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VIC Metro Market Report October 2026

Published October 2026

MARKET INTELLIGENCE VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

What’s Inside This report presents and analyses the most recent economic and building datasets available as of September 2026. Executive Summary

Buyer Activity

Victorian Home Purchasers

Home Purchaser Loan Size

Greater Melbourne Dwelling Supply

Building Approvals - Greater Melbourne

Unit Dwelling Building Activity

Medium and Higher Density Construction Outlook

Construction Costs

Greater Melbourne Pricing, Rents, and Vacancies

Melbourne Unit Market

Construction Pricing

Median Property Prices - Capital City Comparison

Tender Price Escalation

Vacancy Rates and Rental Stock

Economic Outlook

Unit and Apartment Rent - Melbourne by Region

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Executive Summary Luke Kelly National Managing Director Built Form luke@rpmgrp.com.au

Victoria’s residential property market has entered a period of heightened uncertainty as interest rates, budget reforms, and construction cost pressures reshape buyer behaviour and development activity. New owner occupier lending has dropped, and headline figures held up only because investors brought purchases forward in the first half of the quarter. Smaller loan sizes across all buyer types should not be read as improved affordability, with the cash rate now at 4.60% after a rise in September.

Developers are focusing on delivering existing projects as both structural and market changes bring in a period of uncertainty.

Unit prices and returns have weakened, most notably in Melbourne’s middle ring. The area traditionally holds the largest share of dwellings and the most expensive stock, and new tax settings are increasingly cutting it off from investor demand. Middle ring vacancy rates have also risen above 3% for the first time since 2024, which is likely to push rents lower. Construction output costs have so far avoided the sharp escalation expected from the Iran war. Input costs rose 2.0% in the quarter, the largest increase since late 2022, yet the cost of a completed unit in Melbourne held flat, unchanged from the end of March. Victorian contractors largely absorbed higher fuel and material prices, helped by a softer construction market that kept competition for tenders alive. On the other hand, Queensland and Western Australia both of which

record a much higher level of construction activity, has seen contractors largely pass cost increases on. Melbourne’s contractors cannot be assumed to be able to absorb another round of potential short term cost escalation as the Iran war reignites and drives energy and freight prices to record heights. The development pipeline sends mixed signals. Townhome and apartment approvals remain weak, as do completions. Commencements sit at relatively high levels, as does the number of units under construction, suggesting a number of projects managed to time the market. Developers appear focused on finishing existing projects over repeatedly updating feasibilities. The federal migration changes that tighten student and visitor visas may ease demand. With borrowing costs rising and further cost increases possible, developers will need to plan and time projects carefully.

F or more information, please visit: www.rpmgrp.com.au O ur Research Consultancy Services create bespoke reports crafted to your specifications, translating rich data into in-depth analysis. For a bespoke report, email the team at: contactus@rpmgrp.com.au

Disclaimer: Figures presented in this report represent latest available data as of September 2026. However, the economic outlook continues to evolve rapidly. Although reasonable care has been taken in the preparation of this information, RPM Real Estate Group Pty Ltd take no responsibility for the accuracy of VIC MARKET REPORTherein. OCT 2026 | © RPM GROUPthat all the information be verified if it is to be used for commercial purposes. the METRO information contained It is recommended

Buyer Activity

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Victorian Home Purchasers New investor loans reached 13,516 over Q2 2026, the second strongest Q2 on record for investor activity.

Number of Total New Housing Loans

Non-FHB Owner Occupier

Investor

First Home Buyer 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

45.0% 40.0% 35.0% 30.0% 25.0% 20.0%

Quarter

FHB

Subsequent OO

Investor

Jun-2026

Mar-2026

Dec-2025

Sep-2025

Jun-2025

Mar-2025

Dec-2024

Sep-2024

Jun-2024

Mar-2024

Dec-2023

Sep-2023

Jun-2023

Mar-2023

Dec-2022

Sep-2022

Jun-2022

Mar-2022

Dec-2021

Sep-2021

Jun-2021

15.0% Mar-2021

Next quarter’s data will capture the full effect of the May budget. New loan commitments are expected to fall across all measures as the new tax settings weigh on market outlook and investor appetite in particular. Even with dwelling prices easing, first home buyers will continue to struggle to enter the market, with the RBA lifting rates in September.

Total Loans

Dec-2020

Owner occupier activity began to retreat. First home buyers took out 9,791 new loans, 4.3% fewer than the same time last year and measurably below the Q2 average from 2021 onwards.

