Michael Yardney , Founder
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Melbourne has now recorded nine consecutive months of falling values — the longest unbroken decline of any Australian capital city in this cycle. August delivered a further 1.1% fall, leaving the market 6.5% below its November cyclical high and 6.8% below the March 2022 peak.
That second figure deserves attention. Melbourne is not correcting from a recent high — it never fully recovered from the last one. Four and a half years after March 2022, the market sits further below that benchmark than it did when the previous downturn bottomed out. This is a city that has spent nearly half a decade unable to reclaim lost ground, and is now moving away from it again.
What separates Melbourne from Sydney is not the depth of the current decline. Sydney has fallen harder and faster since February. The difference is duration and starting position: Melbourne entered this downturn already carrying unrecovered losses, and nine months in, there is still no evidence of a floor forming.
Transaction activity has contracted alongside values, with home sales running 16% below year-ago levels. But the more revealing behaviour is on the seller side. New listings entering the Melbourne market are down 17% compared to last year — a substantial withdrawal by vendors who have looked at current conditions and decided to wait. Despite that pullback, total advertised supply remains above average, because the properties already listed simply are not clearing.
Melbourne Market Performance
The August data places Melbourne in the middle of the national decline by monthly magnitude, but at the extreme end by duration. Nine months of continuous falls has compounded into a market where the cumulative loss is now measured against a peak most buyers have stopped referencing.
| Segment / Metric | Current Result | Trend & Context |
|---|---|---|
| Monthly Change (August) | -1.1% | 9th consecutive month of decline — longest run nationally |
| Decline Since November Peak | -6.5% | No sign of a floor forming after nine months |
| Position vs. March 2022 Peak | -6.8% | Still further below the 2022 high than at the last trough |
| Home Sales Volume | -16% vs. year ago | Demand contracting alongside values |
| New Listings | -17% vs. year ago | Vendors withdrawing from the market in significant numbers |
| Total Advertised Supply | Above average | Stock accumulating despite fewer new listings |
Source: Cotality, September 2026
The Standoff Between Buyers and Sellers
Melbourne is currently running one of the clearest examples of a market stalemate in the country, and the numbers describe it precisely.
Sellers have pulled back sharply — new listings down 17% year-on-year is not a marginal adjustment, it is a substantial cohort of would-be vendors deciding this is not the moment. Buyers have pulled back further — sales volumes down 16% and values still falling. The result is a market where both sides have withdrawn, but not by equal amounts, and stock continues to build in the gap between them.
This matters for how the downturn eventually resolves. Melbourne’s oversupply is not being fed by a pipeline of desperate sellers. It is being fed by the absence of buyers willing to transact. If confidence returns, the correction could unwind faster than the current stock levels suggest, because the underlying flow of new listings is unusually thin.
Melbourne’s advertised stock remains above average despite new listings falling 17% year-on-year — the accumulation is entirely a function of properties failing to sell.
Nationally, the same dynamic is visible: 93% of capital city suburbs recorded declines over the past three months, up from 45% in autumn. The performance gap between premium and affordable segments has narrowed as affordability pressure spreads more evenly. Melbourne’s more expensive stock is still bearing the heavier falls, but the protection that lower-priced housing enjoyed earlier in this cycle has largely eroded.
Rental Conditions and the Yield Question
Melbourne’s rental market reflects the national pattern of slight loosening within conditions that remain historically tight.
The national vacancy rate reached 1.9% in August — the highest since January 2025, and up from February’s record low of 1.5%. Against the pre-COVID decade average of 3.3%, however, it remains deeply constrained, and the national rate has sat below 2% almost continuously since early 2022.
Rents rose 0.4% in seasonally adjusted terms during August, matching July’s increase. Annual growth of 5.7% has added roughly $38 per week to the national median. Over five years the accumulation is significant: rents up 39%, leaving tenants paying approximately $200 more per week than in 2021.
| Rental & Investment Metric | Current Status & Trends |
|---|---|
| National Vacancy Rate | 1.9% — highest since January 2025, still well below 3.3% pre-COVID average |
| Annual Rental Growth | 5.7% — adding ~$38 per week to the national median |
| 5-Year Rent Increase | 39% — approximately $200 per week above 2021 levels |
| National Gross Rental Yield | 3.79% — highest since September 2019 |
| Quarterly Sales Volumes (National) | -15% year-on-year; 11% below the 5-year average |
| Combined Regionals (August) | -0.4% monthly; -1.2% across winter |
Source: Cotality, September 2026
Gross rental yields nationally have climbed to 3.79%, the highest reading since September 2019, driven by rents rising while values fall. Melbourne, which has consistently carried stronger yields than Sydney, benefits directly from this movement. But the improvement still falls well short of the level most leveraged investors would need to reach neutral cash flow — and with core inflation running above expectations, borrowing costs may not have peaked.
Melbourne Heading Into Spring
The demand-side pressures weighing on Melbourne have been accumulating since late last year and show signs of entrenching rather than fading. Credit availability and serviceability constraints remain acute, even as lower prices marginally improve purchasing power at the edges.
The inflation data introduces a genuine new risk. Core inflation came in higher than expected, raising the likelihood of further Reserve Bank tightening. Another rate increase against Melbourne’s household debt levels would reduce borrowing capacity further, lift the burden on existing mortgage holders, and undermine consumer confidence that remains deeply pessimistic despite improving from January lows.
Real wages have fallen for four consecutive quarters, making deposit accumulation harder precisely when falling prices would otherwise be opening doors. Population growth has normalised after the post-pandemic surge, removing demand support that helped hold Melbourne values through recent years.
Melbourne now sits 6.8% below its March 2022 peak with vendors 17% less likely to list — for buyers with secure income and finance in place, this is the widest gap between market price and historical value the city has offered in over four years.
Structural constraints will limit how far this runs. New housing supply remains insufficient against underlying demand, with construction costs, capacity limits and feasibility problems restricting completions. Low unemployment should prevent the mass defaults and forced sales that turn a correction into something sharper. And first home buyer incentives, including the 5% deposit scheme, should support activity at the affordable end.
Spring is the test. Listings typically rise seasonally through spring and early summer, but Melbourne enters that period with vendors already reluctant and buyers already hesitant. Whether the seasonal lift in stock arrives at all — and whether demand meets it — will determine how much further this nine-month decline extends.
