- Melbourne house prices tipped to surge
Australia’s worst-performing big city housing market is tipped to get double-digit growth next year as the Reserve Bank keeps on cutting interest rates.
Melbourne house prices have hardly grown since Covid, compared with other capital city markets, with the Victorian Labor government’s investor tax suppressing demand – even in the face of soaring overseas migration.
But Westpac is expecting that to change, forecasting 10 per cent growth in 2026, with the futures market tipping two more RBA rate cuts by early next year.
That would be a far cry from the 2.1 per cent growth pace in the year to August for Melbourne, which Cotality data showed was the weakest among the capital cities and well below the increase in wages.
This is despite the Victorian capital receiving a big share of overseas migration and only having a small interstate exodus, compared with unaffordable Sydney.
A double-digit increase in Melbourne would see prices soar by $103,505 from $956,305 now to $1.06million by the end of 2026.
Canstar data insights director Sally Tindall said this would make Melbourne the comeback city.
‘Melbourne is shaping up as the comeback city in 2026, with double-digit growth on the cards,’ she said.
Australia’s worst-performing big city housing market is tipped to get double-digit growth next year as the Reserve Bank keeps on cutting interest rates (pictured is Melbourne at twilight)
‘This could see Melbourne’s median house price go above the million-dollar mark, which for many first home buyers will be a psychological barrier that makes it feel like the goalposts keep moving further away.’
The boom is already starting in more affordable suburbs with Frankston North house prices surging by 13.3 per cent during the past year to $672,767.
This suburb in the city’s outer south east, near Port Phillip Bay, is still unattainable for a borrower on an average, full-time salary of $104,520 with a 20 per cent deposit. But not for much longer, if Westpac’s predictions comes true.
Sydney, Brisbane and Perth are all tipped to see eight per cent growth in 2026.
This would see median house prices rise by $154,216 in Sydney to $1.521million as Brisbane values rose by $93,415 to $1.041million.
Perth prices are expected to rise by $102,250 to $881,867 in a city with Australia’s highest population growth from strong interstate migration.
Adelaide prices are expected to climb by six per cent or $70,190 to $906,620, with the South Australian capital having weaker population growth.
Hobart prices are tipped to go up by four per cent or $30,594 to $724,097.
The boom is already starting in more affordable suburbs with Frankston North house prices surging by 13.3 per cent during the past year to $672,767
Westpac senior economist Matthew Hassan said the RBA’s three rate cuts this year were already boosting demand for housing during an immigration-fuelled population boom.
‘Australia’s housing markets are starting to show a more discernible shift in response to lower interest rates,’ he said.
‘Population flows remain a background positive.’
The Reserve Bank’s three rate cuts since February have already buoyed demand in better value suburbs.
Two more predicted rate cuts, taking the RBA cash rate back to 3.1 per cent for the first time since February 2023, would boost demand in more expensive postcodes as banks were allowed to lend more.
