Melbourne Property Market – Prices, Trends, Forecast [August 2026]

Melbourne’s property market has entered a more pronounced correction, with weaker buyer demand placing downward pressure on prices across both houses and units. Dwelling values fell 1.2% in July and 3.4% over the quarter, bringing the citywide median to about $797,000. Affordability constraints, higher mortgage costs and subdued confidence are shaping conditions, although tight rental supply and restrained housing construction continue to provide some support.

Key Takeaways

• Melbourne dwelling values declined 1.2% in July, 3.4% over the quarter and 2.8% over the year.
• The median dwelling value is approximately $797,354, with houses at $936,528 and units at $632,021.
• Houses are experiencing the greater correction, falling 3.4% annually compared with a 1.5% decline for units.
• The market is 4.9% lower in 2026 to date and remains 5.5% below its previous peak.
• Rental conditions remain supportive, with annual rent growth of about 5.1% and a 4.0% gross dwelling yield.
• Sellers should expect price-sensitive buyers, longer negotiation periods and stronger results for well-positioned properties with realistic asking prices.

Watch Cotality’s July 2026 Housing Market Update for expert commentary on national and capital city housing trends, price movements, and key market drivers across Melbourne.

Melbourne Property Price Growth

The headline is weak, but the decline is not uniform. Overall dwelling values have fallen 2.8% over the past year, with the downturn accelerating through the latest quarter. Houses recorded a 1.4% monthly fall and a 4.0% quarterly decline, while units performed relatively better, dropping 0.7% for the month and 2.0% over three months.

Longer-term growth has also been modest. Melbourne values are 1.6% lower than five years ago, although they remain 29.5% higher over a ten-year period. Some outer and more affordable locations are still recording annual gains, led by Sunbury at 4.3%, Brimbank at 3.7% and Casey South at 2.8%.

Melbourne Property Market Trends

Look beneath the citywide correction and two distinct trends emerge: buyers have more negotiating power, while rental fundamentals remain tight. Reduced borrowing capacity and cautious consumer sentiment are limiting competition, particularly for higher-priced homes, and elevated stock compared with the beginning of the year is giving purchasers more choice.

At the same time, rents continue to rise and Melbourne’s 4.0% gross dwelling yield is the highest among the major capital cities. Units offer an even stronger gross yield of 5.1%, compared with 3.4% for houses, helping explain their greater resilience as buyers and investors focus on relative affordability.

The table highlights housing value trends across capital city, regional, and national markets.

Melbourne Property Market Forecast

Over the next few months, the path of least resistance remains downward. Higher mortgage repayments, cost-of-living pressures and weak confidence are likely to keep demand subdued, while the cumulative effect of 75 basis points of interest-rate increases continues to restrict borrowing capacity. Houses and premium properties may remain more exposed because their higher purchase prices amplify affordability and serviceability constraints.

A severe correction is not the most likely outcome, however. Low unemployment, ongoing population growth, construction constraints and a pullback in new listings should place a floor under values. The result is likely to be a continued but measured decline, with the direction of interest rates, advertised supply and investor activity determining how long the softer conditions persist.

The Reserve Bank of Australia’s ongoing adjustments to interest rates will likely play a crucial role in shaping market dynamics, as higher borrowing costs limit purchasing power for many buyers.

Here are some of the most recent forecasts by the big-4 banks in Australia:

• ANZ predicts a 5-6% increase in capital city property prices in 2024, with Brisbane expected to see the highest rise at 9-10%, Perth property values could go up by 1-11%, Sydney by 4-5%, and Melbourne prices by 2-3%.
• CBA forecasts a 5% rise in capital city prices, with some variations: Brisbane is anticipated to grow by 6%, Melbourne and Perth by 5%, Sydney by 4%, and Adelaide by 1%.
• NAB projects a 5.4% average increase across the capitals, with Brisbane expected to see a 6.5% rise, Perth and Adelaide by 6.2%, Melbourne by 5.5%, Sydney by 5%, and Hobart remaining flat.
• Westpac expects a 6% growth across the combined capitals, with Perth leading at 10%, followed by Brisbane at 8%, Sydney at 6%, Adelaide at 4%, and Melbourne at 3%

Oxford Economics recently released property forecasts predicting where house prices will be in three years.

Conclusion

What matters now is the balance between restrained demand and limited housing supply. Buyers are benefiting from greater choice and stronger negotiating positions, while sellers face a market that rewards accurate pricing, quality presentation and patience. Melbourne is likely to remain soft in the near term, but rental strength, population growth and constrained construction should help contain the depth of the downturn.

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