Melbourne’s property market in winter 2026: what it means for you depends on who you are

By Jarrod McCabe

Winter is always quieter in Melbourne’s property market. Auction numbers thin out and buyers tend to hibernate. But this year, the seasonal lull has been compounded by the federal budget’s tax changes in May, and the result is a market that’s softer than usual. Clearance rates are hovering in the early 50s – firmly buyer’s market territory.

That creates very different dynamics depending on where you sit. An upgrader faces a fundamentally different equation from an investor weighing whether to sell. A first home buyer is looking at opportunities that didn’t exist 12 months ago. A renter is feeling pressure the headline data doesn’t fully capture. And anyone considering a holiday home is looking at regional values that have corrected well beyond what was justified.

Here’s how the current market is playing out for each.

Upgraders: the gap is narrowing in your favour

If you’re looking to move from a smaller or lower-value property into something better, this is one of the most favourable market conditions you’ll find. The logic is straightforward: in a softer market, all properties come back in value – but the more expensive property you’re buying into drops more in dollar terms than the one you’re selling. The gap between the two narrows, making the upgrade more affordable than it would be in a rising market.

The apartment-to-house pathway

For those upgrading from an established apartment into a house, the dynamic is particularly encouraging. The apartment market, while not flying, is the segment where first home buyers remain most active. That gives you a reasonable buyer pool for your existing property. Meanwhile, the housing market you’re buying into is quieter, with less competition and greater room to negotiate.

The premium end

At the top of the market – roughly $5 million and above – conditions are even more pronounced. This sector is experiencing the thinnest buyer interest of any segment. Supply is limited too, so the right property may take time to find. But for those with the capacity to act, the combination of reduced competition and softer pricing creates genuine opportunity. When the market eventually turns, the upside from buying a premium asset at today’s levels could be significant.

Investment property sellers: unless you have to, hold

It has been a bruising period for investment property owners. Increased land tax, tighter minimum rental standards, short-stay accommodation levies, capital gains tax changes, residential tenancy amendments and interest rate rises – all layered on top of years of flat or negative growth. It genuinely feels like death by a thousand cuts.

Many are considering whether it’s time to exit. Our view: unless you’re in financial difficulty or planning to sell within the next 18 to 24 months as part of a retirement strategy, hold. The buyer pool for your property is thin right now. Investors have largely stepped back from the established market post-budget. First home buyers are active but have lost some confidence – they rely on social proof from seeing other buyers in the market, and the absence of investors has dampened that energy.

Selling into weakness when you don’t need to compounds the problem. Let the market find a level, let confidence rebuild, and sell from a position of greater strength when the time is right.

First home buyers: genuine value in the established apartment market

First home buyers are in a similar position to upgraders – this is a favourable market to be entering. Values have come back, competition has eased, and the investor activity that used to crowd out entry-level buyers has largely disappeared.

The established apartment market in particular is offering genuine value. Compared to apartment markets in other capital cities, which have performed reasonably well over the past five years, Melbourne’s has barely moved. The relative value gap is real.

Why construction costs matter here

The supply side reinforces the opportunity. Construction costs have risen sharply, but end values haven’t kept pace. That means developers can’t justify building – the margin between land cost, construction cost and sale price doesn’t work. Some builders we know are literally taking their teams to Queensland, where the certainty and margins are far greater.

If developers aren’t building, future supply is constrained. Current stock at today’s prices is likely sitting below replacement cost. First home buyers who get in now are positioned to build equity when the market eventually moves – and the supply constraints mean that movement, when it comes, could be meaningful.

Renters: the pressure is building beneath the headline numbers

The rental data tells a measured story. Total rental listings are down 5.6 per cent annually. Median dwelling rents are up around 5.1 per cent to approximately $646 per week. Not dramatic numbers.

But the on-the-ground experience tells a different story. Competition at open inspections is strong – even during winter. Application numbers on properties are healthy. And we haven’t hit the spring market yet, when demand typically intensifies.

If supply doesn’t increase meaningfully through spring, rents will continue to rise. Build-to-rent developments are adding some apartment stock at the higher end, which will help in that segment. But on the housing side, supply is more likely to decrease than increase. Investors are exiting, and without the negative gearing incentive on established property, new investors aren’t replacing them. The pressure on housing rents will continue to rise.

Holiday home buyers: regional values have overshot on the downside

For anyone considering a beach house, both the Mornington Peninsula and the Bellarine are offering value that hasn’t been seen in years. Regional markets ran hard during the COVID boom – and the correction since has been significant.

Take Rye as an example. The median house price peaked at around $1.25 million in August 2022. It currently sits at approximately $950,000 – a drop of roughly $300,000. Some of that correction was necessary. The COVID-era growth was artificial and unsustainable. But the pullback has likely gone further than justified.

For those who are personally ready, entry-level houses in townships like Rye, Blairgowrie and similar areas on both peninsulas represent strong opportunities. Coming into spring, supply will pick up as vendors list for the warmer months. If the timing works for you, this is a market worth investigating seriously.

Take home message

Melbourne’s property market is not treating all participants equally right now – and that’s precisely where the opportunity lies. Upgraders benefit from a narrowing gap between what they’re selling and what they’re buying. First home buyers face less competition and genuine value in the established apartment market. Holiday home seekers are looking at regional corrections that have overshot.

For sellers, particularly investors in discretionary positions, the message is different: patience. Don’t sell into weakness unless your circumstances demand it.

Whatever your position, the fundamentals of sound decision-making haven’t changed. Understand your situation, do the homework, and make your move for the right reasons at the right time. The market will shift – it always does. The question is whether you’re positioned well when it does.

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