Melbourne's booming property market and huge population growth have driven a budget surplus $500 million higher than expected.
Stamp duty on house sales has helped lift the 2015-16 budget surplus from $1.2 billion to $1.7 billion in the budget update.
"Our property markets are running quite strong, and that has helped," Treasurer Tim Pallas told reporters on Friday.
But he acknowledged the state could not rely on the stamp duty windfall to fund recurrent services.
"Our reliance upon land taxes does mean there will be volatility," he said.
"We can't simply assume that those numbers will stay around forever."
Victoria had the highest population growth in the nation, which contributed to the state's increasing tax take.
The government has been working on a housing affordability strategy for eight months, and Mr Pallas flagged potential changes in the 2016-17 budget.
"It's one of the biggest and substantial policy issues that confront government," Mr Pallas said.
"We will be seeking to address this problem root and branch into the future."
Shadow treasurer Michael O'Brien said spending on public sector wages has gone up 8.5 per cent since the coalition left office a year ago.
But Mr Pallas said the extra spending was due to filling gaps in service delivery, not increasing base salaries for public servants.
Victoria's budget surpluses are predicted to total $6.6 billion through to 2018-19.
Growth is expected to remain at 2.5 per cent in 2015-16, although volatility in China and US interest rates could affect that outlook.
