This afternoon I was chatting to a real estate agent about the Melbourne market. He didn’t sugarcoat it. Times are tough. Then he said something that stuck with me, even though it’s not exactly a new idea: the only people really winning right now are the ones who are upgrading.
I’ve been turning that over all evening. It lines up with a few other things I’ve noticed lately, friends selling for less than they hoped, a mortgage broker who reckons he’s never seen a slump like this, and my own properties getting way fewer enquiries than I expected. So here’s what I’m actually seeing on the ground in Melbourne at the moment, with the official numbers next to it.
Key takeaways
- The Melbourne housing market is in a genuine downturn: Cotality’s index shows Melbourne values down 7.6% over the year to October 2026.
- On 3 November 2026 the RBA lifted the cash rate again, to 4.85%, and said housing prices “have fallen significantly”.
- Upgraders are the quiet winners: they sell for less, but they also buy for less.
- Sellers I know are taking roughly $50–100k less on a $1 million property than they expected 18 months ago.
- First home buyers are buying at a discount, but higher rates and stricter lending make it harder to get in.
- Victorian landlords face tighter rules, and some investors are choosing to exit.
Melbourne property market update: what’s happening right now?
Let’s start with the facts, because my conversations only tell part of the story.
On Melbourne Cup Day, 3 November 2026, the Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.85%. It was a split decision, six votes to three. In its official statement, the RBA said the economy is slowing, the unemployment rate has risen and “housing prices have fallen significantly”. It also expects falls in housing prices and turnover to weigh on dwelling investment and household spending.
The price data backs that up. According to the Cotality Home Value Index released in early November, Melbourne home values fell another 0.8% in October and are down 7.6% over the year. Nationally, values are 6.7% below their March 2026 peak. Melbourne isn’t alone: Sydney is down 9.4% over the year, and Brisbane and Perth recorded the steepest monthly declines in October, at 2.0% and 1.7%.
Domain has also reported that Melbourne’s median house price is tipped to fall below $1 million by the end of the year. The correction isn’t uniform, either. It varies from suburb to suburb, and between houses and apartments.
So when people ask me whether Melbourne house prices are falling, the honest answer is yes. The more interesting question is: who’s actually getting hurt, and who isn’t?
Who’s winning in the Melbourne housing market? Upgraders
Why the loss cancels itself out
This was the agent’s point, and I think it’s a good perspective. If you’re selling one home and buying a more expensive one in the same market, you take a hit on the place you sell, but you win on the place you buy. The two effectively cancel each other out.
In fact, because the gap between the two properties is usually bigger in dollar terms, an upgrader can come out ahead. A 7% fall on a $900,000 home is a smaller number than a 7% fall on a $1.4 million home. That’s a simple illustration, not a promise. Every deal is different, and stamp duty, agent fees and your borrowing capacity all matter.
Why most people aren’t in that bucket
Upgrading still needs a lender willing to back you at today’s rates. If your income hasn’t moved and your repayments have gone up, the “win” on paper might not be available to you in practice.
First home buyers: buying at a discount, but it’s harder to get in
People trying to enter the market are, in a sense, buying at a discount. Prices are lower than they were 18 months ago. That’s the good news.
The bad news is everything around the price. Interest rates are high and lenders are stricter about how much they’ll let you borrow. I’m also not sure how valuations are coming in at the moment, and a weak valuation can leave a buyer scrambling to find the difference. A cheaper house doesn’t help much if you can’t get the loan approved.
If you’re a first home buyer, I’d spend as much time with a good broker as you do at open inspections. Know your real borrowing limit before you fall in love with a property.
Sellers are taking a haircut
What my friends are going through
I’ve spoken to a few friends who’ve sold recently. They were forced to accept anywhere between $50,000 and $100,000 less on a property worth roughly a million dollars than they were expecting 18 months ago. That’s a good 5–10% gone in the space of 12 to 18 months.
These guys will be okay. They’ll walk away with something. But it hurts, no doubt about it.
When the haircut becomes a real problem
There are others who can’t afford that haircut at all. They were relying on that $50–100k of equity to roll into another property or to pay down debt. Some owe the bank more than the property is now worth, which means they’re in negative equity, or “upside down”, as people say. For them, selling doesn’t just mean a smaller profit. It can mean walking away still owing money.
The cost of living is squeezing everyone
High interest rates aren’t only hurting the property market. They’re hurting the broader Australian economy and the average Aussie, especially with the cost of living as high as it is right now.
