RPM VIC Metro Market Report - Q1 2026

1

VIC Metro Market Report Q1 2026

Published June 2026

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

Whats Inside This report presents and analyses the most recent economic and building datasets available as of early June 2026.

Executive Summary

03

Buyer Activity

04

Victorian Home Purchasers

05

Home Purchaser Loan Size

06

Budget 2026-27

07

Budget Changes and Impact

08

Greater Melbourne Pricing, Rents, and Vacancies

10

Melbourne Unit Market

11

Median Property Prices - Capital City Comparison

12

Vacancy Rates and Rental Stock

13

Unit and Apartment Rent - Melbourne

by Region

15

VIC METRO MARKET REPORT JUNE 2026 | © RPM GROUP

Greater Melbourne Dwelling Supply

17

Building Approvals - Greater Melbourne

18

Medium and Higher Density Construction Outlook

20

Construction Costs

21

Construction Pricing

22

Key Material Price Movements

24

Economic Outlook

25

3

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

Investor lending hit a Q1 record, but first home buyers now hold their smallest market share since 2017.

Monetary policy, federal budget reform, and construction cost pressures are hitting Victoria’s residential property market at the same time, producing a level of uncertainty that is reshaping both buyer behaviour and development activity particularly in the apartment and townhome segment.

The 2026-27 Federal Budget introduces structural changes that work in favour of new dwelling construction. Limiting negative gearing and CGT concessions to new builds gives investor capital a clear reason to move toward apartments and townhomes, though developers should monitor the risk that softening established dwelling prices exert indirect pressure on new unit pricing over the medium term.

Home loan activity held firm in Q1 2026, with 34,680 new loans written. Investor lending was the standout at 12,660 loans, up 29% on Q1 2025 and the highest Q1 figure on record, likely reflecting buyers moving ahead of the budget changes, though that effect is now largely spent. FHBs edged marginally higher but now represent just 24% of the market, the lowest share since 2017. New loan commencements are expected to fall materially from here.

Construction costs remain the most pressure near term challenge. Rising fuel prices and input cost increases across plastics, metals, and bitumen are already being felt across the industry, with housing construction costs escalating around 7-8% between March and May. PPI data for Q2 2026 is expected to reflect the full extent of these pressures, and even a resolution to the Middle East conflict would take months to flow through given supply chain lag.

Melbourne is better placed to absorb these pressures than Sydney or Brisbane. Greater contractor availability has introduced genuine tender competition locally, with builders absorbing a share of cost increases as a result.

For the apartment and townhome sector, the combination of tax changes and a more competitive construction environment represents a more navigable position than the headline conditions might suggest.

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 early June 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.

Q1 2026 |© RPM GROUP that 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 Q1 2026 | © RPM GROUP

40%

40000 35000

35%

5

30000 25000 20000 25%

15000 10000

20%

First home buyers now hold their smallest share of the lending market since 2017.

5000

Non FHB OO Split Share

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

Mar-2021

Dec-2020

Sep-2020

Jun-2021

FHB Split Share

Number of Total New Housing Loans Investor Split Share

45%

50000 45000

40%

40000 35000

35%

30000 25000

30%

20000

25%

15000 10000

20%

5000

Quarter

FHB

Subsequent OO

Investor

Mar-2026

Dec-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

Mar-2021

0 Dec-2020

15% Sep-2020

Investor activity is likely to pull back as rate rises flow through and new tax settings lock in, with the removal of negative gearing and the CGT concessions on established dwellings reducing the viability of shorter term investment strategies.

Total Loans

Jun-2020

Subsequent owner occupier lending also grew, with 13,540 new loans written in Q1 2026, up 7% on Q1 2025. While still below the HomeBuilder-supported peaks of Q1 2021 and Q1 2023, which saw about 17,000 new loans taken out in each quarter, activity in the upgrader segment remains solid.

Looking ahead, new loan commencements are expected to fall materially. The Q1 investor record largely reflects buyers moving ahead of the budget changes rather than a fundamental shift in market confidence, and that effect is now largely spent.

Proportion of Loans by Type

Mar-2020

The standout was investor activity. With 12,660 new investor loans written in Q1 2026, a 29% increase on Q1 2025, this is the highest Q1 investor lending figure on record. The result likely reflects investors moving ahead of the federal budget changes and is particularly notable given the tightening rate environment.

First home buyer lending edged marginally higher year on year, with 8,480 new loans written in Q1 2026, above the Q1 decade average of 8,100. Government support through the 5% Deposit Scheme continues to underpin FHB demand despite tightening affordability and rate rises. With FHB activity the only segment to have remained essentially flat year on year, their share of the total lending market has fallen to just 24%, the lowest since 2017.

