• Melbourne’s median house prices have reached their highest level in three years, having now increased for four consecutive quarters;
• The level of new dwellings completed in Victoria continues to decline, however supply levels appear to be recovering with dwelling commencements now 3% higher than the previous year;
• Dwelling finance commitments have increased across all categories over the past 12 months with investor finance levels up 13% compared to the preceding year and now accounting for 34% of total housing finance.

Residential Market Summary

Melbourne’s median house prices have reached their highest level in three years, having now increased for four consecutive quarters and recording its highest annual growth since 2022. Outside of Melbourne, both the median Victorian Regional house price and median Victorian Regional unit price have reached all-time highs as at December 2025. Despite Victoria’s population growing at above its long-term average, the number of dwellings currently under construction in Victoria is 17% below its peak. Reflecting the constrained pipeline, the vacancy rate for Melbourne residential property remained steady at 2.4% and remains below the 10-year average of 2.9%.

Prices

According to the REIV, Melbourne’s median house prices have reached their highest level in three years, having now increased for four consecutive quarters. As at December 2025, Melbourne’s median house price increased to $973,500 up 1.8% over the quarter and now 8.4% higher than prices recorded 12 months ago – the highest annual growth since 2022, according to the REIV. Melbourne median unit prices are also recording accelerating growth rates, having recorded price increases of 2.0% over the quarter and annual growth of 5.3% – its highest annual growth since 2021. As at December 2025, the Melbourne median unit prices increased to $656,500, their highest levels since June 2022. While the median prices of both Melbourne houses and units remain below their peak levels, with median house prices 14% lower and median unit prices 5% below their peak, the difference continues to narrow. Outside of Melbourne, the median Victorian Regional house price increased over the December 2025 quarter, increasing to $643,000, with median Victorian Regional unit prices also increasing over the quarter, reaching $461,000. As at December 2025, both the median Victorian Regional house price and median Victorian Regional unit price have reached all-time highs.

Annual Median Price Change

Supply

According to the ABS, there are currently 61,700 dwellings under construction across Victoria, slightly lower than the activity recorded 12 months ago, with interestingly high-density apartment development is up 7% than levels recorded last year whereas the detached housing market development levels are 13% lower than the preceding year. Despite Victoria’s population growing at above its long-term average, the number of dwellings currently under construction in Victoria is 17% below its peak. The level of new dwellings completed in Victoria also continues to decline, with housing completions now 9% lower than its 10-year average. Looking forward, pleasingly supply levels appear to be recovering with dwelling commencements now 3% higher than the previous year, albeit still below its 10-year average with current commencements 12%. The decline in the pipeline of housing stock is further evidenced by relatively muted level of approved dwellings in Victoria with current levels 13% lower than the 10-year average. In order to encourage supply, the Victorian state government has recently announced two policies that aim to give developers an incentive to build. Firstly, stamp duty was reduced from October 2024 and be in place for 12 months and available for off-the-plan units, townhouses and apartments for properties at any price point, which has now been extended for a further 12 months to 20 October 2026. Secondly, to encourage more density around railway and tram lines, the government has identified 60 new activity centres where the planning process for multi-storey residential dwellings will be streamlined to fast-track development to potentially encourage more than 300,000 dwellings to be built close to public transport, jobs and services.

Annual Victorian Dwelling Completions

Demand

Victoria’s population grew by 123,500 in the year to June 2025, mainly due to overseas migration. While lower than all-time high levels, Victoria’s population continues to grow by the highest level of any Australian state, 21% higher than New South Wales’ population growth. Housing finance commitments have risen steadily since 2023 with almost $350 billion committed within Victoria over the 12 months to September 2025, 11% higher than the levels financed in the preceding year. Dwelling finance commitments have increased across all categories over the past 12 months. Investor finance levels have increased by 13% compared to the preceding year; with non-first home buyers also active with their levels 9% higher than last year. Investors now account for 34% of total housing finance commitments in Victoria, above the long-term average share of 31%. Looking ahead, with strong rental growth and a shortage of housing, Urban Property Australia expects that first home owners will grow their share of housing loans encouraged by new government incentives.

Vacancy

According to the REIV, as at November 2025, the vacancy rate for Melbourne residential property remained steady at 2.4% over the year but remains below the 10-year average of 2.9%. All precincts’ current vacancy rates now sit below their respective 10-year averages; with the exception of the Outer region. Across the regions, the residential vacancy rate was 2.4% as at November 2025. Over the past 12 months, only the vacancy rate of the Middle region declined while the Inner and Outer regions both recorded vacancy increases. Looking ahead, Urban Property Australia projects that the vacancy rate for the metropolitan Melbourne area will remain low with supply levels remaining constrained whereas the population of Melbourne continues to increase the fastest of all of Australia’s capital cities.

Rents

Reflecting the low vacancy environment, according to the REIV, metropolitan residential rents across the precincts increased (or remained steady) over the past year. Over the year to November 2025, the weekly median rent for houses in metropolitan Melbourne increased slightly, rising to $585 per week, just short of the all-time high of $590 per week. Across Melbourne, rents for houses located in the Middle region increased the most, increasing by 1.2%, with rents in the Inner and Outer regions both remaining steady. Melbourne units recorded stronger rental growth with an annual rise of median rents increasing by 3.6% over the year with all precincts recording rental growth for units. Urban Property anticipates that residential rental rates will maintain an upward trajectory, although the pace of growth is expected to decelerate. This moderation reflects trends observed in the past year, as affordability constraints increasingly influence renters’ ability to accommodate the substantial increases seen in previous years.

Regional

The median Victorian Regional house price increased over the December 2025 quarter, rising to $643,000 – an all-time high. The median Victorian Regional unit price also rose over the quarter, increasing to $461,000, and is also sitting at all-time highs. Boosted by a low vacancy environment and an underlying shortage of new supply, residential rental levels in the Regional markets have remained resilient with the average weekly rental levels for both houses and units sitting at all-time highs as at November 2025 with median house rents increasing by 4.2% and median unit rents increasing by 6.3% over the year. The vacancy rate for Regional Victoria remains very tight at 2.0%, below the metropolitan average of 2.5%.

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