Rental demand across Victoria increased steadily through the 2025-26 financial year, with tight supply levels and solid population growth expected to underpin further increases through the year ahead.
Despite hefty rent increases between 2022-2024 (averaging 7.9% annually), Melbourne’s rental growth is accelerating again. According to the Cotality Rent Value Index, Melbourne rents rose 4.8% in the year to May 2026, rebounding from a low of 1.0% in July 2025. Units led the charge, up 4.9%, with median rents hitting $617 per week. House rents gained 4.7%, recovering from just 0.5% growth in July 2025, to reach $671 per week by May 2026.
Regional Victoria also posted strong annual results, including a 3.8% surge in rents for houses and 4.1% in units.
Figure 1. Change in Cotality Rent Value Index (rolling, annual) - Melbourne
Indexed median rent values
Melbourne
- Unit
- $671
- House
- $617
Regional Victoria
- Unit
- $525
- House
- $424
Source: Cotality, as at 31/05/26
Why the strong performance? On the demand side, wages growth has trended higher through the 2020s according to the Australian Bureau of Statistics, remaining elevated at 3.1% in the year to March 2026. The Fair Work Commission also announced a strong uplift to award wages and the minimum wage for the 2026-27 financial year. More money in the pockets of households usually translates to higher housing demand and upward pressure on rents. Net overseas migration added around 89,000 people to Victoria in the year to September 2025, reinforcing demand.
From a supply perspective, Cotality data shows vacancy rates tightened to 1.2% in Melbourne as of May 2026, down from 1.5% a year ago and below the national average of 1.7%. Rental bond data from the Victorian state government shows a 3.4% decline from the June 2023 peak to September 2025, suggesting a smaller stock of rentals.
Home values, Melbourne 12 months to May 2026
Home values, Regional Victoria 12 months to May 2026
For investors, Victoria offers rare value with strong fundamentals.
Capital growth trends have understandably slowed into 2026, as interest rate rises and cost of living pressures re-emerge in the face of a global oil price shock. The Cotality Home Value Index saw Melbourne home values up 0.5% in the year to May 2026. However, regional Victoria remains a bright spot for growth, rising 7.8% in the same period. Gross rental yields moved a little higher over the year. Thanks to affordable purchase prices and solid rent growth, Victoria’s yields are now higher than the combined capital city figure and on par with the combined regional rate.
Figure 2. Change in gross yields, Melbourne vs other regions
Despite the uncertainty handed down with the Federal Budget and changes to taxation on investment property, the market data indicates solid fundamentals in the Victorian property market. The combination of rising rents, steady yields, and price stability signals confidence for both home buyers and investors. ABS data still shows decent investment activity, with 12,700 new investment loans secured across the state in the March quarter of 2026, up 29.3% on the year prior.
Melbourne isn’t just any city; it’s a proven global leader. The Economist Intelligence Unit’s Global Liveability Index placed Melbourne fourth globally in 2025. Despite ranking highest of the Australian and New Zealand cities featured, it has the second-lowest median dwelling value behind Wellington. That’s exceptional value for a world-class city.
For investors, this means Victoria offers rare value with strong fundamentals. A tight rental market and affordable purchase prices are inspiring confidence despite an uncertain global economic environment and domestic tax changes. The window is open now, and those who act early stand to benefit.