Jun-2020

Home loan activity held firm in Q1 2026, with just over 34,680 new loans written across all buyer types. While this is a pullback from Q4 2025, when activity peaked at a near-decade high, the result is still the strongest Q1 since 2022.

0 Mar-2020

15%

Sep-2025

Victorian Home Purchasers

30%

Total New Loans

Mar-2026

8,489

0.25%

13,537

6.62%

12,658

29.30%

34,684

12.05%

Mar-2025

8,468

4.91%

12,696

3.43%

9,790

11.95%

30,954

6.40%

Mar-2024

8,072

17.29%

12,275

9.46%

8,745

4.81%

29,092

10.03%

Mar-2023

6,882

-29.64%

11,214

-34.39%

8,344

-33.90%

26,440

-33.05%

Source: ABS Lending Indicators VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

6

$800,000

Home Purchaser Loan Size

$700,000 $600,000 $500,000 $400,000 $300,000

$200,000 Home loan sizes have retreated down to an average of $650,000 in Q1 2026. $100,000

Average loan sizes also decreased for subsequent owner occupier buyers, down 1.0% to $745,062. While this figure remains materially higher than Q1 2025 (up 6.2% YoY), the recent downward trend reflects growing unease in the upgrader market, compounded by rate rises in February and March.

Preliminary data to May 2026 shows dwelling values falling, raising the prospect of FHBs who purchased under the 5% Deposit Scheme entering negative equity. The risk is most pronounced for borrowers who bought at or near the Scheme’s price cap. Provided loans can be serviced, negative equity at an individual level does not present real risk.

FHB

Investors

Feb-2026

Sep-2025

Apr-2025

Nov-2024

Jun-2024

Jan-2024

Aug-2023

Mar-2023

Average Loan Size by Buyer Type

Oct-2022

May-2022

Dec-2021

Jul-2021

Feb-2021

Sep-2020

Apr-2020

Nov-2019

Jun-2019

Jan-2019

Aug-2018

Mar-2018

Oct-2017

May-2017

Dec-2016

Jul-2016

Feb-2016

Sep-2015

Apr-2015

Average FHB loan sizes held largely steady at $562,198 in Q1 2026, up just 0.2% on Q4 2025. This reflects loans continuing to be written at pace under the 5% Deposit Scheme through January, before pulling back sharply following the first rate rise in February. On an annual basis, however, FHB average loan sizes have grown 8.7%, the largest increase in any buyer cohort and a clear measure of the Scheme’s effect on borrowing behaviour.

Subsequent OO

$800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Jun-2017 Sep-2017 Dec-2017 Mar-2018 Jun-2018 Sep-2018 Dec-2018 Mar-2019 Jun-2019 Sep-2019 Dec-2019 Mar-2020 Jun-2020 Sep-2020 Dec-2020 Mar-2021 Jun-2021 Sep-2021 Dec-2021 Mar-2022 Jun-2022 Sep-2022 Dec-2022 Mar-2023 Jun-2023 Sep-2023 Dec-2023 Mar-2024 Jun-2024 Sep-2024 Dec-2024 Mar-2025 Jun-2025 Sep-2025 Dec-2025 Mar-2026

The sharpest pullback was among investor buyers, who tend to be the most sensitive to borrowing rate movements. The average investor loan size fell 1.8% in Q1 2026 to $606,178, sitting below the $609,040 recorded in Q1 2025. Investors are the only buyer cohort to have seen average loan sizes fall on an annual basis. This trend is expected to continue, as lenders begin to reassess investor borrowing capacity to exclude negative gearing.

Nov-2014

As of Q1 2026, two consecutive rate rises and a sharp deterioration in consumer sentiment pushed the average new loan size in Victoria down to $649,619, a 0.9% contraction from the Q4 2025 peak of $655,619.

Jun-2014

$0

Quarter

FHB

Subsequent OO

Investor

Mar-2026

$562,198

$745,062

$606,178

Previous Quarter (Dec-2025)

$561,180

$752,829

$617,572

12 Months Ago (Mar-2025)

$517,395

$701,371

$609,040

Source: ABS Lending Indicators VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

Budget 2026-27

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

8

Budget Changes and Impact The Budget favours new construction, with negative gearing and CGT concessions limited to dwellings that add supply.

The 2026-27 Federal Budget introduces two structural changes to property tax that will reshape the investment landscape.

