June 2026 column
Over the past month we’ve seen new data on economic growth which shows growth slowing, the unemployment rate has continued to trend higher, inflation has eased a little but remains uncomfortably high.
Let’s look at the key data over the past month.
Inflation remains elevated but the rate of growth slows
In April 2026, headline inflation increased by 0.4 per cent over the month to be 4.2 per cent higher over the year, down from an annual rate of growth of 4.6 per cent the previous month. The RBA’s preferred measure of underlying inflation rose 0.3 per cent over the month and was 3.4 per cent higher over the year, a marginally stronger rate of growth than the previous month.
With an inflation target of 2.5 per cent, both headline and underlying inflation remains too high. While high levels of inflation persist the risk of higher interest rates will remain.
For Melbourne, inflation was unchanged over the month, the lowest rate of inflation of any capital city. Over the 12 months to April 2026 Melbourne also recorded the equal lowest inflation of any capital city (along with Perth) at 3.9 per cent.
Although the data indicates that some of the inflationary pressures may be moderating, inflation remains too high. Interest rates have been increased three times this year but did not increase in June. If inflationary pressures persist, we may still see higher interest rates.
For those who own a home or are looking to own a home, higher inflation for longer is likely to see interest rates higher for longer too, which could lead to lower housing prices. In turn this means reduced borrowing capacities, potentially more people looking to sell and lower overall demand for housing.
RBA meets and keeps rates on-hold for the first time this year
Following three consecutive rate increases across three RBA Monetary Policy Board meetings, the RBA decided to keep interest rates on-hold in June. This leaves the cash rate at 4.35 per cent back at the highs of early 2025 and prior to that, the highest cash rate since late 2011.
Despite inflationary pressures remaining high and the RBA not forecasting inflation to return to its target until 2028, expectations of further interest rate increases have faded significantly over recent weeks. Equally, any likelihood of interest rate cuts remains some way off too.
The statement the RBA published with their announcement still highlighted that inflation was too high, so there are risks that interest rates may still rise from here but for the moment it looks like interest rates will be on-hold over the coming months.
Elevated interest rates which have reduced borrowing capacities are still likely to result in a period of softer price growth for the Victorian housing market.
Property prices push marginally higher in May 2026
According to REIV data, the median house price in Melbourne in May 2026 was $965,000 and the median unit price was $650,000. The median house price increased by 0.3 per cent over the month and by 5.5 per cent over the year while the median unit price was 0.2 per cent higher over the month and 3.8 per cent higher over the year.
Melbourne continues to see slower price growth than most capital cities and relatively speaking it has shifted over the past five years from being one of the most expensive capital city markets to being one of the most affordable. There is still a large gap in the city between median house and unit prices with houses typically $315,000 more expensive than units.
In regional Victoria, the median house price was unchanged over the month and 8.3 per cent higher over the year reaching $650,000. Regional Victoria’s median unit price was $455,000 in May 2026 after prices rose 1.1 per cent over the month and 8.3 per cent over the past year.
Areas outside of Melbourne continue to see stronger housing affordability and stronger price increases.
More broadly, lower prices across Victoria are attractive for buyers but the consistently elevated volume of properties available for sale is resulting in limited price growth.
Rental growth has slowed, particularly in Melbourne
According to REIV data, the median house rent in Melbourne in May 2026 was $590 per week and for units it was $600 per week. House rents were unchanged over the month and 1.7 per cent higher over the year while unit rents rose 1.7 per cent over the month and were 4.3 per cent higher than a year ago.
Much like housing prices, rents in Melbourne have been seeing softer growth for several years which has resulted in improving relative affordability of rental properties. House rents continue to rise at a rate below inflation with unit rents rising at above inflation despite them now being more expensive than typical house rents.
In regional Victoria, the median weekly house rent is $520, and it was unchanged over the month but 6.1 per cent higher over the year. Units in regional Victoria had a median weekly rent of $420 which was also unchanged over the month but 6.3 per cent higher over the year.
Rental vacancy rates are drifting higher which should also result in more moderate rent increases if the trend continues. In Melbourne, the rental vacancy rate was 2.8 per cent in May 2026, up from 2.6 per cent the previous month and 2.4 per cent a year ago. In regional Victoria, the rental vacancy rate was 2.4 per cent in May 2026, 2.3 per cent in April 2026 and 2 per cent in May 2025.
Mortgage lending slows over the March 2026 quarter
The latest lending indicators data for the March 2026 quarter showed that there was a pull-back in lending nationally and in Victoria.
The number of new loans to owner-occupiers was 3.8 per cent lower over the quarter and the value of these loans fell by 3.2 per cent. Meanwhile, the number of investor loans was 0.5 per cent lower over the quarter and the value of these loans was 2.9 per cent lower.
Looking at owner-occupier subsequent buyers, the number of loans was 3.9 per cent lower over the quarter and the value was 3.3 per cent lower while for owner-occupier first home buyers the number was 4.5 per cent lower and the value was 2.3 per cent lower.
Overall, by the number of loans, investors are 37.3 per cent of all new lending in Victoria, owner-occupier first home buyers are 24.4 per cent (only ACT has a higher share) and owner-occupier subsequent buyers are the remaining 38.3 per cent.
Not one segment was immune from the market slowing over the quarter but interestingly investors saw the smallest slowdown. It’s likely these trends will shift on the back of the federal government’s changes to negative gearing with the overall level of investment likely to reduce.
Victoria has already seen what happens when you lift taxes on investment and with the federal government following suit, I’d expect we see lower investment in the future. While that creates space and opportunity for first home buyers, the lack of investment housing can also result in less rental stock and push up the cost of renting.
The volume of Melbourne properties for sale has returned to historic high levels
The latest data from SQM Research has found that in May 2026 there were 19,852 newly listed properties for sale. The volume of new listings was 14.3 per cent higher over the month and 15.1 per cent higher than a year ago.
Even though there was a large monthly rise in new listings, they were lower than they were in both February and March of this year.
In May 2026 there were 46,928 total properties listed for sale in Melbourne, the highest volume of any capital city in the country. Total listings were 10.7 per cent higher over the month and 12.1 per cent higher over the year.
Total listings are now sitting at close to historic highs and at a volume last seen in mid-2014.
Melbourne is truly an outlier, although new and total listings are now trending higher across the country, they remain at historically low levels whilst listings are historically high in Melbourne.
The persistent heightened volume of stock for sale and an ongoing large volume of new listings hitting the market continues to contribute to the much weaker price growth being experienced in Melbourne.
While transactions continue to occur, buyers are showing heightened levels of trepidation, and the higher interest rates have led to relatively fewer active buyers in the market.
In this environment the presentation of the property and setting a realistic price is imperative. Even with these things right it still may be a challenge to draw offers out of purchasers due to the waning consumer sentiment and high volume of choice of properties on the market.
Final thoughts
Housing market conditions in Victoria continue to lag those of the other states and territories.
Properties are still selling but buyers have a lot of choice which means vendors are facing a lot of competing stock when they are trying to sell.
One of the big positives for Victoria longer term is that the slower price and rental growth over recent years is making it look increasingly attractive from an affordability perspective. Market confidence will eventually shift as other housing markets become increasingly less affordable, but that may take some time.
The key thing to remember for sellers is that there is a lot of stock for sale currently so your asking price is important as is finding the things that can set your property apart from the rest of those for sale.
Buyers well and truly hold the upper hand in this market with less competition to buy and a lot of stock to choose from.
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.