Although investor activity eased in the second half of the quarter, investors still accounted for 35.8% of all new loans in Q2 2026. First home buyers made up only a quarter of the market, with borrowing capacity continuing to hold them back.

Proportion of Loans by Type

Sep-2020

Investors rushed to buy ahead of the May 12 cutoff. New investor loans reached 13,516 over Q2 2026, up 7.1% on the same time last year and the second strongest Q2 on record for investor activity. The immediate drop in investor lending proved smaller than many had expected.

High interest rates drove most of this decline, particularly after three consecutive rate rises in February, March, and May. Subsequent owner occupier buyers followed a similar path, with 14,457 new loans marking a 1.7% fall on Q2 2025.

Jun-2020

Victoria recorded 37,764 new home loan commitments in Q2 2026, almost level with Q2 2025. Overall activity held firm despite property tax changes introduced midway through the quarter, which limit negative gearing on established properties purchased after May 12 to twelve months.

Total New Loans

Jun-26

9,791

-4.31%

14,457

-1.72%

13,516

7.14%

37,764

0.55%

Jun-25

10,232

1.11%

14,710

-1.30%

12,615

6.10%

37,557

1.74%

Jun-24

10,120

16.03%

14,903

13.94%

11,890

17.93%

36,913

15.77%

Source: ABS Lending Indicators VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Home Purchaser Loan Size Average loan sizes fell 1.2% to $642,623, led by subsequent owner occupiers, while first home buyer loans held steady.

Subsequent Owner Occupier

Investor

First Home Buyer

$800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000

Quarter

FHB

Subsequent OO

Investor

Jun-2026

$561,689

$733,534

$604,010

Previous Quarter (Mar-2026)

$562,137

$745,564

$607,028

12 Months Ago (Jun-2025)

$528,372

$715,731

$597,297

Mar-2026

Sep-2025

Mar-2025

Sep-2024

Mar-2024

Sep-2023

Mar-2023

Sep-2022

Mar-2022

Sep-2021

Mar-2021

Sep-2020

Mar-2020

Sep-2019

Mar-2019

Sep-2018

Mar-2018

Sep-2017

Mar-2017

Sep-2016

Mar-2016

$0 Sep-2015

Loan sizes are expected to fall sharply in the next quarterly release, particularly for subsequent owner occupiers and investors, as the market continues to cool, and the RBA lifted rates again in September. Investor borrowing capacity has already taken a significant hit, with lenders now assessing capacity without negative gearing, and further data will reflect this.

Average Loan Size by Buyer Type

Mar-2015

Subsequent owner occupiers recorded the sharpest fall in average loan size falling $12,000 to $733,534. These buyers make up the bulk of demand at the higher end of the market, which is typically the first segment to respond to a downturn. Larger loans also feel borrowing cost changes more in absolute dollar terms.

The average investor loan size dropped 0.5% on Q1, though it has changed very little since late 2023. First home buyer loans also held steady at an average of $561,689, a figure measurably higher than Q2 2025. The 5% Deposit Scheme appears to be supporting borrowing capacity for first home buyers who can access it, while rising rates are mostly affecting how many buyers can purchase at all.

Sep-2014

Three rate rises to May and major tax changes have pushed the property market into retreat across the country, and the effect now shows in every buyer cohort. The average new loan fell by 1.2% in size from $650,152 to $642,623 in Q2 2026.

Source: ABS Lending Indicators VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Greater Melbourne Pricing, Rents, and Vacancies

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Melbourne Unit Market Laurence Rao Research Manager Market Intelligence laurence@rpmgrp.com.au

New dwellings in the inner and outer rings will become more attractive to buyers and developers alike. After rising slightly at the start of 2026, Melbourne’s median unit value contracted 1.6% to $646,500 in Q2 2026. The middle ring recorded the largest fall, with values down 2.3% in the quarter. This follows a 0.7% drop in Q1 and leaves the median well below the $738,000 medium term peak recorded in Q4 2025. The pattern is a familiar one, with cooling markets tending to start at the upper end. In the unit market, that upper end sits in the middle ring, which hosts the greatest concentration of large, premium units. With the middle ring now two quarters into negative growth, the inner and outer rings have followed,

New dwellings in the inner and outer rings will become more attractive to buyers who are able to purchase relatively affordable dwellings and continue to have access to negative gearing. Melbourne’s middle ring, which holds the bulk of established stock and at higher prices, will become comparatively less attractive.

