Market resilience and migration: Q4 in review and investment market outlook for 2026

Rental demand rebounds in Melbourne

After slowing mid-year, Melbourne’s rental market regained momentum in the second half of 2025, closing the year on a high. Cotality’s rent value index shows annual growth lifted from 1.1% in July to 2.9% by December. This was comprised of a 3.5% rise in unit rents and 2.5% lift for houses. Average advertised rents were $575 per week in December, up from $565 a year earlier.

Across the Jellis Craig network, rental properties continued to command strong returns with median weekly house rents rising to $750 in the quarter (up from $740 in Q3 2025), while unit rent held steady at $620 per week. These results underscore Jellis Craig’s role in delivering consistent value for landlords and positioning clients to capitalise on a resilient rental market.

What’s behind the uptick?

Real income growth improved in Victoria through 2025, which often leads to more competition in rental markets. As rate relief supported a lift in economic activity, real wages growth across the state hit 1.3% in the year to June, the highest level in six years. Melbourne rent values appear to have adjusted accordingly through to the end of the year. 

Net overseas migration continued to support rental demand. In the year to June 2025, Victoria saw a net gain from overseas of around 88,000 arrivals. This was down from a high of 160,000 in the year to June 2023 but signifies a return to pre-COVID levels. Most overseas arrivals to Victoria are initially renters, and historically over 90% go to Melbourne, particularly the inner-city suburbs. 

Rental supply levels also remain tight. Active rental bond numbers have declined across the state, the vacancy rate remains under 2% and rent listings at the end of 2025 were below historic averages. 

Alongside rising rents, purchasing values climbed 4.8%, and gross yields were fairly steady compared to this time last year, at 3.6%. This means many investors have enjoyed solid gains in equity alongside the rise in rental demand.  

For investors looking for both strong rent yield and solid capital gain, units in Port Phillip recorded one of the highest gross rent yields of any Melbourne market at the end of 2025, at 5.1% per annum. This coincided with a 4.2% rise rent values in the year, and a 4.1% lift in purchase values. 

Regional rent growth outperforms Melbourne

In Regional Victoria, rent values increased 3.7% in 2025. While outperforming growth in Melbourne rent values, the trajectory is different. Annual rent increases remained solid but have slowed from a 5.4% rise in 2024.

Like Melbourne, purchase values rose alongside rents, increasing 6% over the year. Gross rent yields in regional Victoria were 4.2% in December 2025, steady on the year prior. Due to strong internal migration trends, regional Victoria in particular is expected to see a continuation of solid capital growth in 2026.

Investors step back in

The investor market is bouncing back strongly. Lending indicators from the Australian Bureau of Statistics shows investment loans surged 12% in Q3, with new loans jumping from 12,500 in June 2025 to over 14,000 in September 2025, a series high since 2019. This rebound comes despite recent tax hikes, suggesting investors can be confident of the resilience in the Victorian property market, and look forward to solid gains in value and steadiness in rental demand.

Melbourne continues to rank among the most desirable cities to live in and right now, it offers exceptional value for savvy investors. With higher-than-expected interest rates anticipated in 2026, the current window presents a rare opportunity to secure premium property at relatively attractive prices.

Meanwhile, tight rental supply and strengthening migration trends are set to underpin steady rent growth across Victoria. For investors, this means strong demand, steady yields, and long-term upside in one of Australia’s most sought-after markets.

Written by Eliza Owen, Housing Market Analyst & Economic Commentator