While property values continue to rise in many parts of regional Victoria, the real estate market in Daylesford and the broader Hepburn Shire appears to be heading in the opposite direction. Recent data from Domain.com.au shows that median house prices in the region have fallen over the past year, in contrast to steady growth in surrounding areas.

According to Domain’s June 2025 property report, the median house price in Daylesford dropped by 6.3% in the year to June, down to approximately $820,000, while the Hepburn Shire median fell 11.3% to $687,500. Towns such as Hepburn Springs, Trentham and Clunes have also seen modest declines or stagnant prices.

Meanwhile, regional centres such as Ballarat and Castlemaine have continued to experience price growth, albeit at a slower pace than during the peak of the post-COVID boom. Some tree change locations, such as Colac Otway (median price $609,000, +14.9%), Mansfield ($755,000, +9.5%) and the Southern Grampians ($389,000, +8.2%) experienced substantial growth over the same period. More affordable inland towns are catching up to nearby, higher priced LGAs.

Local real estate agents and property analysts suggest several possible reasons for the shift. Rising interest rates and cost-of-living pressures have cooled demand across the board, but Daylesford may be particularly affected by a downturn in the short-stay rental market. Tighter regulations on holiday accommodation and a softening in tourism-related demand have led some investors to exit the market. The recent 10% increase in municipal rates and the financial stress facing Hepburn Shire Council may have dampened the enthusiasm of some buyers.

The property market in Daylesford is driven in part by investors as is evident from the disproportionately high number of short term stay properties. As such, the market is sensitive to investor demand. Advocates and property advisors have been advising investors (ie  developers and investors of existing stock) away from Victoria  to Queensland and even NSW because the land tax environment in Victoria makes it very difficult to make a reasonable return.

There are also signs that the tree-change boom, which drove prices up during the pandemic, may be tapering off. As hybrid work settles into predictable patterns, fewer Melbourne buyers are relocating to regional areas full-time. Some recent arrivals are also putting properties back on the market amid changing personal or financial circumstances.

Despite the downturn, Daylesford remains an attractive lifestyle destination, and some buyers may see current conditions as an opportunity. For first-home buyers, this could be a welcome shift.

The Wombat Post will continue to monitor trends in the local property market.