falling 1.4% and 2.2% respectively in Q2 2026. Inner ring unit values are now level with mid 2023, while outer ring values remain above medium and long term trends, supported by significantly stronger capital growth despite the recent slowdown. Melbourne’s unit to house price relativity retreated sharply from 50% in Q1 to 43%. This reflects a significant fall in median house price rather than any appreciation in unit price. Established unit prices are forecast to keep falling, particularly in the middle ring, where investors buying after 12 May will be unable to access tax concessions. Purchasers of new dwellings are able to keep access to negative gearing, and prices in the inner and outer rings sit below the middle ring. This combination will draw buyers, particularly investors, to new dwellings in these areas, which supports the sales needed to complete projects.

Median Unit Prices by Location - Q2 2026 Overall

$646,500 -1.6% q/q and +2.2% y/y

Middle Ring

$716,500 -2.3% q/q and +0.6% y/y

Inner Ring

$598,500 -1.4% q/q and +1.4% y/y

Outer Ring

$636,500 -2.2% q/q and +4.4% y/y

Inner ring: 0-10km radius around Melbourne CBD. Middle ring: 10-20km radius around Melbourne CBD. Outer ring: 20km+ radius around Melbourne CBD, including the Mornington Peninsula. Source: REIV and RPM Market Intelligence Note: Units include all dwellings that are not detached houses

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Melbourne Unit Market by Region The unit market has begun to contract, with the steepest movement in the middle ring.

Unit Prices Inner

Unit Price Rate of Change Middle

Outer

Overall Units

Inner

$800,000

Middle

Outer

10.0%

9.3%

$716,500

$750,000

8.0%

$700,000

$646,500

$650,000

6.3%

6.0% $636,500

$600,000

$598,500

$550,000

4.4%

2.0%

$500,000

3.8%

4.0%

1.4%

1.3%

0.6%

$450,000

0.1%

0.0%

$400,000 -2.0%

$350,000

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Jun-26

Dec-25

Jun-25

Dec-24

Jun-24

Dec-23

Jun-23

Dec-22

Jun-22

Dec-21

Jun-21

Dec-20

Jun-20

Dec-19

Jun-19

Dec-18

Jun-18

Dec-17

Jun-17

Dec-16

Jun-16

Dec-15

Jun-15

Dec-14

Jun-14

$300,000

-4.0%

-1.0%

-1.4% -2.3% -2.2% Quarterly Change

1.8%

-2.9% -2.8% 1 Year Change

3 Year Change

5 Year Change

10 Year Change

Source: REIV, RPM Market Intelligence Note: Units include all dwellings that are not detached houses

Median Property Prices - Capital City Comparison Median Unit Prices - June 2026 Sydney

Melbourne

Unit Price

$840,000

$657,000

+0.2% 3-mo Ch, +2.4% Ann. Ch.

-0.4% 3-mo Ch, +3.5% Ann. Ch.

Brisbane

Perth

Unit Price

$835,000

$720,000

+0.3% 3-mo Ch,+19.3% Ann. Ch.

+0.4% 3-mo Ch, +26.3% Ann. Ch.

Adelaide

Canberra

Unit Price

$725,000

$630,000

0.0% 3-mo Ch,+15.1% Ann. Ch.

0.0% 3-mo Ch, +4.1% Ann. Ch.

Hobart

Darwin

Unit Price

$613,000

$450,000

0.0% 3-mo Ch,+6.1% Ann. Ch.

0.0% 3-mo Ch, +11.1% Ann. Ch.

Source: REIA - Whilst REIA sources figures from each respective state’s institute, published figures differ slightly from state level data. Note: Units include all dwellings that are not detached houses VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Vacancy Rates and Rental Stock Melbourne’s vacancy rate rose to 2.6% at the end of June, the highest since late 2022.

Melbourne’s rental vacancy continued to ease slightly, with the vacancy rate rising to 2.6% at the end of June 2026. This is the highest rate since late 2022 and points to the start of a very slow return to the longer term average, though the market remains tightly held. The outer ring shows the clearest easing in rental pressure. Its vacancy rate of 2.3% sits well above medium and long term averages, both of which sit at or below 2.0%. Even so, the rental market in the outer ring remains tighter than the inner ring, at 2.7%, and the middle ring, at 3.1%. Middle ring vacancies have now reached a level widely regarded as balanced, generally between 3.0% and 3.5%. Easing rental demand in the inner ring, combined with falling middle ring unit prices, suggests renters and investors are both pivoting away from these areas, which is likely to reduce rental stock. Recently announced reductions to NOM through student visa integrity (curbing ‘visa-hopping’), restrictions on secondary family dependents, and reworked visitor visa systems are expected to lower demand for larger rental properties. Reduced demand may see new owner occupiers filling the gap.

