Melbourne’s property market is falling. Median dwelling values sit at $797,354 as at August 2026, down 3.4% over the quarter, and the cause is the cash rate rather than anything specific to Melbourne.
Houses have taken most of it, down 4.0% to $936,528. Units held up better, down 2.0% to $632,021. This page sets out where prices actually are, what is driving them, and what it means if you are buying, selling or investing here.
Current state of Melbourne’s property market
These are the August 2026 Cotality figures for Greater Melbourne, with the change over the quarter:
- All dwellings — $797,354, down 3.4%
- Houses — $936,528, down 4.0%
- Units — $632,021, down 2.0%
- Gross rental yield — 4.0%
Nationally the Home Value Index fell 0.7% in July 2026, the largest monthly drop since December 2022, so Melbourne is part of a broad downturn rather than an outlier.
What is actually driving it
The cash rate is 4.35%, effective 12 August 2026. That is the whole story in one number. When the rate rises, every buyer’s maximum loan shrinks on the same income, and the prices bid at auction fall with it. The next Reserve Bank decision is 29 September 2026, and forecasters are split — our Rate Prediction Index tracks the futures market against named economists and updates as they change their minds.
The knock-on effects are visible everywhere in the selling data. Auction clearance rates ran near 66% in February and finished July in the low 40s. Homes take a median 35 days to sell. Vendors are discounting 3.8% off asking to get a sale away. Capital city sales volumes are down 3.5% on the year while regional sales rose 4.2%.
What has not changed
The structural side of Melbourne is the same as it was two years ago, and it is why this is a rate cycle rather than a collapse:
- New home building remains well below what the city needs, and a downturn makes that worse as marginal projects get shelved.
- Melbourne keeps adding people faster than it adds homes.
- Rents are still rising. Annual rental growth was 5.9% nationally in July 2026.
- Infrastructure like the Metro Tunnel continues to reshape which suburbs are well connected.
Melbourne property prices by price band
Where a suburb sits on price has predicted its fall better than where it sits on a map. Expensive stock depends most on borrowing power, so it moved first and furthest.
Premium suburbs (above $2m)
Toorak, Brighton, Canterbury and the like have given back the most in dollar terms. Buyers at this level are less rate-constrained than most, but the pool of them is small and it thins quickly when credit tightens.
Mid-range suburbs ($800k to $2m)
The established middle ring — Essendon, Box Hill, Glen Waverley, Mitcham — tracks closest to the citywide average. These are family-house markets, and family houses are where the falls have concentrated.
Entry-level suburbs (under $800k)
Melton, Werribee, Craigieburn, Tarneit and Pakenham remain the way into the city. They are also the most rate-sensitive of all, because buyers there are usually borrowing close to their limit. Units across the middle and outer ring now sit largely in this band.
What this means for investors
The calculation has changed. With capital growth negative, the rent is doing the work, and Melbourne’s 4.0% gross yield is the best of the three biggest capitals.
- Units are the more defensive half. They fell 2.0% against 4.0% for houses, and they carry the better yield.
- Buffers matter more than forecasts. Holding a property whose value is falling is only comfortable if the shortfall is affordable at a higher rate than today’s.
- Quality falls less. Well-located stock holds up and recovers first. A big discount on a poorly located property is usually not a bargain.
If you are weighing a first purchase, our guide to a first investment property and the one on rental yield cover the numbers that matter most right now. A Melbourne mortgage broker can tell you what you can actually borrow at 4.35%.
How Melbourne compares to the other capitals
On the August 2026 figures:
- Sydney — $1,244,617 all dwellings, down 4.0%, yield 3.3%. Houses $1,529,308.
- Melbourne — $797,354, down 3.4%, yield 4.0%.
- Brisbane — $1,104,094, down 0.6%, yield 3.4%. The only one of the three where units rose.
Melbourne is now the cheapest of the three by a wide margin and pays the best rent relative to price. Brisbane has fallen least. Sydney has fallen most and costs most. That is the trade in one paragraph.
The challenges
Affordability has not really improved
Lower prices sound like relief, but a rate rise takes more off your borrowing power than the price fall gives back. The deposit is still a percentage of a price well above where it sat five years ago.
Supply is still choked
Construction costs, labour shortages and planning delays continue to hold back completions, and falling values remove the incentive to start new projects.
Not every suburb moves together
Citywide medians hide a lot. A well-connected unit market and an outer-ring house market are having completely different years, and property values should be checked at the suburb level before any decision.
“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.”
“For first home buyers, investors, and upgraders alike, this presents a strategic window to enter or reposition in the market before more pronounced growth kicks in. Melbourne’s fundamentals – from infrastructure investment to population growth – suggest a resilient long-term outlook, making today’s conditions an attractive entry point for those with a medium to long-term perspective.”
James Haywood, Approved Property Finance
How to approach Melbourne’s market in 2026
A falling market is not automatically a bad time to buy. It changes which risks matter, and it hands buyers something they did not have at the peak: time.
If you are buying your first home
- Confirm what you can borrow before you look. It has moved since 2025. Read up on borrowing power and speak to a broker if your income is self-employed or irregular.
- Negotiate. Vendors are discounting 3.8% and homes sit for over a month. The asking price is a starting point.
- Look hard at units. Cheaper entry, better yield, and they have fallen less.
- Stress-test the repayment against a higher rate than today’s, not just today’s.
- Our full first home buying guide walks through the rest.
If you are investing
- Yield is carrying the return. With growth negative, the rent is what you are buying. Melbourne’s 4.0% is the best of the big three.
- Keep a real buffer. The shortfall has to be affordable while the asset is also losing value.
- Buy quality over discount. Well-located stock falls less and recovers first.
- Our guide to buying an investment property covers structure and holding costs.
If you are selling
You are selling into a buyer’s market, and the data says so plainly: clearance rates in the low 40s, 35 days on market, 3.8% off asking. Sellers who do not have to move are staying put, which is the main thing stopping falls from being larger. If you do have to sell, price it to the market you are in rather than the one you bought in.
Frequently Asked Questions
Is the Melbourne property market going up or down?
Down. Median dwelling values fell 3.4% over the quarter to August 2026, with houses down 4.0% and units down 2.0%.
What is the median property price in Melbourne?
$797,354 for all dwellings as at August 2026. Houses are $936,528 and units are $632,021.
Why are Melbourne prices falling?
The cash rate rose to 4.35% in August 2026. Higher rates mean every buyer can borrow less on the same income, so the prices bid at auction come down. It is a credit story, not a Melbourne story — Sydney fell further.
Is Melbourne cheaper than Sydney?
By a long way. Melbourne’s median dwelling is $797,354 against Sydney’s $1,244,617, and Melbourne pays a better gross rental yield at 4.0% versus 3.3%.
Is it a good time to buy in Melbourne?
That depends on your own numbers rather than the market’s. What you can borrow at 4.35%, what you could still carry if rates rose again, and how long you would need to hold. Those are answerable. Where the market goes next is not.
Which Melbourne suburbs are holding up best?
Units across the middle and outer ring have fallen least, and the pattern citywide is that cheaper stock has held up better than expensive stock. Check the suburb rather than the citywide median before acting.
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.