Recent interest rate cuts designed to boost economic activity have prompted banks to adjust mortgage lending rates lower. Although additional state taxes have kept sentiment at bay, many are waiting for further interest rate cuts to be announced
Regional Victoria’s property market has experienced higher residential sales following increased new listings but has also pushed out the time taken to sell on market
Winter/25
Regional Victoria Residential
Price growth continues to be in a holding pattern across most of Regional Victoria, as buyers have the upper hand. Although this growth will likely modestly improve over the coming two years
An undersupplied rental market with sustained low vacancy continues to impact household budgets as rents remain elevated and are forecast to experience further solid upward growth
Interest Rate
3.85%
In May 2025, the Reserve Bank of Australia (RBA) lowered the interest rate target 25 bps to 3 85% Many banks followed this direction and adjusted their mortgage lending rates accordingly. Interest rates significantly influence the cost of borrowing money, which in turn affects the willingness and ability to apply for a home loan. The RBA forecasts the target could be 3 40% by the end of 2025, and 3 20% in 2026 When interest rates are lowered, borrowing becomes cheaper, which can stimulate demand for residential property and drive economic growth
Unemployment Rate
4.3%
Employment levels influence people’s ability to initially purchase a home and then the ongoing mortgage repayments servicing the loan The unemployment rate in Australia was 4 3% in March 2025, which is considered a healthy, balanced labour market given the rate falls within the ideal range of 4% to 5% The RBA forecasts the unemployment rate to rise by the end of 2025 to 4.3%, then remain relatively steady in 2026
Economic Growth 1.3%
Economic growth remains a key driver because it fuels job creation, boosts incomes, and increases demand across property markets Australia recorded economic growth at 1.3% in 2024, following stronger performance of 3.1% in 2022 and 1 5% in 2023 Looking forward, the RBA forecasts economic growth to lift to 2.1% in 2025 and 2.2% in 2026. Ideally, sustainable economic growth is considered to be around 2% to 3%
Population Growth
1.2%
Population growth increases housing demand as more people require places to live, encouraging more housing and infrastructure to be built in regional areas. As less people moved to Regional Victoria following the pandemic, population grew by 1 2% in 2022 and then 1 1% in 2023, before picking up to 1 2% growth again in 2024 The ABS have projected the long term population growth for Regional Victoria at 1.3% in 2025 and 1.5% in 2026.
Source: McGrath Research, RBA, ABS
Residential Sales Update
Residential annual sale transactions across Regional Victoria tallied to 34,137 in the first quarter of 2025, an upward trajectory of 5% from the previous quarter Over the past year, the total number was 22% stronger. This was influenced by the total number of listings being 9 3% more in the four weeks ending March 2025 when compared to the equivalent period last year delivering more choice for homebuyers Other factors include the further reduction in mortgage lending rates and the opportunity that comes following a market price correction in the past two years.
