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Melbourne has spent the better part of the past decade as Australia’s second-most expensive capital city (trumped by Sydney, the city consistently taking the top spot on the country’s property ladder when it comes to inaffordability). But according to new reporting, the city has quietly flipped the script – and in 2026, it’s being heralded as one of the most affordable capital cities in Australia.
In a housing market dominated by horror stories and eye-watering price tags, Melbourne has reportedly emerged as a rare outlier. While Brisbane, Adelaide and Perth have seen house and unit prices surge by nearly 80 to 90 per cent over the past five years, Melbourne’s values rose by a comparatively modest 15.5 per cent, according to data released earlier this month by property analytics firm Cotality.
Speaking to the ABC, Tim Lawless, Cotality’s head of research, said the gap between Melbourne and Sydney pricing is now the widest it’s been in decades. “The gap between Melbourne prices and Sydney prices hasn’t been this wide since about 1999,” he said. Melbourne’s median house value now sits at around $980,000 – more than $600,000 cheaper than Sydney.
So what’s behind the slowdown? Analysts point to a cocktail of factors: a sharp market downturn in 2022, years of above-average housing delivery, negative interstate migration – and, perhaps most significantly, an investor exodus.
According to the ABC, property investment groups began sounding the alarm after Victoria’s 2023 state budget introduced higher land taxes and an increased absentee owner surcharge as part of Covid debt recovery measures. Rental bonds data suggests that Victoria lost around 16,500 rental properties in the first year after the changes came into effect, and Cotality has estimated that property with a land value of $650,000 now attracts an extra $1,300 a year in land tax.
Toby Balazs from the Real Estate Institute of Victoria told the ABC that the subdued growth in the Victorian market was “somewhat surprising” nationally, but understandable.
“If you look at it from an investment perspective, there’s been a number of challenges for property investors in the Melbourne market,” he said.
The upside? Renters and first-home buyers are finally catching a break. Melbourne’s rent increases sat at around 2.5 per cent in 2025, well below the national average of 5.2 per cent. First-home buyers now account for 27 per cent of demand across Victoria, with Melbourne sitting above the national average for new loans taken out by this cohort.
“This is the flipside of Melbourne’s soft housing value growth,” said Mr Lawless. “It’s actually seen Melbourne become one of the more affordable capital cities – absolutely the most affordable of the major capitals.”
It’s not a perfect picture – affordability remains out of reach for many low-income households – but after years of runaway growth elsewhere, Melbourne’s relative stability is starting to look less like a weakness and more like a quiet win.
Wanting to join the housing market? These are the most future-proof places to buy in Victoria in 2026.
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