Vacancy Rates 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Current vs Prev Qtr vs Prev Year vs Long Term Avg

Inner (0-10km)

km) Middle (10-20KM)

Outer (20km+)

Melbourne Total

2.7% 2.6% 2.6% 3.1%

3.1% 2.8% 2.5% 3.7%

2.3% 1.8% 2.0% 1.8%

2.6% 2.5% 2.5% 2.9% Source: REIV, RPM Market Intelligence

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Unit and Apartment Rents – Melbourne by Region Melbourne’s unit rental growth has plateaued, with little capacity for further increases.

Median Rental Rates by Region Inner

Middle

Outer

Comparison with Previous Periods Metro Melbourne

$700 $650 $600 $550 $500

Area

Jun-26

vs Prev Quarter

vs Prev Year

vs 3 Year

vs 5 Year

Inner

$630

+1%

+5%

+20%

+58%

Middle

$615

+3%

+6%

+23%

+45%

Outer

$530

+2%

+18%

+36%

Metro Melbourne

$600

+3%

+20%

+50%

$450 Inner ring: 0-10km radius around Melbourne CBD. Middle ring: 10-20km radius around Melbourne CBD. Outer ring: 20km+ radius around Melbourne CBD, including the Mornington Peninsula.

$400 $350

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Jun-26

Mar-26

Dec-25

Sep-25

Jun-25

Mar-25

Dec-24

Sep-24

Jun-24

Mar-24

Dec-23

Sep-23

Jun-23

Mar-23

Dec-22

Sep-22

Jun-22

Mar-22

Dec-21

Sep-21

Jun-21

Mar-21

Dec-20

Sep-20

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Mar-19

Dec-18

Sep-18

Jun-18

Mar-18

$300

Source: REIV and RPM Market Intelligence Note: Units include all dwellings that are not detached houses.

Unit and Apartment Rents – Melbourne by Region Middle ring vacancy rates are diverging from the inner ring, though rents have yet to follow.

Vacancy Rate

Median Rental by Product Type and Region Inner Ring 1 Bed

Inner Ring 2 Bed

Inner Ring Vacancy Rate

Middle Ring 1 Bed

Middle Ring 2 Bed

Middle Ring Vacancy Rate

Jul-26

Apr-26

Jan-26

Oct-25

Jul-25

Apr-25

Jan-25

Oct-24

Jul-24

Apr-24

Jan-24

Oct-23

Jul-23

Apr-23

Jan-23

0.0% Oct-22

$300 Jul-22

1.0%

Apr-22

$350

Jan-22

2.0%

Oct-21

$400

Jul-21

3.0%

Apr-21

$450

Jan-21

4.0%

Oct-20

$500

Jul-20

5.0%

Apr-20

$550

Jan-20

6.0%

Oct-19

$600

Jul-19

7.0%

Apr-19

$650

Jan-19

8.0%

Oct-18

$700

Jul-18

9.0%

Apr-18

$750

Source: REIV and RPM Market Intelligence

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Greater Melbourne Dwelling Supply

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Building Approvals – Greater Melbourne On a rolling 12 month basis, 8,851 townhomes were approved, the lowest figure in over a decade.

Townhome approvals across Greater Melbourne rose in Q2 2026, with 2,189 dwellings approved for construction. This is a 9% increase on Q1, though still well below medium and long term trends. On a rolling 12 month basis, 8,851 townhomes were approved, the lowest figure in over a decade.

Monetary policy has tightened further, with the RBA lifting the cash rate to 4.60% in September and markets pricing another rise before year end. Together, these pressures make new unit developments more expensive to finance and harder to start, and developers remain focused on delivering existing projects over launching new ones. This reduces the chance of approvals regaining momentum in the medium term.

Apartment approvals totalled 10,727 dwellings over the past year, a small uptick on the year to Q1 2026. Approvals remain firmly in the trough, sitting 20% below the year to Q2 2025.

