---
title: "Melbourne Tipped to Lead the 2026 Property Boom — What the KPMG Report Actually Means"
description: "KPMG forecasts Melbourne house prices to rise 6.6% in 2026, leading all capitals. We break down the report and explain which suburbs will capture the growth."
author: Yan Zhu
date: 2023-10-30
category: Suburb Analysis
url: https://premiumrea.com.au/blog/melbourne-tipped-lead-2026-property-boom-kpmg
tags: ["KPMG report", "Melbourne property", "2026 forecast", "suburb analysis", "property boom", "affordability"]
---

# Melbourne Tipped to Lead the 2026 Property Boom — What the KPMG Report Actually Means

*By Yan Zhu, Co-Founder & Chief Data Officer at PremiumRea — 2023-10-30*

> KPMG named Melbourne as Australia's top-performing capital for 2026, with house prices expected to rise 6.6%. But the growth won't be evenly distributed. Here's where the gains will actually land.

KPMG's latest national property forecast has named Melbourne as the top-performing capital city for 2026, projecting house prices to climb 6.6% — well above the national average of 4.5%. On Melbourne's current median of approximately $983,000 (PropTrack data), that would add roughly $64,878 to the typical house price. About $178 per day, if you want to think of it that way.

As someone who has helped more than 150 clients buy property across Melbourne, I've read dozens of these forecasts. Most are directionally correct but practically useless because they treat Melbourne as a single market. It isn't. The gap between what's actually happening in different suburbs is so wide that the city-level median is essentially meaningless for investment decisions.

Today I'm going to break down what KPMG's forecast actually implies, which suburbs are positioned to capture the growth, and which will underperform despite the headline number.

## Why Melbourne specifically

KPMG's chief economist Dr Brendan Rynne pointed to Melbourne being "on the verge of coming out of its post-Covid slumber." That's a polite way of saying Melbourne has been the worst-performing capital city for two years running, which means it's now the most undervalued relative to fundamentals.

The logic is sound. Property markets move in cycles. Sydney boomed first post-COVID, then Brisbane and Perth caught up. Melbourne lagged because of extended lockdowns, negative migration during 2020-2021, and elevated apartment supply in the CBD and inner suburbs.

But the structural demand drivers never went away. Melbourne's population growth has returned to pre-COVID levels. Rental vacancy rates have plummeted below 1.5% across most established suburbs. And the supply pipeline — particularly for houses on land — has effectively collapsed due to construction cost blowouts.

The KPMG report also highlights affordability as a key driver. Melbourne remains more affordable than Sydney by a significant margin. For a dual-income household earning $150,000 combined, Melbourne still offers viable options under $800,000. In Sydney, that budget barely gets you an apartment in the mid-ring suburbs.

Western Australian investors, who captured strong Perth growth of 15-20% over the past two years, are now diversifying into Melbourne. Multiple buyers' advocates have confirmed this cross-capital flow. As one put it: "They've had their Perth growth and now they're chasing value."

Contrast this with Perth's outlook: just 1.6% growth forecast for 2026, down from 4.7% in 2025. The rotation is underway.

## The affordability filter that actually matters

Here's where the KPMG report gets genuinely interesting — and where most media coverage completely misses the point.

The report emphasises affordability as the primary driver of Melbourne's forecast growth. This is not just about Melbourne being cheaper than Sydney. It's about which parts of Melbourne remain affordable to the typical Australian household.

Australia's median household income is approximately $110,000. At a 7-8x income multiple — which is historically the comfort zone for owner-occupier demand — the target price range is $770,000 to $880,000. Properties below this ceiling have deep, liquid buyer demand. Properties above it increasingly rely on narrower buyer pools.

This framework demolishes the conventional "good suburb" narrative. The old logic — buy in Camberwell, Hawthorn, Glen Waverley, hold forever — worked when household incomes were growing in proportion to house prices. They're not any more. House prices in established inner-east suburbs have doubled or tripled while incomes have grown 30-40% over the same period.

