Q3 Investment Market Update: Rental demand remains robust
Andrew McCann - Chief Executive Officer & Jellis Craig Foundation Chair
September 2026As demand for quality rental homes continues to outpace supply, Victoria's rental market offers renewed confidence to property investors.
The rental market remains tightly contested, with properties in short supply and solid demand from tenants. First-homebuyers moving into home ownership have absorbed some properties from the rental pool, adding further pressure to available stock, with rental vacancy rates across Melbourne dipping in Q3 ’26 to 2.5% versus 3.1%¹ in Q2 ’26.
Higher borrowing costs and tighter regulations have made property investment more complex. However, the underlying demand for rental housing is robust, and investors who have stayed in the sector are benefiting from higher yields than in previous years.
Spring brings signs of renewal
As we move through the spring selling season, Melbourne’s residential market is showing encouraging signs. However, growth remains more measured than a typical seasonal upswing.
The market has experienced a renewed sense of optimism, with increased activity throughout the first month of spring. At the same time, volumes are thin, with a 6.9%² decrease in properties sold across the broader Melbourne market during the month of September ’26 versus the same time last year. That scarcity is helping to support prices, where we have seen a 6.6%³ increase in median house price growth versus the June ‘26 quarter.
While much of the commentary around Victoria’s property sector has focused on government intervention and interest-rate pressure, vendors entering the market are finding conditions more favourable than the headlines suggest.
I expect this gradual improvement to continue, with depth returning to the buyer pool, boosting competition for quality properties.
Rental legislation changes
Further rental law reforms will be coming into effect from 13 October 2026, strengthening renter protections and lifting the quality, energy efficiency and sustainability of rental homes. Navigating legislative change can be complex, particularly when it comes to understanding your obligations as a rental provider. Whether you’re a rental provider or a renter, staying informed is key.
Our team is here to guide you through these changes, helping rental providers meet their obligations and renters understand their rights and responsibilities for a smoother, more transparent rental experience for everyone.
Looking ahead to 2027
Heading into the final months of 2026, the window for sellers is narrowing. A state election is also on the horizon, and history tells us these periods can introduce some short-term caution into the housing sector. The final months of the year also tend to move quickly, and with Christmas fast approaching, there is a relatively short period left for planned sales.
Looking further ahead, I’m genuinely optimistic about 2027. Melbourne has been through a relatively soft period, and I anticipate the cycle will shift into a firmer recovery phase in the new year. Victoria continues to offer compelling value compared with the rest of the country. Beneath the noise around price performance, the underlying strength of the market remains sound, and I expect that longer-term recovery to gain traction through 2027.
Written by Andrew McCann - Chief Executive Officer & Jellis Craig Foundation Chair.
Victorian Rental Law Reforms
What this means for Renters and Rental Providers. Significant changes to Victoria's rental laws have now come into effect. These reforms are aimed at strengthening renter protections and improving the quality, energy efficiency, and sustainability of rental homes across the state.
1. Jellis Craig Data, Number of Properties Sold, Greater Melbourne, 1/07/2026 - 30/09/2026 vs 1/07/2025 - 30/09/2025
2. Jellis Craig Data, Median House Price Growth, Greater Melbourne, 1/07/2026 - 30/09/2026 vs 1/04/2026 - 30/06/2026
3. REIV, Rental Vacancy Rates, Greater Melbourne, 1/07/2026 - 1/07/2026 - 30/09/2026 vs 1/04/2026 - 30/06/2026