New builds will retain access to negative gearing once the tax changes are fully implemented, which supports cautious optimism that investor demand for new townhomes and apartments will hold at similar levels. Even so, data centre and engineering work will likely continue to dominate the construction environment. Housing reforms should support townhome and apartment construction over time, but conditions remain challenging in the near term.

With townhome approvals at decade lows and apartment approvals showing no clear sign of improvement, Melbourne’s medium and higher density supply pipeline is under pressure. Spare capacity in Melbourne’s residential building sector has seen material price shocks largely dampened, with contractors absorbing the increase in plant and machinery running costs.

VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

Apartment and Townhome Approvals Apartments Q2 2026

2,136 dwellings -35% q/q and +20% y/y

Apartments - Rolling Annual

10,727 dwellings

+3% q/q and -20% y/y

Townhomes Q2 2026

2,189 dwellings +9% q/q and -10% y/y

Townhomes - Rolling Annual

8,851 dwellings

-3% q/q and -2% y/y

Source: ABS Building Approvals Note: Units include all dwellings that are not detached houses.

Building Approvals – Greater Melbourne Both townhome and apartment building pipelines remain in a trough.

Townhome Approvals

Rolling Annual Approvals

Greater Melbourne Quarterly Townhome Approvals

Rolling Annual Approvals

Apartment Approvals

Rolling Annual Approvals

Greater Melbourne Quarterly Apartment Approvals

4,000

14,000

3,500

12,000

Rolling Annual Approvals

10,000

30,000

9,000 25,000

8,000

3,000

10,000

2,500 8,000 2,000

7,000

20,000

6,000 5,000

6,000 1,500 4,000

1,000

15,000

4,000 10,000

3,000 2,000

Jun-26

Nov-25

Apr-25

Sep-24

Feb-24

Jul-23

Dec-22

May-22

Oct-21

Mar-21

Aug-20

Jan-20

Jun-19

Nov-18

Apr-18

Sep-17

Feb-17

Jul-16

Dec-15

May-15

Oct-14

Mar-14

Aug-13

Jan-13

Jun-12

Nov-11

Apr-11

Sep-10

Feb-10

Jul-09

Dec-08

May-08

Oct-07

Mar-07

Aug-06

1,000

Jan-06

Jun-26

Nov-25

Apr-25

Sep-24

Feb-24

Jul-23

Dec-22

May-22

Oct-21

Mar-21

Aug-20

Jan-20

Jun-19

Nov-18

Apr-18

Sep-17

Feb-17

Jul-16

Dec-15

May-15

Oct-14

Mar-14

Aug-13

Jan-13

Jun-12

Nov-11

Apr-11

Sep-10

Feb-10

Jul-09

Dec-08

May-08

Oct-07

Mar-07

Aug-06

Jan-06

Jun-05

500

5,000

Jun-05

2,000

Unit Dwelling Building Activity Low approvals suggest feasible projects have largely started, leaving relatively few in the pipeline.

In the year to Q1 2026, 19,434 unit dwellings were approved and 20,225 completed, with both measures sitting firmly in the lower half decade quartile.

Townhome and Apartment Building Activity - Victoria (Half Decade Rolling Annual Comparison)

Commencements remain high, with construction starting on 22,410 unit dwellings over the same period. With unit projects starting but only slowly completing, the sector is becoming increasingly backlogged. Input cost pressures and competition for labour from more active construction sectors are causing delays, despite developers’ focus on completing existing projects.

29,000

Low approvals also suggest feasible projects have largely started, leaving relatively few in the pipeline. With uncertainty from the Iran war, limited specialist labour and equipment, and rising running costs, approvals are not expected to lift in the near term. Commencements are likely to drop significantly in upcoming data releases. Unit dwelling construction may improve in late 2027 as housing reforms take full effect, though this will depend on a range of other market conditions, key of which will be how both buyers and investors adjust to a new taxation system.

31,000

5 Year High

27,000 25,000

Upper Quartile

23,000

Median

21,000

Lower Quartile

19,000

5 Year Low

17,000 15,000

Approvals

Year to March Quarter 2026

Commencements

Completions

Guide

Source: ABS Building Activity. Last 5 Years. Note: Data releases are lagged . Note: Units include all dwellings that are not detached houses.

Medium and Higher Density Construction Outlook

Construction Costs - June 2026 Figures show that contractors have largely absorbed significant material cost escalation earlier in the year.