Total Number of Annual Sales Regional Victoria
Source: McGrath Research APM
Share of Victoria Annual Sales
Over the past year, Regional Victoria (22%) far outpaced the annual growth of sales activity in Greater Melbourne (4%) As a result, the Regional Victoria share of total number of annual residential sales in Victoria was 24% at the end of Q1 2025 This was higher than one year ago when the proportion was 21%, and remains similar to the share recorded five years ago
Share of Victoria Annual Sales, by Number Regional Victoria
Source: McGrath Research, APM
Source: McGrath Research, APM
Residential Sales Update
Duration
119 days
Regional Victoria homes took an average 119 days on market - from the time they were listed to the day they went under contract - in the March 2025 quarter This duration was 114 days the quarter before and 92 days one year ago Typically, houses take longer than sell than apartments and this was no different in the past quarter Houses averaged 120 days to sell in Q1 2025, which was 4 days longer than in Q4 2024 and 26 days more than in Q1 2024 Apartments took an average 109 days to sell, being 10 days longer than the previous quarter and 32 days more than a year ago A low number of days on market mean homes are selling fast with more desirable or undersupplied properties, while a high number of days suggests a slower market
Average Days on the Market
Regional Victoria
Newly advertised property listings in Regional Victoria were 4 7% higher in the month of March 2025 than the equivalent period last year. This trended above the -4.8% average for the combined regional areas of Australia
Regional Victoria’s total number of listings in the month of March 2025 were 9 3% above the equivalent period last year. By comparison, total listings were an average 0.7% higher across the combined regional areas of Australia
Source: McGrath Research, CoreLogic
Source: McGrath Research
Source: McGrath Research
Residential Prices Update
Median Price
$614,500
Tracking median property prices provides a benchmark for homebuyers for market performance and helps identify emerging trends Residential property prices rose by 0 2% in the year to March 2025, with a 0.3% fall recorded in the most recent quarter This brought the Regional Victoria median value to $614,500, reflecting a stable trajectory in housing demand and softer resilience in the market. Median house prices were $635,000, while the value of apartments were at $429,000 in Q1 2025 House prices fell 0 2% from a quarter ago but rose 0 4% over the year Over the same quarter, apartment values declined by 1.9% and by 2.4% in the past year
Change in Median Prices
Regional Victoria
Source: McGrath Research
Price Outlook 0%
Looking ahead, McGrath Research anticipates Regional Victoria residential property prices to remain stable at the end of 2025, followed by a stronger 1% rise in 2026 These projections reflect softer population growth, with recovery to be led over the next two years by lowered interest rates and improving consumer confidence
Forecast for Median Prices
Regional Victoria
Source: McGrath Research
Source: McGrath Research
Residential Rents Update
Changes in rental vacancy can have a significant impact on the residential property market, influencing both rental prices and property values. Regional Victoria residential rental vacancy was recorded at 2 1% in Q1 2025, remaining steady for the quarter but in overall, 10 bps lower over the past year. Generally, 3% vacancy is considered a balanced market between rental supply and demand Below this benchmark is considered to be an undersupplied pool of rental homes.
Change in Residential Rental Vacancy
Yield
+7 bps
Gross rental yields are a good initial measure of comparing the return of a property investment before expenses are deducted A range of 4 00% to 5 00% is considered good for many properties located in a capital city, while below this, may indicate high property prices relative to rent, or low rental demand Regional Victoria residential gross rental yields rose 7 bps in the Q1 2025 quarter to be 4 63%, while this was 23 bps higher than a year ago. Apartment yields (5 28%) consistently outperform house yields (4 55%) in most markets House yields rose 6 bps in Q1 2025 to overall rise by 21 bps over the past year, while apartment yields were 21 bps higher in this past quarter and 42 bps above a year ago
Change in Gross Rental Yield Regional Victoria
Source: McGrath Research
Source: McGrath Research
Source: McGrath Research
Residential Rents Update
Median Weekly Rent
Low vacancy and underlying population growth are keeping rents elevated across Regional Victoria. Residential rents rose 1 1% in Q1 2025, while rents increased by 4 4% over the past year, to stand at $470 per week Median weekly house rents were $100 higher than apartments, growing by 1.1% in Q1 2025 to $480 per week, with 4 3% growth over the past year Apartment weekly rents, at $380, rose 1 3% in Q1 2025 and in the past year by 7 0%
Change in Median Weekly Rents
Regional Victoria
Source:
Rental Outlook
As Regional Victoria continues to experience relatively solid population growth compared to other regional areas and an moderately undersupplied rental market, McGrath Research forecast sustained upward pressure on rents of 3% at the end of 2025, with a further 2% rental growth likely in 2026
Forecast for Median Rents Regional Victoria
Source: McGrath Research
Source: McGrath Research
McGrath Research
Regional Victoria
Regional Victoria refers to the area outside of ‘Greater Melbourne’ or ‘Rest of State’ for Victoria as defined by the Australian Bureau of Statistics
