from mid-range properties to lower quartile ones, leading to higher demand in that sector.
KPMG predicts steep Melbourne value rises
Although a lift in interest rates will add some downward pressure on home prices, economic consultants KPMG are still forecasting a big 6.8% rise in the Melbourne median house price over 2026, followed by a 7.3% rise in 2027 (KPMG Residential Property Outlook). The Melbourne median house price is currently $1.07M. KPMG’s optimistic projection equals equity growth at around the $150,000 mark over 24 months on a median value home. However, the strongest growth will likely be for houses with more affordable price points. We’re talking outer suburbs here.
Value growth based on catch-up
KPMG’s predicted rise in Melbourne values relies largely on playing catch up with other interstate capitals. Despite the temporary setback, KPMG believes Melbourne’s traditional position as a leading Australian property investment market is bound to return. Melbourne is (arguably) Australia’s biggest city already, or on the verge of being so, with constant inbound immigration underwriting housing demand.
Home values rose in January
According to market analysts PropTrack, Melbourne house values rose 0.2% through January. Rents are rising steeply. New data shows Melbourne’s median weekly dwelling rent rose 2.7% over the last 12 months to $575. This was mostly driven by rising unit rents.
Melbourne is currently the second-cheapest capital city rental market. (Only Hobart is cheaper). REA Group senior economist Anne Flaherty says one major reason for lower rents here is because Melbourne has stronger first-home buyer activity compared with other capitals. This reduces demand. Quite simply, homes are cheaper to buy here and more people have the option of homeownership, sooner.
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