I heard a line the other day that made me laugh, then made me think. Someone said more couples would get divorced, but in this economy they can’t afford to, so they stay under the same roof because neither can afford to move out alone. I can’t vouch for it as a statistic. It’s just something I heard. But the fact that it rings true for a lot of people says plenty about where household budgets are at.
What I’m seeing in shared accommodation
For those of you who don’t know, I manage a few shared accommodation in Melbourne. In the past, when I advertised a room, I’d be inundated with enquiries. A dozen requests would come through almost straight away.
Right now, that demand isn’t there. Enquiries are still coming in, but they’re on the light side, and I find that intriguing and a bit perplexing. With the cost of living this high, I expected affordable options like shared housing to be in hot demand. I know people want the rooms. For whatever reason, they’re not moving as fast.
Maybe it’s just me. I’d genuinely like to hear what other landlords, housemates and renters are experiencing, so leave a comment below if you’ve noticed the same thing (or the opposite).
Agents and mortgage brokers are feeling it too
It’s not just buyers and sellers. I spoke to my mortgage broker, and he told me that in his 15 to 20 year career he has never gone through a slump like this. Fewer people are applying for mortgages, so the work has slowed right down.
I do have another colleague in the industry who’s still doing okay. He’s out there making and shaking, moving and making things happen. But he’s an outlier. Most people in property right now are not in that bucket.
Tighter rules for Victorian landlords
On top of rates and prices, regulation for landlords in Victoria keeps getting tighter. From 25 November 2025, Consumer Affairs Victoria brought in a set of changes, including:
- a ban on no-fault evictions, so rental providers need a valid reason to ask a renter to leave
- rental properties must meet minimum standards before they’re advertised
- longer notice periods for rent increases and some notices to vacate (90 days instead of 60)
- smoke alarms installed and tested every 12 months
- a ban on rental bidding
Rooming house operators also had to install a fixed heater in each resident’s room from December 2025. Many of these changes are good for renters. But they add cost and paperwork for owners, and alongside higher interest costs and Victorian land tax on investment properties, I know property investors who’ve decided to get out of Victorian property and invest elsewhere.
Making the numbers work in this market
I’m not telling you to sell, buy or hold. This is not financial advice. What I will say is that you really do have to be creative to make the numbers work right now. A few questions I’d be asking myself:
- Can I handle another rate rise? Stress-test your repayments, not just today’s rate.
- Am I upgrading or selling out? The maths is very different for each.
- What’s my real equity position? Get an honest appraisal, not the number you’d like to hear.
- Who’s on my team? A good broker, accountant and agent are worth their fees in a market like this.
For me, property sits under the wealth pillar of the three pillars of success. It’s one part of a bigger picture, and the fundamentals I wrote about in my blueprint to building wealth still apply: spend less than you earn, keep a buffer, and don’t over-extend.
Frequently asked questions
Are house prices dropping in Melbourne?
Yes. Cotality’s Home Value Index shows Melbourne values fell 0.8% in October 2026 and are down 7.6% over the past year.
Is the Melbourne property market slowing down?
Yes. Prices and turnover are falling, and the RBA said on 3 November 2026 that housing prices have fallen significantly. Agents and brokers I’ve spoken to describe it as one of the toughest periods they’ve seen.
Who benefits when property prices fall?
Upgraders tend to do best, because the discount on the home they buy can offset the hit on the home they sell. First home buyers also pay less, but higher rates and tighter lending make it harder to get a loan.
Should I buy now or wait?
That depends on your finances, your borrowing capacity and how long you plan to hold. Nobody can reliably time the bottom. Speak to a licensed adviser or mortgage broker about your own situation.
What is the RBA cash rate right now?
The RBA raised the cash rate target to 4.85% on 3 November 2026. Check the RBA website for the latest decision.
Will Melbourne house prices rise again?
Property markets move in cycles, but no one knows exactly when Melbourne will turn. Interest rates, inflation, unemployment and housing supply will all play a part.
Final thoughts
The Melbourne property market in 2026 is tough, especially if you need to sell, need to borrow or work in the industry. Upgraders are doing fine. Almost everyone else is feeling it somewhere. If you’re in the thick of it, I hope this helps you feel a little less alone, and I’d love to hear what you’re seeing in the comments.
All the best and to your Success.
This article shares my personal observations and general information only. It is not financial advice. Please speak with a licensed financial adviser or mortgage broker before making any property or investment decisions.