Melbourne and Sydney Home Prices Continue to Decline
Australia’s housing market is continuing to adjust after several months of weaker buyer demand, with Melbourne and Sydney experiencing some of the deepest price declines among the major capital cities.
The latest realestate.com.au Home Price Report shows that Sydney dwelling values are now 5.5% below their November 2025 peak, while Melbourne values are 5.7% below their October 2025 peak. The correction is even more pronounced for houses, with Sydney house prices 6.9% below peak and Melbourne house prices 6.6% below peak.
Nationally, home prices have now fallen for six consecutive months and sit 3.3% below their March 2026 peak. Combined capital-city prices are down 4.3% from peak, showing that the downturn has broadened beyond Sydney and Melbourne into other major markets.
Higher interest rates remain one of the main reasons behind the slowdown. As borrowing capacity falls, buyers are able to spend less, while existing mortgage holders face higher repayments. This has reduced competition, extended selling times and encouraged many purchasers to become more selective.
For Melbourne’s western growth corridor, the correction may create opportunities for buyers who have been waiting for prices to become more accessible. First-home buyers in particular may find that softer conditions provide more choice and greater negotiating power than was available during stronger market periods.
Affordable suburbs in Melbourne’s west could become increasingly attractive as buyers adjust their expectations around location, dwelling type and size. Some households who can no longer afford established suburbs closer to the CBD may broaden their search toward outer-western areas, townhouses, units or newer developments.
For investors, lower prices may create potential entry points, but caution remains important. A property purchased below its recent peak may still fall further in value if market conditions continue to weaken. Rental demand, infrastructure, population growth, local supply and holding costs should therefore remain central to any investment decision.
The difference between houses and units is also becoming increasingly important. Units have generally experienced smaller price falls than houses, reflecting the growing importance of affordability. In Melbourne, house prices are around 6.6% below peak compared with a decline of about 2.7% for units.
For sellers, the adjustment means that expectations may need to be aligned with current market evidence rather than previous peak prices. Buyers now have more choice and are generally less willing to pay above comparable market value, especially when similar properties are available nearby.
At the same time, strong properties in desirable locations can still attract competition. Presentation, realistic pricing, local amenities and property condition remain important factors in determining how well a home performs even during a softer market.
Overall, the current correction could provide a more favourable entry point for some buyers in Melbourne’s western growth corridor, particularly those with secure finance and a long-term view. However, the latest data suggest the market is still adjusting, meaning buyers and investors should focus on value, affordability and property fundamentals rather than assuming prices have already reached their lowest point.