From 1 July 2027: • Negative gearing will be limited to new builds • The 50% CGT discount will be replaced with indexation plus a minimum 30% tax Buyers purchasing newly built dwellings that add to supply will retain access to negative gearing and may choose between the optional 50% CGT discount or the new indexation method. Knock down rebuilds are excluded from this exemption.

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

The new 30% minimum tax is not punitive by design; investors earning above $45,000 are already at or above this floor on their marginal rate. The rate is primarily aimed at income-splitting CGT strategies rather than mainstream property investors. The practical difference in capital gains tax between purchasing an established versus a new dwelling is relatively modest, and diminishes the longer an established dwelling is held. The more consequential change for investor behaviour is the loss of negative gearing on established stock.

The shift in tax setting effectively redirects investor demand away from established dwellings, which are likely to become a predominantly owner occupier asset class, and toward new builds. Independent of the budget’s impacts on property prices, these changes are expected to significantly drive activity towards new builds and boost new infill developments.

One caveat is that lenders have already begun factoring out negative gearing in new investor loan application as tax changes mean that at most, an existing dwelling purchased after 12 May 2026 can only be negatively geared for one year.

The new build exemption also extends to owner occupiers who subsequently convert their dwelling to an investment property, provided the property has only been owned by the original builder and has not been occupied for more than 12 months. The ability to retain negative gearing concessions represents a significant level of flexibility for buyers of new units in infill areas.

Property Purchase Price

Further announcements in the budget also includes a $6 billion commitment to enabling infrastructure, as well as a $2 billion Local Infrastructure Fund to be delivered over four years. For developers with land holdings in outer metropolitan and growth corridor locations, this directly addresses one of the more persistent early stage development hurdles.

Finally, the budget introduces no new build-to-rent (BTR) measures. BTR developers should treat existing policy as the operating baseline.

New Dwelling

Established Dwelling

$600,000

$600,000

Indexed Cost Base (3% CPI x 3 yrs)

$655,636

Sales Price at 1 July 2030

$750,000

$750,000

Gross Gain

$150,000

Less 50% CGT Discount

-$75,000

Taxable Gain

$75,000

$94,364

Tax at 39% (Incl. Medicare)

$29,250

$36,802

Assumptions: ​ • Purchased after 1 July 2027​ • Property to be sold in 2030​ • 3% annual CPI increase​ • Investor on 39% marginal rate​

9

Budget Changes and Impact Investor capital is being redirected toward new builds, with established dwellings losing access to negative gearing.

Development Type​Impacted

Impact

Off the plan (OTP) apartments and townhomes

Investor demand strengthened. New builds retain access to negative gearing and CGT concessions, placing them at an advantage over existing stock.

Knock-down rebuilds​

Dwellings that replace a single residence with multiple new dwellings (e.g. four townhomes on a large block) qualify for the same new concessions.

Rebuilds of old residence (ie replacement of residence that does not add to net dwelling supply) unable to quality for NG and CGT concessions.

Vacant land subdivisions​

New builds on vacant land qualify for new build concessions. Benefits further with the $2b Local Infrastructure Fund.

Build To Rent​

Existing policy settings unchanged. The foreign buyer ban exemption has been extended to 30 June 2029.

Established Dwellings​

Investor demand expected to weaken. Resales into the investor market lose access to negative gearing, and the reduced tax incentive is likely to diminish the appeal of renovations.

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

Greater Melbourne Pricing, Rents, and Vacancies

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

11

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

Melbourne’s unit market continued to edge upward in Q1 2026, with the median reaching $659,500, a 1.1% increase on the prior quarter. Growth has slowed noticeably compared to the end of 2025, and the pattern of price appreciation has shifted across rings.

Value growth in Q1 2026 was concentrated in the inner ring, up 1.4%, while the middle and outer rings saw comparatively modest gains of 0.4% and 1.1% respectively. With inner ring units now priced meaningfully below both middle and outer ring products, demand is being funnelled toward lower priced stock. This dynamic is particularly evident among FHBs accessing the 5% Deposit Scheme, who are primarily constrained by price points.

With established units set to lose negative gearing, new infill products are well positioned to capture investor demand.

Melbourne’s unit-to-house price relativity has reached 50% for the first time, with median house prices now 50.3% more expensive than units. This appears to unwind some of the relative strength the unit market showed toward the end of 2025.

The new tax settings are likely to produce a two speed unit market. Existing stock, much of which has already saturated the market, will lose access to negative gearing and CGT concessions, placing downward pressure on established unit prices. New stock retains access to both negative gearing and the existing 50% CGT discount, giving new infill products a pricing and investment advantage. However, falling established unit prices carry a risk of dragging broader median figures down and exerting indirect pressure on new unit pricing. How the market absorbs the tax changes over the coming months will be critical.

