Key takeaways
Melbourne home values rose by a marginal 0.1% in January, slightly recovering from a 0.2% fall in December but leaving the market 0.7% below its March 2022 peak.
A clear performance gap exists between property types as house values rose 6.5% annually while the unit sector fell 0.2% in January with a much lower annual growth rate of 2.7%.
Despite the subdued growth, Melbourne offers a relatively more affordable entry point than Sydney with median values of 990,000 dollars for houses and 640,000 dollars for units.
Melbourne’s housing market showed a marginal recovery at the start of 2026, with home values inched 0.1% higher in January.
This subtle uptick partially reversed the 0.2% decline recorded in December, though the city continues to trail the stronger growth seen in mid-sized capitals.
Despite the slight gain, Melbourne values remain 0.7% below the record highs established back in March 2022.
The market is currently characterized by a notable divergence between housing types.
While house values have shown more resilience, the unit sector continues to be a drag on overall performance, reflecting a shift in buyer preferences and supply dynamics within the high-density segment.
Melbourne Market Performance
The softer conditions in Melbourne have resulted in relatively healthier affordability compared to other major capitals, with the median house value still sitting below the $1 million mark.
| Segment | Monthly Change (January) | Annual Change | Median Value |
|---|---|---|---|
| All Dwellings | 0.1% | N/A | $780,000 (Approx) |
| Houses | Rising | 6.5% | $990,000 |
| Units | -0.2% | 2.7% | $640,000 |
Source: Cotality, February 2026
Divergence in Housing Types
The unit sector remains the primary weak point for Melbourne, with values falling 0.2% over the month.
In contrast, house values have grown by 6.5% over the past 12 months, more than double the annual growth rate of units (2.7%).
- Also read:Melbourne housing market update | February 2025
- Also read:Australian housing market update | February 2026
- Also read:Melbourne property market forecast for 2026 | Is it a good time to invest in Melbourne?
- Also read:Latest Property Price Forecasts Revealed. Australian Property Market Outlook 2026: Where To Now After The Rate Rise.
- Also read:Sydney property market forecast for 2026. Is it a good time to invest in Sydney?
This widening gap highlights the sustained demand for detached housing, even as affordability constraints push some buyers toward lower price points.
Note: For prospective buyers, the "silver lining" of these softer outcomes is a more accessible entry point.
Melbourne’s median house value of $990,000 and unit value of $640,000 provide a relatively more affordable alternative to Sydney, where median prices are significantly higher.
Supply and Demand Factors
Supply remains a critical factor in stabilising prices.
Across the broader national market, and reflected in Melbourne’s conditions, advertised stock levels are tracking significantly below historical averages.
| Metric | Current Market Condition |
|---|---|
| Advertised Stock (National) | 25% below 5-year average |
| New Completions | Tracking well below average |
| Labor Market | Resilient; supporting mortgage serviceability |
Source: Cotality, February 2026
Outlook for 2026
The Melbourne market is expected to face continued headwinds throughout the year.
Note: The RBA’s decision to raise the cash rate by 25 basis points in February, combined with the introduction of APRA’s debt-to-income limits, is likely to dampen borrowing capacity further.
However, the combination of low supply and a resilient labour market is expected to act as a buffer, preventing a sharp downturn.
The city is likely to see "softer and more uneven growth" as it navigates these complex economic conditions.