The result? Established premium suburbs are increasingly unaffordable even to high-income households. Camberwell's median has grown just 33% over the past decade. Glen Waverley managed 43%. These numbers barely beat inflation.

Meanwhile, suburbs nobody talks about at dinner parties have been quietly compounding. Narre Warren, with a median around $750,000, has grown approximately 88% over the same decade. Not because it's fashionable. Because it's affordable, well-served by infrastructure, and has effectively zero new land supply.

When KPMG says Melbourne will lead in 2026, the growth will be concentrated in the $600,000-$800,000 bracket. That's the sweet spot where population growth, rental demand, infrastructure investment, and affordability converge.

## Suburbs positioned to outperform

Based on the affordability framework and our own transaction data across 350+ properties, the suburbs most likely to capture above-average growth in the coming cycle share specific characteristics:

1. **Median house price between $600,000 and $800,000** — affordable to the largest buyer demographic
2. **Established infrastructure** — train station, major shopping centre, hospital, quality schools
3. **Zero or minimal new land release** — supply constraint drives scarcity pricing
4. **Owner-occupier ratio above 85%** — owner-occupiers maintain properties and resist selling, creating sticky supply
5. **Rental vacancy below 1.5%** — confirms genuine demand rather than speculative interest

The suburbs that consistently pass all five filters in our analysis:

**Cranbourne:** Median approximately $650,000. Train station. Cranbourne Park shopping centre. Casey Hospital nearby. Vacancy rate under 1%. We've purchased multiple properties here at $590,000-$650,000 and seen bank valuations come in $40,000-$60,000 above purchase price within months.

**Narre Warren:** Median approximately $750,000. Fountain Gate — Australia's second-largest shopping centre — is the anchor. Train station. Multiple school zones. Monthly price appreciation has been running at approximately $5,000 for the past 18 months.

**Hampton Park:** Median approximately $620,000. One of the few remaining suburbs in the Casey corridor below $650,000 with 600+ sqm blocks. Our benchmark property here: purchased at $590,000, renovated, renting at $850 per week.

**Berwick:** Slightly higher median around $780,000 but offset by premium infrastructure — Beaconhills College, Federation University campus, Casey Fields sporting complex. Properties here generate $800-$850 per week with appropriate renovation.

**Frankston / Frankston South:** Beach access, train line, hospital, university campus. The Frankston revitalisation project has transformed the town centre. Properties on 600+ sqm blocks in Frankston South are still available under $750,000.

These aren't speculative picks. They're the suburbs where we've been transacting consistently for three years, with documented results across our portfolio.

## Suburbs to avoid despite the broader boom

A rising tide doesn't lift all boats. Some suburbs will underperform even in a 6.6% growth environment.

**New development corridors (Clyde North, Cranbourne East, Tarneit, Wyndham Vale):** These areas have massive new land release pipelines. When supply is effectively unlimited, scarcity pricing doesn't apply. House-and-land packages in these corridors are priced at $600,000-$700,000 but the land component is only 40-50% of the total value. The building depreciates. The land supply keeps expanding. Growth is structurally capped.

**CBD and inner-city apartments:** KPMG's report notes potential in the unit market due to affordability. I disagree for investment purposes. Apartment supply in Melbourne's CBD and Southbank remains elevated, body corporate fees eat into yields, and land ownership per unit is negligible. You don't own meaningful dirt when you buy an apartment.

**Suburbs with median above $1.5 million:** Toorak, Canterbury, Balwyn, Kew — these will track inflation at best. The buyer pool at these price points is too narrow to generate the volume-driven price growth that characterises a genuine boom.

The KPMG forecast of 6.6% is an average. Some suburbs will do 10-15%. Others will do 2-3%. The difference is entirely explained by affordability positioning and supply dynamics.

## The interest rate multiplier

KPMG's forecast implicitly assumes interest rate cuts in 2026. This is consistent with market pricing — 90-95% of borrowers are currently choosing variable rates, positioning for expected cuts.

