Surprise slump sees Melbourne house prices fall before interest rates rise – realestate.com.au

Melbourne’s property market recovery could be in trouble just months after kick-off, with new statistics showing values ​​deteriorated in January despite growth expectations.

PropTrack’s latest home price index shows that the city’s typical home lost ground in January, falling 0.1 percent, knocking just over a thousand dollars off the figure and bringing it to $1.007 million.

And while the Victorian capital is still doing well this year, having risen $47,000 (3.8 per cent) since January 2025, it lags behind other major capitals including Sydney, Brisbane, Adelaide and Perth, where house prices rose by six figures in the same timeline.

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The city’s unit value held steady at $624,000 this month, having risen $17,900 (2.8 per cent) over the past year – again significantly higher than the country as a whole, with Brisbane and Perth figures also up $100,000-plus for units, townhouses and apartments.

PropTrack economics director Angus Moore said Melbourne had become “an interesting one”.

PropTrack economist Angus Moore says Melbourne’s property market is in for an interesting year.

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“In 2025, Melbourne started to look a little firmer, as if the long-awaited recovery was finally arriving, but spring looked a little softer and prices in Melbourne have fallen modestly over the past three months,” Moore said.

“Part of the story there, and the same goes for Sydney, is that there is quite a lot of choice for buyers in the market.

“And while that doesn’t have a huge impact on prices, compared to say interest rates, it’s probably on the margins, it does have an impact and has helped keep price growth in Melbourne a little bit slower than what we’ve seen in some other parts of the country where choice is very limited and prices have risen very quickly.”

While noting that momentum was difficult to see in January and December, the economist said the prospect of a rate hike as soon as this week was a “headwind” for house prices – but that Melbourne’s relative affordability compared to other capital cities meant growth was more likely to continue into 2026.

Cohen Handler Victoria director Nicole Jacobs says regulation and under-quota solutions will always struggle to deal with emotionally driven buyers driving up prices.

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“We expect we will see house prices rise in Melbourne, but it may slow that rate of growth,” Moore said.

As a result, he said there were no expectations of any improvement in housing affordability over the next twelve months.

Prominent buyer’s agent Nicole Jacobs said that while January was difficult to gauge, it had been easier to buy in recent months and she expected the coming year to be flat and even somewhat sluggish for some parts of the property market.

Ms Jacobs said owners of homes that are move-in ready and well located are likely to continue to generate good sales, especially below the $1 million price point.

Homebuyers hoping to get their money’s worth should look for our properties slightly above seven figures, if they can afford it, according to Cohen Handler’s buyer’s agent.

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