Median Unit Prices by Location - Q1 2026 Overall

$659,500 +1.1% q/q and +5.2% y/y

Middle Ring

$741,500 +0.4% q/q and +6.5% y/y

Inner Ring

$609,500 +1.4% q/q and +2.8% y/y

Outer Ring

$654,500 +1.1% q/q and +7.3% 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 Q1 2026 | © RPM GROUP

12

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

Melbourne

Unit Price

Unit Price

$912,000

$644,000

+1.2% 3-mo Ch, -4.2% Ann. Ch.

+0.6% 3-mo Ch, +5.8% Ann. Ch.

Brisbane

Perth

Unit Price

Unit Price

$866,000

$747,000

+7.2% 3-mo Ch,+24.6% Ann. Ch.

+10.2% 3-mo Ch, +24.6% Ann. Ch.

Adelaide

Canberra

Unit Price

Unit Price

$685,000

$599,000

+3.6% 3-mo Ch,+15.1% Ann. Ch.

+1.1% 3-mo Ch, +1.3% Ann. Ch.

Hobart

Darwin

Unit Price

Unit Price

$570,000

$451,000

+0.8% 3-mo Ch,+8.3% Ann. Ch.

+4.1% 3-mo Ch, +23.0% Ann. Ch.

Source: Corelogic | Note: For the purposes of comparison, data is drawn from Corelogic to provide a consistent comparison of values between states, as REIV data is collated for Victoria only. Slight variations between these two data sources can occur depending on level of settled sales.

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

13

Vacancy Rates and Rental Stock Rental supply dynamics will shift as investors pivot toward new builds.

Melbourne’s rental vacancy rate eased slightly to 2.5% at the end of Q1 2026, bringing it back in line with levels from around 12 months ago. The market remains tightly held.

Inner and middle ring vacancy rates held largely steady at 2.6% and 2.8% respectively. While both figures represent marginal upward movement, neither signals any meaningful easing in rental conditions, with both remaining well below medium and long term averages.

The outer ring tells a more interesting story. After an unexpected spike in the latter half of 2025, which saw vacancy rates peak at 2.5%, the outer ring has tightened sharply back to 1.8% as of Q1 2026, returning to early 2025 levels.

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)

Middle (10-20km)

Outer (20km+)

Melbourne Total

2.6% 2.4% 2.7% 3.1%

2.8% 2.6% 2.6% 3.8%

1.8% 2.0% 1.7% 1.8%

2.5% 2.4% 2.5% 2.9%

Current

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

vs Prev Qtr

vs Prev Year

vs Long Term Avg

Source: REIV, RPM Market Intelligence

5.0% 14

4.0% 3.0%

Vacancy Rates and Rental Stock 2.0%

1.0%

Jun-23

Sep-23

Dec-23

Mar-24

Jun-24

Sep-24

Dec-24

Mar-25

Jun-25

Sep-25

Dec-25

Mar-26

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

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

Jun-20

Established dwellings vacated by departing investors are likely to be absorbed by owner occupiers, evening out the overall supply impact.

The pressure, however, shifts away from prospective buyers and toward renters.

Mar-23

Near term impacts on weekly rents are expected to be mild. Over the medium to long term, some disruption is possible as investors move away from older residential stock, but the dynamic is more nuanced than a simple reduction in rental supply.

Mar-20

Melbourne’s rental market is expected to remain tight despite the likely investor pivot toward new builds driven by the tax changes.

Mar-19

Dec-18

Sep-18

Jun-18

Mar-18

Dec-17

Sep-17

Jun-17

Mar-17

Dec-16

Potential impacts of the budget on vacancy rates are only likely to materialise in the longer-term.

0.0%

Metro Melbourne Vacancy Rates Melbourne Total

Melbourne Long Term Average

7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0%

Mar-26

Dec-25

Sep-25

Jun-25

Mar-25

Dec-24

Sep-24

Jun-24

Mar-24

Dec-23

Sep-23

Jun-23

Dec-19

Sep-19

Jun-19

Mar-19

Dec-18

Sep-18

Jun-18

Mar-18

Dec-17

Sep-17

Jun-17

Mar-17

Dec-16

0.0%

Source: REIV, RPM Market Intelligence

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

15

Unit and Apartment Rents – Melbourne by Region​

Inner

Middle

Outer

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

Median Rental Rates by Region

Dec-22

Sep-22

Jun-22

Mar-22

Dec-21

Sep-21

Jun-21

Mar-21

Dec-20

Sep-20

Jun-20

Mar-20

Comparison with Previous Periods

Metro Melbourne

Area

Dec-25

Quarter

Year

3 Yr Ave

5 Yr Ave

Inner

$625

+4%

+4%

+25%

+56%

Middle

$595

+1%

+3%

+24%

+38%

$600

Outer

$520

+2%

+2%

+21%

+33%

$550

Metro Melbourne

$600

+3%

+4%

+24%

+50%

$700 $650

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.