Historically, Melbourne property prices have rallied within 6-12 months of every RBA rate-cutting cycle. The 2019 cuts produced a 15% surge in established suburb prices over 18 months. The mechanism is direct: lower rates increase borrowing capacity, which expands the buyer pool, which lifts prices.

For a household earning $150,000, each 0.25% rate cut increases borrowing capacity by approximately $20,000-$25,000. Two cuts (0.50% total) adds $40,000-$50,000 to what they can borrow. That extra capacity flows directly into the price they can pay.

Critically, this capacity expansion has the biggest proportional impact in the $600,000-$800,000 range. A $50,000 increase in borrowing power on a $700,000 purchase is a 7% uplift. On a $2 million purchase, it's 2.5%. The maths favours affordable suburbs.

The investors who position before the first cut capture the full cycle. Those who wait for confirmation — for the media to declare the recovery — buy after the early gains have already been absorbed into prices.

As I tell my clients: the KPMG report isn't telling you something new. It's confirming what the transaction data has been showing for months. The question isn't whether Melbourne will grow. It's whether you'll be positioned to capture it.

## What to do with this information

If you're sitting on the fence about Melbourne, KPMG has given you one data point. Here are several more:

- National housing deficit: approximately 50,000 dwellings per year (only 177,000 built against 223,000 needed)
- Melbourne rental vacancy: below 1.5% and falling
- Construction cost inflation: 30%+ since 2019, choking new supply
- Population growth: back to pre-COVID levels, driven by immigration

All of these factors point in the same direction. Supply is constrained. Demand is growing. Affordability in the right suburbs is still manageable. Rates are expected to fall.

The practical next step is simple. Get your borrowing capacity assessed. If you can service a $600,000-$800,000 purchase, the southeast corridor offers properties on 600+ square metres of land with rental yields of 5-8% after renovation and growth prospects that KPMG, CoreLogic, and PropTrack all agree upon.

I'm not saying buy blindly. I'm saying the window is closing at approximately $5,000 per month in the suburbs that matter. Every month you wait, the same house costs more.

If you want help identifying specific properties that match your budget and strategy, that's exactly what we do. We've completed over 350 transactions across Melbourne's southeast and manage properties at a 1:50 PM ratio — one dedicated manager per 50 properties versus the industry average of 1:170.

The data is clear. The forecast is public. The question is what you do with it.

## References

1. [KPMG, 'National Property Forecast 2026', via Mortgage Choice, February 2021.](https://www.mortgagechoice.com.au/news/melbourne-tipped-to-lead-2026-property-boom/)
2. [PropTrack, 'Home Price Index — Melbourne', February 2021.](https://www.proptrack.com.au/)
3. [CoreLogic, 'Melbourne Market Update', Q1 2021.](https://www.corelogic.com.au/our-data/home-value-index)
4. [Australian Bureau of Statistics, 'Regional Population Growth', Cat. No. 3218.0, 2019-20.](https://www.abs.gov.au/statistics/people/population/regional-population)
5. [SQM Research, 'Residential Vacancy Rates — Melbourne', February 2021.](https://sqmresearch.com.au/graph_vacancy.php)
6. [REIV, 'Quarterly Median Prices — Melbourne Suburbs', Q4 2020.](https://reiv.com.au/market-insights/median-prices)
7. [Reserve Bank of Australia, 'Statement on Monetary Policy', February 2021.](https://www.rba.gov.au/publications/smp/)
8. [Domain, 'Melbourne House Price Report', Q4 2020.](https://www.domain.com.au/research/house-price-report/)
9. [Australian Bureau of Statistics, 'Building Activity', Cat. No. 8752.0, 2020.](https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia)
10. [PremiumRea internal transaction data, southeast Melbourne, 2019-2021.](#)

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Source: https://premiumrea.com.au/blog/melbourne-tipped-lead-2026-property-boom-kpmg
Publisher: PremiumRea (Optima Real Estate) — Melbourne buyers agent