Melbourne house prices have fallen hard. The median house is $936,528 as at August 2026, down 4.0% over the quarter. A year ago that same figure was above $1.06 million.
Units went the other way. At $632,021 they are worth more than they were in mid-2025, and they fell only 2.0% over the quarter against 4.0% for houses.
This guide sets out where Melbourne prices actually sit, why houses and units have split, and what it changes for buyers.
Current Melbourne house prices
These are the August 2026 Cotality figures for Greater Melbourne. The percentage is the change over the quarter.
- Houses — median $936,528, down 4.0%
- Units — median $632,021, down 2.0%
- All dwellings — median $797,354, down 3.4%
- Gross rental yield — 4.0%, the highest of the three biggest capitals
“Melbourne’s median house price has come back to $936,528, and affordability still varies enormously across the city — from multimillion-dollar homes in Toorak to sub-$500,000 options in Melton,” explains Mansour Soltani from Soren Financial.
Melbourne is now materially cheaper than Sydney, where the median house is $1,529,308. That is a gap of almost $600,000 between the two largest cities, and it is wider than it was a year ago because Sydney houses fell further in percentage terms from a much higher base.
What has happened over the past twelve months
The turn is not subtle. Four things drove it:
- Rates went up. The cash rate is 4.35%, effective 12 August 2026. Every rise cuts what buyers can borrow, and Melbourne prices followed. The next Reserve Bank decision is 29 September 2026 — our Rate Prediction Index tracks what the futures market and named economists expect.
- Auctions thinned out. National clearance rates ran near 66% in February and finished July in the low 40s.
- Selling got slower. Homes are taking a median 35 days to sell and vendors are discounting 3.8% off asking to get a sale away.
- Houses fell faster than units. The more expensive the asset, the more a borrowing-power squeeze hurts it. That is why the gap between Melbourne houses and units has narrowed.
“Melbourne has come back about 4% over the quarter, and the reason is the cash rate rather than anything wrong with Melbourne. When borrowing power shrinks, the most expensive stock falls first — which is exactly what the split between houses and units is showing. Buyers who know what they can carry if rates rise again are in a better position now than they were at the peak.”
“We’re not seeing a boom, but we are seeing balance. And in a market like Melbourne, that’s a good sign.”
James Haywood, Approved Property Finance
Melbourne house prices by region
The fall has not landed evenly. Price level is the best predictor of how hard a suburb has been hit, because expensive stock depends most on borrowing power.
Inner Melbourne (0–10km from the CBD)
Richmond, Collingwood and Fitzroy still carry the highest price tags in the city, and they have given back the most in dollar terms. The lifestyle draw has not changed; what changed is how much a buyer can borrow against it. Inner-city units have held up considerably better than inner-city houses.
Middle-ring Melbourne (10–20km)
Essendon, Box Hill, Glen Waverley and Mitcham sit in the band that moves closest to the citywide average. Transport, schools and established streets keep demand steady, but these are family-house markets and family houses are where the falls have concentrated.
Outer Melbourne (20–50km)
Berwick, Melton, Mickleham and Wyndham Vale remain the entry point to the city, and they are the most sensitive of all to interest rates because buyers there are typically borrowing close to their limit. Infrastructure keeps improving in these corridors, which supports them over a long hold, but a rate rise bites here first.
Where Melbourne goes from here
The honest answer is that it depends on the Reserve Bank, and forecasters are split on the next move. What can be said with more confidence:
- Units are the more defensive half of the market. They have fallen less in every one of the three biggest capitals, and Melbourne’s 4.0% gross rental yield is the best of the three.
- The supply shortfall has not gone away. If anything a downturn worsens it, because marginal projects stop stacking up and get shelved.
- Rents are still rising. Annual rental growth was 5.9% nationally in July 2026, so the cost of waiting is going up at the same time as prices come down.
Anyone quoting you a Melbourne price forecast for the next twelve months is guessing at a Reserve Bank decision. Over a fifteen-year hold this cycle is noise; over three years it is not, and that difference should shape your decision more than any forecast.