$500 $450

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

$400 $350

Inner

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

Middle

Outer

Metro Melbourne

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

Dec-17

$300 Sep-17

Dec-19

Unit rental growth has stalled as affordability pressures weigh on what the market can absorb.

6.0% 16

5.0% 4.0%

Unit and Apartment Rents – Melbourne by Region​

3.0% 2.0%

Inner and middle ring vacancy rates have converged, with rental price growth running strongest in the inner ring over the near term.

1.0%

Middle Ring 1 Bed

Middle Ring 2 Bed

Inner Ring 1 Bed

Inner Ring 2 Bed

Middle Ring Vacancy Rate

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

Median Rental by Product Type and Region

Jun-21

Mar-21

Dec-20

Sep-20

Jun-20

Mar-20

Dec-19

Sep-19

Jun-19

Inner Ring Vacancy Rate

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

0.0% Sep-22

$300 Jun-22

1.0%

Mar-22

$350

Dec-21

2.0%

Sep-21

$400

Jun-21

3.0%

Mar-21

$450

Dec-20

4.0%

Sep-20

$500

Jun-20

5.0%

Mar-20

$550

Dec-19

6.0%

Sep-19

$600

Jun-19

7.0%

Mar-19

$650

Dec-18

8.0%

Sep-18

$700

Jun-18

9.0%

Mar-18

$750

Dec-17

Mar-19

0.0%

Source: REIV and RPM Market Intelligence

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

Greater Melbourne Dwelling Supply​

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

18

Building Approvals – Greater Melbourne​ Townhome approvals have hit their second lowest quarterly figure since Q4 2014.

Townhome approvals across Greater Melbourne fell below 2,000 for the first time in two years in Q1 2026, with 1,987 approvals recorded for the quarter. This is the second lowest quarterly figure since Q4 2014. On a rolling 12 month basis, approvals have continued to trend downward, with 9,062 townhome dwellings approved in the year to Q1 2026.

Apartment approvals are also contracting. While individual quarterly figures can be skewed by a single large scale development, rolling annual approvals have fallen 6% to 10,372 dwellings in the year to Q1 2026, suggesting the current apartment development cycle has reached a new low point.

Prior signs of optimism in unit supply are unlikely to materialise in the near term. New tax settings have introduced considerable uncertainty, even as new off the plan (OTP) dwellings retain meaningful concessions relative to established stock. Interest rate increases have pushed developers back to

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

reassessing feasibilities, with the cash rate target at 4.35% as of May 2026 returning monetary policy to the restrictive settings last seen in 2024. Planning changes, including the new mid rise code, will take time to deliver supply benefits.

The greatest risk to unit dwelling supply is the construction cost escalation. The Middle East conflict has driven building costs sharply higher.

Diesel prices have risen approximately $3.00/L before settling in the mid-$2.00 range, while costs across plastics, metals, and asphalt have increased by double digit percentages. The scale of escalation means that achieving feasible $/sqm rates will be challenging and, in some cases, may not be achievable. Uncertainty over the course of the global conflict has given way to near certain expectations that cost escalation will exceed baseline projections set at the end of 2025. These figures will translate into materially lower building approval figures as developers and the market adjust to new settings.

Apartment and Townhome Approvals - Q1 2026 and Rolling Annual to Q1 2026 Apartments Q1 2026

3,310 dwellings +42% q/q and -17% y/y

Apartments - Rolling Annual

10,372 dwellings

-6% q/q and -17% y/y

Townhomes Q1 2026

1,987 dwellings -7% q/q and -8% y/y

Townhomes - Rolling Annual

9,062 dwellings

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

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

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

Mar-26

Aug-25

-

Jan-25

Apartment and townhome approvals continue to decline 2,000 amid uncertainty.

