“May property market report”
Here’s your property market wrap on the results from May 2026. We’ll cover home prices, rents, the strongest performing regions, current auction conditions, and the policy changes now shaping investor sentiment.
May marked a clear shift in the national property cycle, with Cotality reporting that national dwelling values were flat over the month. Beneath that headline result, however, conditions became increasingly uneven. Sydney and Melbourne led the softer side of the market, while Perth, Darwin, Brisbane and several regional markets continued to record growth.
Melbourne dwelling values fell 0.8% in May and are now down 2.3% over the quarter. Annual growth has slowed to just 0.5%, with the median dwelling value sitting at $812,621. Regional Victoria continued to perform more steadily, with values rising 0.5% over the month, 1.3% over the quarter and 7.8% annually. The median dwelling value across Regional Victoria is now $640,848.
The May result points to a market where buyers are gaining more choice and negotiating power, particularly in Melbourne. Cotality notes that Melbourne values are now 3.2% below their March 2022 peak, and only 3.3% higher than they were five years ago. That is a very different story to markets such as Perth, where values have lifted more than 91% over the same period.
For Melbourne, the softer result reflects the combined impact of affordability pressure, higher interest rates, weaker confidence and rising advertised supply. The buyer pool has narrowed, particularly at higher price points, and Cotality also reported that estimated sales volumes in Melbourne were down 14.2% compared with a year ago. In practical terms, the market is still active, but it is no longer forgiving. Buyers are more selective and sellers need to be more strategic.
On the rental side, pressure remains a key part of the housing story. Nationally, Cotality reported that rents rose 0.6% in May, taking annual rental growth to 5.9%, the strongest annual increase since September 2024. The national vacancy rate also fell to 1.5%, returning to levels seen during the tightest rental conditions of 2022 and 2023. While rental demand remains strong, affordability is becoming more stretched, with Cotality noting renters are now dedicating around a third of their pre-tax income to rental payments.
In Victoria, rental conditions remain tight across both Melbourne and regional markets. Melbourne recorded annual rental growth of 4.7% for houses and 4.9% for units, while its gross rental yield lifted to 3.9%, the highest level since August 2013. Regional Victoria continues to offer stronger yields at 4.2%, supported by lower purchase prices and steady tenant demand. However, higher borrowing costs, insurance, maintenance, land tax and affordability constraints mean the investment equation remains challenging, even as vacancy remains low and quality rental homes continue to attract strong interest.
Even with Melbourne softening at the headline level, several metropolitan SA3 markets are still recording solid annual growth. Cotality’s top 5 SA3 areas for Metropolitan Melbourne by annual dwelling value growth at May 2026 were:
- Sunbury — median value $744,117, annual growth 6.7%
- Frankston — median value $834,640, annual growth 6.6%
- Brimbank — median value $725,006, annual growth 6.1%
- Casey - South — median value $812,811, annual growth 5.4%
- Tullamarine - Broadmeadows — median value $735,571, annual growth 5.2%
The common theme across these areas is relative affordability, family appeal and access to established infrastructure.
Regional Victoria remains one of the more resilient parts of the state. While growth is slowing, it is still outperforming Melbourne on an annual basis. Cotality’s top 5 SA3 areas for Regional Victoria by annual dwelling value growth at May 2026 were:
- Grampians — median value $391,194, annual growth 18.1%
- Mildura — median value $554,377, annual growth 16.2%
- Latrobe Valley — median value $517,896, annual growth 15.9%
- Glenelg - Southern Grampians — median value $462,517, annual growth 15.1%
- Ballarat — median value $638,711, annual growth 13.2%
Regional Victoria continues to benefit from lower entry prices, lifestyle appeal and more affordable housing options compared with Metropolitan Melbourne. However, the pace of growth is also expected to moderate as interest rate pressure, cost-of-living concerns and weaker sentiment flow through to regional buyers as well.
The recent Federal Budget has also added a new layer of uncertainty for investors. The announced changes centre on limiting negative gearing to new builds from 1 July 2027 and replacing the current 50% capital gains tax discount with an indexed cost base approach and a minimum 30% tax rate on real capital gains accruing from 1 July 2027.
In simple terms, the proposed negative gearing changes mean future investors may no longer be able to offset rental losses from established investment properties against salary or business income. Instead, those losses would be quarantined and could generally be used against residential property income or future capital gains. The policy is designed to direct more investor demand towards new housing supply, but it may also reduce investor appetite for established dwellings.
For capital gains tax, the shift away from the 50% discount means future gains would be treated differently, with indexation returning as part of the calculation and a proposed minimum tax rate applying to real gains from 1 July 2027. Existing investors are expected to watch the detail closely, particularly around transitional arrangements, timing and how the rules apply to assets already held.
The major watchpoints for the remainder of the year will be inflation, interest rates, auction clearance rates, listing volumes and the market’s response to the proposed tax changes. If borrowing conditions remain tight and listings continue to rise, Melbourne may stay subdued. If confidence stabilises and buyers adjust to the new policy environment, activity could improve, particularly in price-sensitive parts of the market.
Remember, the information provided is of a general nature only. You should always seek independent legal, financial, taxation or other advice based on your own circumstances.
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