What is driving Melbourne prices
- Interest rates. The single biggest factor, and currently working against prices.
- Population growth. Melbourne keeps adding people faster than it adds homes, which puts a floor under the market that a rate cycle does not remove.
- Construction costs and delays. Higher build costs, labour shortages and planning bottlenecks mean fewer completions.
- The rental market. Low vacancy and rising rents push some renters toward buying, and support investor yields.
Tips for first-home buyers
- Check what you qualify for through government grants and stamp duty savings — they take a real chunk off the upfront cost.
- Get your borrowing capacity confirmed before you shop. It has moved since 2025, and a mortgage broker can tell you which lenders treat your income best.
- Look seriously at units and townhouses. In this market they are both the cheaper entry and the more defensive asset.
- Consider rentvesting if you want to live in one part of the city and buy in another.
- Negotiate. Vendors are discounting and homes are sitting for over a month. The asking price is a starting point.
- Stay ready with pre-approval so you can move when the right place appears.
Final thoughts
Melbourne is cheaper than it was a year ago, and that is the plain fact underneath everything else on this page. Whether that makes it a good time to buy depends on your own numbers — what you can borrow at 4.35%, and what you could still carry if rates rose again from here. Those are answerable questions, and they matter more than a forecast.
Austin Rulfs
Financial Services Expert
“Markets will always move through different cycles, but successful property decisions are usually built on preparation rather than prediction. Understanding your borrowing capacity, choosing the right asset and having a long-term strategy will generally have a far greater impact than trying to buy at the absolute bottom of the market.”
Austin Rulfs
Director, Zanda Wealth
Need help buying property in Melbourne? Check out our top 10 guides on the best financial professionals in the city.
- Top 10 Melbourne Mortgage Brokers
- Top 10 Melbourne Buyers Agents
- Top 10 Melbourne Conveyancers
- Top 10 Melbourne Accountants
Frequently Asked Questions
What is the average house price in Melbourne?
The median house is $936,528 as at August 2026 and the median unit is $632,021. That is the middle of the market, so Toorak and Brighton sit far above it and Melton and Pakenham far below.
Are Melbourne house prices going up or down?
Down. Houses fell 4.0% over the quarter to August 2026 and units fell 2.0%. The median house was above $1.06 million a year ago and is $936,528 now.
What are the cheapest suburbs in Melbourne to buy a house?
The outer suburbs still offer the lowest entry price — Melton, Werribee, Craigieburn, Pakenham and Tarneit among them. They are also the most sensitive to interest rates, because buyers there are usually borrowing close to their limit.
How much do I need to earn to buy a house in Melbourne?
For a home at the $936,528 median with a 20% deposit, a household income in the region of $160,000 to $180,000 is the usual guide. Buying somewhere cheaper like Melton brings that well down. A smaller deposit is possible but normally means paying Lenders Mortgage Insurance on top.
How do Melbourne house prices compare to Sydney?
Sydney is far more expensive. Its median house is $1,529,308 against Melbourne’s $936,528 — a gap of almost $600,000. Melbourne also has the better gross rental yield of the two at 4.0%.
What affects Melbourne property prices?
Interest rates first, because they set what buyers can borrow. After that: population growth, how many new homes get built, and the rental market. Locally, transport upgrades, schools and zoning changes move individual suburbs more than any national trend does.
Mansour Soltani
Financial Services Expert
With over two decades of experience in Australia’s real estate sector, Mansour has built a career specialising in the acquisition and sale of investment and commercial properties, spanning major metropolitan hubs and regional areas. As the founder and owner of a finance brokerage firm, he manages a loan portfolio exceeding $250 million while serving a broad range of clients nationwide.
A frequent contributor to money.com.au, Mansour has developed a deep understanding of diverse investment strategies, enabling him to provide valuable, well-informed perspectives on market trends and opportunities.