Jun-24

2,000

Nov-23

3,000

Apr-23

Building Approvals – Greater Melbourne​

Sep-22

5,000

Feb-22

Q1 2026

Q2 2025

Q3 2024

Q4 2023

Q1 2023

Q2 2022

Q3 2021

Q4 2020

Q1 2020

Q2 2019

Q3 2018

Q4 2017

Q1 2017

Q2 2016

Q3 2015

Q4 2014

Q1 2014

Q2 2013

Q3 2012

Q4 2011

Q1 2011

Q2 2010

Q3 2009

7,000

Jul-21

Q4 2008

Q1 2008

Q2 2007

8,000

Dec-20

May-20

Oct-19

Mar-19

Aug-18

Jan-18

Jun-17

Nov-16

Apr-16

Sep-15

Feb-15

Jul-14

Dec-13

2,000

May-13

500

Oct-12

1,000 4,000

Mar-12

Greater Melbourne Quarterly

Aug-11

1,500

Jan-11

6,000

Jun-10

2,000

Apartment Approvals

Nov-09

8,000

Apr-09

2,500

Sep-08

10,000

Feb-08

3,000

Jul-07

12,000

Dec-06

3,500

May-06

14,000

Oct-05

Rolling Annual Approvals

Mar-05

4,000

Q3 2006

Q4 2005

-

Mar-26

Q1 2005

4,000

Aug-25

6,000

Jan-25

8,000

Jun-24

Q1 2026

Q2 2025

Q3 2024

Q4 2023

Q1 2023

Q2 2022

Q3 2021

Q4 2020

Q1 2020

Q2 2019

Q3 2018

Q4 2017

Q1 2017

Q2 2016

Q3 2015

Q4 2014

Q1 2014

Q2 2013

Q3 2012

Q4 2011

Q1 2011

10,000

Nov-23

Apr-23

Sep-22

Feb-22

Jul-21

Dec-20

May-20

Oct-19

Mar-19

Aug-18

Jan-18

Jun-17

Nov-16

Apr-16

Sep-15

Feb-15

Jul-14

Dec-13

May-13

Oct-12

Mar-12

Greater Melbourne Quarterly

Aug-11

Jan-11

Jun-10

Nov-09

Apr-09

Sep-08

Feb-08

Jul-07

Dec-06

May-06

Oct-05

Mar-05

Townhome Approvals

Q2 2010

Q3 2009

Q4 2008

Q1 2008

12,000 25,000

20,000 19

6,000 15,000

4,000

10,000

5,000

1,000 -

Rolling Annual Approvals

10,000 30,000

9,000 8,000 25,000

7,000 20,000

6,000 5,000 15,000

4,000 3,000 10,000

2,000 5,000

1,000 -

Source: ABS Building Approvals

Medium and Higher Density Construction Outlook

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

21

Construction Costs - March 2026 Official figures are yet to reflect significant cost escalation reported on the ground.

Inputs to Construction - MEL

Inputs to Construction - AUS

Outputs to ‘Other’ Housing - MEL

Outputs to ‘Other’ Housing - AUS

Quarterly

Quarterly

+0.2%

+0.6%

Quarterly

+1.5%

Quarterly

Yearly Change

Yearly Change

+2.6%

+2.5%

Yearly Change

Yearly Change

Change Since 2021

Change Since 2021

Change Since 2021

Change Since 2021

+20.5%

+21.8%

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

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

+4.1%

+28.4%

+1.1%

+4.2%

+26.5%

Source: ABS Producer Price Indexes

6.0%

5.7% 5.1%

5.0% 4.0%

Construction Pricing

4.6% 4.2% 3.5%

3.0%

2.6%

2.0% 1.0%

22

1.6%

1.9%

1.7% 1.2%

1.1%

0.7% 0.6%0.6%

0.6%

1.0% 0.8% 0.7% 0.8%0.8% 0.6% 0.6% 0.5% 0.4% 0.4% 0.3% 0.2% 0.2% 1.2%

1.2% 0.0%

0.0%

1.5%

1.0%

1.0%

Housing Construction cost figures are expected to grow as latest figures have yet to reflect changes in the latter half-0.2% of the quarter.

