From the Desk – May 2026

The Victorian property market is mostly treading water with regional areas continuing to show moderate upside. Melbourne dwelling values fell 0.6% during April, while regional Victoria recorded growth of 0.9% for the month and 4.2% over the past four months. My local region is currently showing some signs of volatility, with Geelong down 2.8%, the Surf Coast easing 1.6% but the Bellarine Peninsula climbing 6.3% over the past 12 months. Ballarat has been the standout performer, recording growth of 13.8% over the same period and somehow managing to be voted the 17th happiest town in the world despite experiencing what must be some of the coldest winters on earth.

I believe the most recent 0.25% interest rate increase was necessary. However, it will hurt more households and businesses than the previous rises. RBA Governor Michelle Bullock indicated that this latest increase would provide the board with greater clarity ahead of future meetings, hinting that hold decisions may now be on the cards. I tend to agree, because even if inflation does continue to be difficult to tame an additional rate increase soon would be unlikely due to the carnage it would cause.

Restricted oil deliveries into Australia will not only impact fuel prices at the bowsers but also the cost of thousands of household products, packaging materials and the businesses supplying them. Combined with ongoing cost-of-living pressures and the continued struggles facing restaurants and entertainment venues, many businesses are reaching breaking point. Approximately 350 Victorian businesses close their doors a day and I expect that number to continue rising. In many respects, much of Melbourne’s property market remains on life support.

Auction clearance rates are softening, averaging approximately 65% since the beginning of 2026. During April there were close to 4,000 auctions conducted, producing a clearance rate near 70% and around 12,000 transactions. More recently, however, weekly clearance rates have drifted closer to 55%, highlighting weakening buyer confidence. It is also important to remember that more than 60% of property transactions in Victoria occur via private treaty rather than auction.

Over the coming months I expect Melbourne and Sydney prices to plateau and potentially soften further, while regional markets may remain in better shape as buyers continue searching for more affordable housing and a relaxed lifestyle. I have seen little evidence of any major plans to significantly reduce immigration, which reinforces just how difficult it will be to build enough homes each year to accommodate both interstate migration and continued overseas arrivals. This also creates ongoing uncertainty around inflation and how many additional interest rate increases may still be required.

Michael Ramsay

Principal

The Advocates

 Federal Budget

The 2026–27 Federal Budget has introduced some of the most significant housing and property tax reforms Australia has seen in decades. In my opinion, the changes are not entirely unexpected and certainly not all negative, however they will have major implications for buyers, investors and the broader property market moving forward. The headline reform is the restriction of negative gearing and favourable capital gains tax treatment to newly built properties only from 1 July 2027, while existing investment properties purchased before budget night will retain their current arrangements. The Government’s objective is clear — reduce investor demand for established homes, improve access for owner-occupiers and first home buyers, and redirect private investment toward increasing housing supply through new developments.

The removal of negative gearing on established homes, together with the proposed capital gains tax changes, will inevitably affect the willingness of many investors to remain in the market, potentially creating an even greater shortage of rental accommodation. While encouraging new construction makes sense in principle, there remains a serious question as to whether enough homes can realistically be built year after year to keep pace with population growth and continued migration. Investors are already contending with higher holding costs, increased compliance obligations and ongoing uncertainty surrounding future policy direction. Remove additional incentives and many may simply decide the risks no longer justify the return.

What these reforms do reinforce is the importance of strategic asset selection and timing. The coming years are likely to produce a two-speed market, with newly built housing attracting stronger investor demand while established markets become more balanced. For patient and disciplined buyers, calmer market conditions may finally create opportunities that were almost impossible to secure during the aggressive growth years. As always, quality assets in strong locations should continue to perform well over the long term, regardless of short-term policy changes or broader market uncertainty.

Victorian Statistics

MEDIAN HOUSE PRICE MELBOURNE	$991,500
MEDIAN UNIT PRICE MELBOURNE	$659,500
MEDIAN PRICE REGIONAL VICTORIA	$672,000
MEDIAN UNIT PRICE REGIONAL VICTORIA	$462,000
AUCTION CLEARANCE RATE	70%
CASH RATE	4.35%
INFLATION RATE	4.6%
RENTAL VACANCY RATE	2.4%

From the team at The Advocates

P.S.

We welcome input to our newsletters so please contact us with any experiences you’d like to share – positive or otherwise! Disclaimer: the information contained in this newsletter is based on personal opinion and experience, it should not be considered professional financial investment advice. Statistics are sourced from the REIV and RP Data