February 2026 Newsletter
HEY NEIGHBOUR!
There is a growing sense of frustration across Melbourne — and it is difficult to ignore.
Once again, inflation is being met with what feels like the Government’s default and blunt response: another interest rate increase. Last week’s 0.25% rise has landed hardest on Melbourne households and property owners, despite widespread acknowledgment that much of the current inflationary pressure is not driven by discretionary consumer spending, but by unavoidable cost increases.
In Victoria, the situation is particularly stark. The latest inflation figures have been heavily influenced by rising electricity prices, following the winding back of state and federal rebate schemes. Energy costs in Melbourne have surged, flowing directly into household budgets, business overheads, strata levies and property operating costs. Yet rather than addressing these structural pressures, the response has once again been to lift interest rates.
For Melbourne landlords, the impact is cumulative. Mortgage repayments have increased, insurance premiums continue to climb, compliance obligations are expanding, and now utility costs are rising — all within one of the most highly regulated rental markets in the country. At the same time, rental providers are being asked to shoulder these increases while navigating strict compliance timelines and growing legislative complexity.
Raising interest rates WILL NOT reduce electricity prices. It will not ease planning bottlenecks or accelerate new housing supply in Melbourne. And it does nothing to address the fundamental cost drivers that are pushing inflation higher in the first place. What it does do is place further financial pressure on those already contributing significantly to housing availability across the city.
As a Melbourne-based property management business, we see these pressures play out daily. Our focus remains on helping our clients respond strategically — through careful rent positioning, proactive asset management and informed, local advice. But it is reasonable to say that Melbourne needs smarter policy levers than repeated rate rises, particularly when inflation is being fuelled by costs outside the control of households and investors alike.
We will continue to advocate for practical, balanced outcomes — and for the rental providers who play a critical role in keeping Melbourne housed.
Warmest wishes,
Carmela
MARKET INSIGHTS
We strive to stay up to date on the latest market trends. Here are a few articles we think are worth reading.
Interest Rates Rise: RBA Lifts Cash Rate by 0.25% to 3.85% (rba.gov.au)
After a long period of stability, the Reserve Bank of Australia has raised the cash rate target by 25 basis points to 3.85%, citing ongoing inflation pressures and a tight labour market. For property owners, this move may increase holding costs if lenders pass the rise through in full. For the rental market, higher mortgage repayments can add pressure to landlord cashflow, reinforcing the importance of reviewing rent positioning, lease renewals and overall investment performance.
Key Points:
- Cash rate now 3.85%, up from 3.60% (Feb 2026 decision).
- Borrowing costs may rise for variable-rate loans as lenders flow through the increase.
- The RBA signalled inflation remains a focus, so the market is watching upcoming data closely.
Property Market Economics: Cotality Insight on 2025 Trends (cotality.com)
New analysis from Cotality reveals that 2025 saw mixed momentum in Australia’s property market, with home value growth continuing despite softer auction conditions later in the year. Overall housing demand remained resilient, supported by ongoing population growth and low supply. Cotality’s national Home Value Index recorded solid value gains throughout the year, reflecting ongoing buyer appetite.
Key Points:
- The cash rate was held at 3.60% as inflation remained above target, keeping borrowing costs elevated.
- Housing values climbed alongside persistent demand, offsetting some affordability pressure.
- Buyer activity and low stock levels continue to influence market dynamics into 2026.
How AI Is Transforming Real Estate (morganstanley.com)
Artificial intelligence is increasingly reshaping the real estate industry across the globe. From automated market analysis to smarter customer interactions, AI tools are enhancing efficiency and decision-making. According to research from Morgan Stanley, AI could automate a significant portion of tasks within real estate operations — potentially driving billions in efficiency gains by 2030. Tools such as virtual assistants, data-driven valuation models, and automated admin support are already helping agents and firms work more effectively and provide improved client experiences.
Key Points:
- AI can automate hundreds of tasks in property operations, boosting productivity.
- Smart tools help with valuations, market research, and client engagement.
- Enhanced analytics help investors and agents make quicker, more informed decisions.
Melbourne Rental Market: Vacancy Rates Tight Through 2025 (propertyme.com.au)
Melbourne’s residential rental market remained relatively tight throughout 2025, with vacancy rates holding below longer-term historical averages and rental demand continuing to support strong occupancies. According to recent figures from the Real Estate Institute of Victoria (REIV), the metropolitan vacancy rate sat around 2.4% in late 2025, a level that has stayed fairly consistent and below pre-COVID decade averages.
This relative scarcity of available rental stock highlights continued demand from tenants — even as rental growth has moderated in some periods and affordability pressures persist. A 2–3% vacancy rate typically indicates a landlord-favoured market, where well-priced properties continue to rent quickly and with minimal vacancy time.
In addition to metropolitan results, broader national data shows rental listings remain tight, with vacancy rates nationwide sitting well below long-term averages. While Melbourne’s vacancy remains higher than some smaller capital markets, it still reflects strong demand relative to the number of available homes.
Key Points:
- Vacancy rates steady at ~2.4%: Melbourne’s rental market remains tight compared with historical rental availability levels.
- Continued tenant demand supports occupancy: Lower vacancy typically means shorter leasing times for quality properties and fewer days empty.
- Market conditions still favour landlords: With supply constrained and demand sustained, competitive pricing and proactive marketing can help maintain strong returns.