Melb Construction Inputs

Mar-2026

Dec-2025

Sep-2025

Jun-2025

Mar-2025

Dec-2024

Sep-2024

Jun-2024

Mar-2024

Sep-2023

Jun-2023

Mar-2023

Inputs and Outputs to Housing Construction​

Vic Other Residential Outputs

7.0% 6.0%

5.7% 5.1%

5.0%

4.2% 3.5%

3.0%

2.6% 1.7% 1.2%

1.2% 0.0%

0.0%

1.0%

0.8% 0.6% 0.6% 0.4% 0.4% 0.3% 0.2% -0.2%

Melb Construction Inputs

Dec-2024

Sep-2024

Jun-2024

Jun-2023

Mar-2023

Dec-2022

Sep-2022

Jun-2022

Mar-2022

Sep-2023

-0.4%

-1.0%

0.7% 0.5% 0.2%

Mar-2026

0.7% 0.6%0.6%

1.0% 0.8%0.8%

Dec-2025

0.6%

1.1%

1.5%

1.0%

Sep-2025

1.2%

Jun-2025

1.9%

Mar-2024

1.0%

1.6%

Mar-2025

2.0%

Dec-2023

4.0%

4.6%

Dec-2021

The most direct impact was a spike in diesel prices to $3.00/L, which has since settled to around $2.50/L following the lifting of the fuel excise and the securing of alternative supply. Australia’s construction industry is deeply transport and diesel dependent, with fuel costs running through virtually every element of a project, including plant and operation, materials haulage, site logistics, earthworks, and the production of energy intensive inputs.

Dec-2022

With the Iran conflict and the closing of the Strait of Hormuz cutting around 20% of global oil and gas flows, downstream effects were almost immediately visible across the Australian construction industry.

Building outputs for residential construction tell a different story, with a 1.5% increase recorded in Q1 2026, the highest quarterly movement since late 2023, driven by the immediate flow through of rising fuel costs.

Sep-2022

The latest ABS Producer Price Index figures for Q1 2026 show material input costs escalating by just 0.2% in Melbourne, well below the 0.6% recorded nationally. This unusually low reading largely reflects timing, given the conflict had only recently commenced at the point of measurement.

Jun-2022

Mar-2022

Dec-2021

Construction cost escalation in Australia had shown meaningful signs of stabilisation in late 2025 and early 2026, with both material inputs and building outputs tracking modest, stable increases compared to the preceding three years.

Dec-2023

-0.4%

-1.0%

Vic Other Residential Outputs

Source: ABS Producer Price Indexes ‘Other’ dwellings include all residential dwellings that are not detached houses.

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

+5.0%

+3.1% +2.2%

+5.0%

+7.5% +3.5% +1.8%

0.0% -5.0%

23

-0.8%

-1.9%

-2.4%

All Inputs to Housing Construction

Other Materials

Installed Gas and Electrical Appliances

Electrical Equipment

Plumbing Products

Other Metal Products

Cement Products

Input Cost Escalation by Material - Melbourne​ vs Last Quarter

vs 12mo

vs 24mo

+15.0% +10.6%

+10.0% +5.0%

+3.1% +2.2%

+5.0%

+3.5% +1.8%

0.0% -0.8%

-5.0%

+12.0%

+10.5% +7.5%

+6.0%

+4.9% +3.8% +1.2%

-0.1%

-1.1%

+6.7% +5.0% +0.8% +0.3%

+6.4% +5.9% +2.9%

-0.8%

-1.9%

-2.4%

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

-5.1%

-10.0%

vs Last Quarter

vs 12mo

All Inputs to Housing Construction

Other Materials

Installed Gas and Electrical Appliances

Electrical Equipment

Plumbing Products

Other Metal Products

Cement Products

Concrete, Cement, and Sand

Steel Products

-13.4%

-15.0% Ceramics

It is worth noting that the federal government’s actions in securing fuel supply, effectively trading domestic gas for imported fuel, have left Australia’s present fuel stockpile above pre-conflict levels.

Materials continue to flow into the country, albeit at higher prices with some delays. The current challenge facing the construction industry is therefore primarily one of cost rather than supply.

Concrete, Cement, and Sand

Ceramics

Melbourne’s outlook is comparably more stable, supported by a more competitive contractor market and lower levels of ongoing construction activity than Brisbane or Sydney. Some supply and labour cost increases are being absorbed by contractors in Melbourne given the relative availability and competitiveness of the local market.

Steel Products

-13.4%

-15.0%

Timber and Joinery

That said, Australia comprises multiple sub markets operating at different speeds. There is a broad consensus that civil engineering construction will be more severely affected than residential construction.

+2.9%

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

-10.0%

The construction industry is facing a cost crisis rather than a supply crisis.

Significantly, more volatile movement is expected in the Q2 2026 PPI data release. Input and output costs are likely to reach an annualised 6-8%, well above the 4.5% forecast that had been projected for the next 12 months absent the Iran conflict. Cost escalation will be most concentrated in plastics such as PCE, PE, and PP metals, and bitumen, and asphalt – all of which have seen immediate price increases. Beyond raw costs, lead times and contractor risk pricing are also expected to shift materially.

