Waiting for Melbourne prices to fall further? You might be waiting for the wrong market
Written by Michael Lawes
If you're a first home buyer holding out for prices to drop, it's worth checking whether that strategy still makes sense for you. The headlines about falling property values are accurate, but they don't tell the full story, and the gap between what's reported and what's actually happening at the affordable end of the market could work against you.
The falls are real, just not where you might think
National home values eased 3.1% over the past quarter, with annual growth slowing to 2.7%, according to Cotality's latest data. But that national figure hides a lot of variation. The falls are heavily concentrated at the premium end of the market, while more affordable properties are proving far more resilient.
In Melbourne, the most expensive quarter of the market has fallen materially more than the cheapest quarter over the same period, and upper-quartile Melbourne houses are now down more than 10% from their cyclical peak. The most affordable segment hasn't come close to that. Sydney shows the same pattern, with premium property leading the downturn while entry-level stock holds its ground. It's a trend repeating across most capital cities, and in Hobart and Darwin, affordable-end values have actually been rising.
That matters if you're shopping at the entry level, because that's exactly where prices are proving the most stubborn.
Why cheaper homes aren't following the same trend
A few things are keeping demand steady at the affordable end. First home buyer numbers held firm in the June 2026 quarter at just over 29,000, broadly unchanged on the same quarter last year, according to ABS lending data. Government support such as the 5% Deposit Scheme, First Home Owner Grants and stamp duty concessions is also helping sustain demand. And there's a simple numbers game at play too - far more buyers can afford a modest home than a luxury one, so competition for that stock stays tight even as the broader market cools.
Rate rises have pushed more buyers into the same bracket as you
Three RBA rate hikes this year have reduced borrowing capacity across the board, and the practical effect is that more buyers are being squeezed toward the affordable end rather than out of the market entirely. Online search activity on some budget-friendly suburbs has more than doubled over the past year, according to REA data. That's not a sign of a market cooling off. It's a sign of more buyers competing for the same limited stock, which tends to support prices rather than push them lower.
What this means if you're weighing up buying now versus waiting
None of this guarantees prices in affordable suburbs will rise from here. But it does suggest that holding out for a further discount is a riskier bet than it might seem, particularly if you're shopping at the entry level where demand keeps building rather than easing. Values in these suburbs could hold steady, or even climb, while you wait for a price drop that may not eventuate.
If you're weighing up your next move, whether that's buying now or continuing to save, it's worth having a conversation with your broker about how current market conditions affect your specific timing and borrowing position. Contact us here.
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