Inputs to Construction - MEL

Inputs to Construction - AUS

Outputs to ‘Other’ Housing - VIC

Outputs to ‘Other’ Housing - AUS

Quarterly

+2.0%

+2.1%

Quarterly

0.0%

Quarterly

Yearly Change

+3.5%

+3.8%

+3.2%

+0.8% +4.1%

Other dwellings refers to all dwellings that are not detached/freestanding homes.

Source: ABS Producer Price Indexes

Construction Pricing Capacity in Melbourne’s construction sector has seen contractors absorb most material cost increases.

The on again, off again Iran war has created global uncertainty. For Australia’s construction sector, it has driven up the cost of diesel, freight, concrete, and other energy linked and energy intensive products.

The latest ABS Producer Price Index figures for Q2 2026 show the full extent of the initial shock, with material input costs rising 2.1% across Australia. Sydney and Brisbane recorded the strongest escalation at 2.3%, with both markets maintaining elevated construction activity. Melbourne sat below average at 2.0%. In every market, Q2 2026 recorded the largest quarterly material price increase since late 2022.

Inputs and Outputs to Housing Construction

Petroleum based and energy intensive products contributed most to the increase. The ABS measured a 12% jump in plastic pipes and fittings in Q2 2026, with some suppliers lifting prices by around 30% in March and April and no evidence of a reversal. Copper pipes, metals, and especially electrical equipment also rose significantly over the quarter.

3.0%

7.0% Melbourne Construction Inputs

VIC Other Residential Outputs

6.0% 5.0% 4.0%

2.0% 1.0% 0.0%

Jun-2026

Mar-2026

Dec-2025

Sep-2025

Jun-2025

Mar-2025

Dec-2024

Sep-2024

Jun-2024

Mar-2024

Dec-2023

Sep-2023

Jun-2023

Mar-2023

Dec-2022

Sep-2022

Jun-2022

Mar-2022

-1.0%

Source: ABS Producer Price Indexes ‘Other’ dwellings include all residential dwellings that are not detached houses. VIC METRO MARKET REPORT OCT 2026 | © RPM GROUP

+5.0%

+3.1% +2.2%

+5.0%

+7.5% +3.5% +1.8%

0.0% -5.0%

-0.1%

-1.1%

+4.9% +3.8% +0.8% +1.2% +0.3%

+2.9%

+3.8% +1.3% +2.6% +0.3% +0.2%

-0.8%

-1.9%

-2.4%

-10.0%

Installed Gas and Electrical Appliances

Other Materials

All Inputs to Housing Construction

Steel Products Products Steel

Metal Products Products Other Metal

Plumbing Plumbing Products Products

For Victorian developers, the figures offer some breathing room for projects ready to commence construction. This breathing room is likely to be brief, with costs still being passed on in Queensland and Western Australia, and the Iran war ongoing. Since the conflict resumed in early September, the terminal gate price of diesel has risen from $2.36 to $2.70 as of late September, matching April levels. Freight costs have reached historic highs and will drive further material cost escalation. Victorian contractors cannot be assumed to absorb the next round of increases.

Electrical Equipment

Plumbing Products

Other Metal Products

Cement Products

Concrete, Cement, and Sand

Ceramics

Steel Products

-13.4%

-15.0%

There is no guarantee that Victorian contractors will be able to absorb the next round of cost increases as the conflict reignites and places further pressure on energy and freight costs.

Contractors have passed on very little of these increases to tender prices, absorbing the vast majority in most states. Output costs for townhomes and apartments (the cost of a completed dwelling) rose only 0.8% nationally, well below the 2.1% input cost increase. Victoria recorded no output cost escalation in Q2 2026, partly reflecting its softer construction environment. Queensland’s output costs rose 2.0%, slightly below its 2.3% input cost increase, with New South Wales sitting between the two.

+6.4% +5.9%

-5.1%

Timber and Joinery

Construction Pricing

-0.8%

+6.0%

+6.7% +5.0%

Input Cost Escalation by Material - Melbourne vs Last Quarter

vs 12mo

vs 24mo

+20.0% +15.0% +10.0% +5.0% 0.0% -5.0%

All All Inputs Inputs to to Housing Housing Construction Construction

Other Other Materials Materials

Installed Gas and Installed Gas and Electrical Electrical Appliances Appliances

Electrical Electrical Equipment Equipment

Cement Products Products Cement

Concrete, Cement, and Concrete, Cement Sand and Sand

Ceramics Ceramics

Timber and and Joinery Joinery Timber

-10.0%

Source: ABS Producer Price Indexes

Tender Price Escalation Melbourne’s relatively soft construction market will see steady tender price escalation in both the medium and longer terms.