-0.1%

-1.1%

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

+6.4% +5.9%

-5.1%

Timber and Joinery

Construction Pricing

-0.8%

+6.0%

+6.7% +5.0%

vs 24mo Source: ABS Producer Price Indexes

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

24

Key Material Price Movements Construction cost movements of this scale will need to be passed to consumers.

The most significant price movements are concentrated in energy and petrochemicals supply chains, where energy costs drive up both transport and energy-intensive material costs.

Container shipping costs increased around 15% in March alone, and some quotes for new fixed price contracts now include fuel surcharges that have doubled as diesel prices rose 50-75%.

The table summarises observed price movements as of May 2026. These figures represent conditions to date, and developers should not assume a resolution to the Iran conflict will quickly reverse them. Even if the conflict were to cease immediately, building prices are unlikely to fall given the backlog of demand and the many months required for supply chains to normalise.

Overall housing construction costs escalated around 7-8% between March and early May 2026. Key material increases include plastics, up 30-40%, and bitumen and asphalt, up 30-50%.

These movements are particularly consequential for subdivision works and will need to be passed through to consumers, with direct implications for project feasibilities across the board.

Material/Input

Observed Price Movements

Plastic pipe products (PVC, PE, PP)​

+30-40%

Bitument and asphalt​

+30-50%

Reinforcing and structural steel

+5-10%

Concrete surcharge​

+$8/m2

Aluminium cladding​

+10%

Glazing

+9-10%

Laminated timber

+5-6%

Quarry products (aggregates, sands)​

+5%

Domestic freight surcharges (overall)​

+10-25%

International container shipping (March 2026)

+15%

Source: Rawlinsons Cost Data; Rider Levett Bucknall; Australian Constructors Association.

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

25

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

The first half of 2026 has been genuinely difficult for the industry, and the second half will require careful navigation. Rate rises have shifted sentiment, tax changes are still working through purchasing decisions, and escalating input costs are forcing feasibility reassessments across the board.

Investor lending reached a Q1 record, but the timing says more than the number. Buyers pulled forward decisions ahead of the Budget changes rather than signalling a fundamental shift in market confidence.

The effect is now largely spent. First home buyer lending has plateaued despite ongoing government support, with average loan sizes broadly flat quarter on quarter. As a result, unit price is slowing.

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

The developers best placed are those treating current conditions as a planning and execution challenge, rather than a reason to stand still.

Melbourne’s rental market remains tight at the mid2% mark, driven by population growth rather than investor behaviour. The fundamental tension in the rental market is not going away regardless of how tax settings shift purchasing patterns.

Input cost escalation tied to Middle East supply disruptions has placed real pressure on feasibilities prepared earlier in the year. Borrowing rates have returned to 2024 highs, and cost conditions are deteriorating at a pace that invites comparison to the post Covid escalation period – without the buyer activity and price growth that helped developers absorb those increases. This is a cost and margin challenge, not a demand or supply crisis, and that distinction matters for how risk is framed in feasibility assessments.

The policy environment has shifted meaningfully for new dwelling construction. Limiting negative gearing and CGT concessions to new builds redirects investor capital away from established stock. Apartments, townhomes, and dual occupancy products are well placed to capture that flow, with pre-sale absorption expected to benefit as investor purchasing patterns realign. The $2 billion Local Infrastructure Fund represents a meaningful commitment to trunk infrastructure gaps, with growth corridor projects among the primary beneficiaries. Unchanged BTR policy settings provide a degree of stability for that sector and position it well for future investment.

Melbourne’s construction market is better positioned than Sydney or Brisbane, both of which have been running near capacity for an extended period. Greater contractor availability has introduced genuine tender competition locally, with builders absorbing a share of increases rather than flowing them through entirely.

The fundamentals underpinning new residential development in Melbourne remain intact. Structurally tight rental conditions, redirected investor demand, and a more competitive construction market combine to create real opportunity for well structured projects.

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

26

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

Imogene Schaefer

Michael Vilar

General Manager Marketing imogene@rpmgrp.com.au

General Manager Medium Density michaelv@rpmgrp.com.au

Greg Rankin

Clinton Trezise

Peter Neale

Tim Hyland

Managing Director QLD & NSW clinton@rpmgrp.com.au

VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP

Managing Director QLD & NSW petern@rpmgrp.com.au

General Manager Communities gregr@rpmgrp.com.au

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

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

Johnathon Driessen

General Manager Communities johnathon@rpmgrp.com.au

27

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

rpmgrp.com.au VIC METRO MARKET REPORT Q1 2026 | © RPM GROUP