Warrnambool recorded the state's biggest increase in median house prices in the past month, new data shows.
The median price increased by 1.8 per cent to $546,375, CoreLogic data reveals.
This was the highest increase across the state, ahead of Shepparton which saw a 1.6 per cent increase and Hume, which saw an 0.9 per cent increase in median prices.
Melbourne properties all saw a reduction in the median price in the past month, with prices in the inner south dropping by 1.3 per cent to $1.204 million.
Brian O'Halloran and Co agent Brian Hancock said the low number of listings in the city was driving up the prices.
"It's the distinct lack of stock on the market and high demand," Mr Hancock said.
Mr Hancock said more people were choosing to live in Warrnambool because of its outstanding facilities.
"Warrnambool has good schools, a good hospital, good shopping centres," he said.
Mr Hancock said he was unsure whether prices in the city would continue to rise.
"I think that will depend on the governance of the country and interest rates," he said.
He said the rising cost of living might make it more difficult for some buyers to enter the property market. Wilsons Real Estate agent Lucas Wilson said the city remained a popular choice for buyers. However, he believed prices may be impacted by the rising cost of living and interest rates. "With interest rates rising, people's borrowing capacity is impacted," Mr Wilson said.
Warrnambool's median price increased by 4.1 per cent over the past three months and 23.5 per cent in the past 12 months. Conversely, Ballarat was found to have the largest decrease in the past month at 0.6 per cent.
CoreLogic's Research Director Tim Lawles said housing markets lost more steam in May as a combination of higher interest rates, rising inventory levels and lower sentiment.
"There's been significant speculation around the impact of rising interest rates on the property market and last month's increase to the cash rate is only one factor causing growth in housing prices to slow or reverse," he said. "It is important to remember housing market conditions have been weakening over the past year, at least at a macro level."
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