RLB Tender Price Index Annual % Uplifts (as at Q2 2026) 2025

2026 (F)

2027 (F)

2028 (F)

2029 (F)

Adelaide

3.5

5.1

5.5

6.0

Brisbane

5.0

7.0

Canberra

3.8

4.7

4.8

4.3

4.0

Darwin

5.0

6.9

5.1

4.6

4.0

Gold Coast

4.5

6.0

7.0

Melbourne

4.0

Perth

5.4

5.6

5.2

4.8

Sydney

4.5

4.0

4.5

5.0

4.5

Townsville

6.0

7.0

7.0 Source: Rider Levett Bucknall

Economic Outlook Michael Staedler General Manager Market Intelligence m.staedler@rpmgrp.com.au

Melbourne’s townhome and apartment markets have faced a tumultuous first half of the year, with prices and buyer activity cooling and very limited capacity for rental growth. Cyclical and structural factors will continue to significantly overshadow government policy on both the demand side (e.g. the 5% Deposit Scheme) and the longer term supply side (the medium density planning reform). Two forces will shape demand for units and developers’ ability to bring on new supply. The first is borrowing rates. The RBA lifted the cash rate target to 4.60% on September 29, its fourth increase this year after rises in February, March, and May, and the highest level since late 2011. The Board has said it will raise rates further if inflation requires it, and markets are pricing another increase before the year end.

Borrowing rates and materials costs will shape demand for units and developers’ ability to bring on new supply.

Higher rates will weaken buyer appetite while prices are already falling and make funding and feasibilities more challenging for developers. The second is material costs. Melbourne’s contractors absorbed the initial round of pricing shocks from the Iran war, but they cannot be counted on to do the same as the conflict intensifies again and energy prices return to the highs of March and April. Relatively soft construction activity gives Melbourne some breathing room compared with Brisbane and Perth, though skilled labour shortages persist. Any further material cost increases will likely slow approvals and the building pipeline. Some slight positive structural shifts are emerging. Established stock, which can no longer access tax concessions, is slowly being absorbed by owner occupiers. Investor activity remains high and is likely to be redirected into new builds, which retain access

to negative gearing. The coming months will be critical in determining whether a new pricing structure emerges as a result of new tax settings, even if overall unit prices remain under pressure. Q3 2026 figures will be telling, as the first full quarter of purchasing activity under the new tax settings. Recently announced visa changes will also reshape migration patterns and demand for unit stock. Lower migration targets will phase in gradually, but may ease rental demand and help return vacancy rates to a more balanced level. Prioritising skilled migration, particularly for the construction industry, may slightly relieve the shortage of skilled tradespeople and dampen some future uncertainty.

Our Team Market Intelligence Michael Staedler

General Manager Market Intelligence m.staedler@rpmgrp.com.au

Andrew Raponi

Senior Research Manager a.raponi@rpmgrp.com.au

Laurence Rao

Simon Brinkman

Rod Anderson

Peter Grant

Research Manager - VIC laurence@rpmgrp.com.au

Research Manager - QLD & NSW simon@rpmgrp.com.au

Executive, Sales and Marketing Leadership Paul McMahon

Luke Kelly

Chief Operating Officer paul@rpmgrp.com.au

National Managing Director Built Form luke@rpmgrp.com.au

National Managing Director Communities rod@rpmgrp.com.au

Joe Catanese

Imogene Schaefer

Greg Rankin

General Manager Marketing imogene@rpmgrp.com.au

General Manager New Business gregr@rpmgrp.com.au

Johnathon Driessen

Clinton Trezise

Peter Neale

James Matley

Tim Hyland

National Managing Director Transactions & Advisory joec@rpmgrp.com.au

Managing Director QLD clinton@rpmgrp.com.au

Managing Director QLD petern@rpmgrp.com.au

Director Transactions & Advisory QLD & NSW james@rpmgrp.com.au

National Managing Director Business Development peter@rpmgrp.com.au

General Manager Communities johnathon@rpmgrp.com.au

National Strategy Manager Transactions & Advisory tim@rpmgrp.com.au

Unlocking Australia’s Property Landscape For detailed insights or custom reporting, contact the team at: contactus@rpmgrp.com.au