Quick answer: Victorian property prices are weakening in parts of the market, particularly Melbourne, while the Reserve Bank of Australia has held the cash rate at 4.35%. For buyers, that combination may create more negotiating room, but it does not necessarily mean borrowing has become easier.
Melbourne has been one of the softer Australian capital-city property markets in 2026. At the same time, higher interest rates continue to restrict borrowing capacity and put pressure on household budgets.
So, does the combination of lower property prices and an RBA rate hold make this a better time to buy in Victoria?
The answer depends on where you are buying, what you can borrow and whether the property makes sense for your financial position.
Are Victorian property prices actually falling?
Melbourne property values are falling, but the same trend is not occurring evenly across Victoria.
Cotality housing market data showed Melbourne dwelling values fell 1.2% during July 2026, making Melbourne one of the weaker capital-city markets during the month.
Data from the Real Estate Institute of Victoria also showed softer conditions in metropolitan Melbourne during the June quarter.
According to the REIV, Melbourne’s median house price fell 3.1% over the June quarter to $952,500, while the median unit price declined 2.1% to $643,500.
Regional Victoria showed a different result, with REIV data recording annual growth of 8.3% for regional house prices and 9.0% for regional unit prices.
This means it is more accurate to say that Melbourne is experiencing a property market correction rather than claiming the entire Victorian property market is falling at the same rate.
How much have Melbourne property prices fallen?
Cotality reported that Melbourne dwelling values fell 1.2% in July 2026 alone.
The Cotality August 2026 Housing Chart Pack also noted that Melbourne housing values were already more than 5% below their previous peak.
Melbourne is particularly notable because it experienced less growth than markets such as Brisbane, Adelaide and Perth during the previous housing upswing.
For buyers, declining overall values do not mean every house or apartment will sell for less. Individual suburbs and properties can still attract strong competition.
However, softer market conditions may give some buyers more time to compare properties, negotiate on price and include appropriate conditions in an offer.
What did the RBA do with interest rates in August 2026?
The Reserve Bank of Australia held the cash rate at 4.35% on 11 August 2026.
In its August 2026 monetary policy decision, the RBA said monetary policy remained somewhat restrictive and that it wanted to assess how the economy was responding to the interest rate increases already delivered during 2026.
The RBA had increased the cash rate three times earlier in the year.
A rate hold is important, but a rate hold is not the same as a rate cut.
The cash rate remains at 4.35%, meaning home loan repayments and lender serviceability assessments remain important considerations for anyone looking to purchase property.
Why is the RBA holding rates while Melbourne property prices are falling?
The RBA does not set interest rates to maintain property prices. Its monetary policy decisions are primarily aimed at achieving price stability and full employment.
In its August decision, the RBA said inflation remained too high and noted that the full effect of previous interest rate increases was still working through the economy.
The RBA also acknowledged changing housing conditions, noting that housing prices were falling in some capital cities while new housing lending had declined.
That creates an unusual situation for Victorian property buyers:
The property itself may become cheaper while the finance required to purchase it remains relatively expensive.
Does a fall in property prices make it easier to buy a home?
A lower property price can reduce the amount you need to borrow, but it does not automatically increase your borrowing capacity.
Lenders generally assess borrowing capacity using factors such as:
- Income
- Existing mortgages
- Credit card limits
- Personal and car loans
- Dependants
- Household expenses
- The proposed loan amount
- Rental income where applicable
- Lender serviceability requirements
For example, a seller reducing a property’s asking price by $50,000 can reduce the amount a buyer needs to borrow. However, that buyer still needs to satisfy the lender’s borrowing and serviceability requirements.
If you are considering buying, it can therefore be useful to understand your finance position before negotiating. LoanBrix can help you review your available home loan options and borrowing position before you start making offers.
Is Melbourne becoming a buyers’ market in 2026?
Some parts of Melbourne are becoming more favourable to buyers, but conditions vary significantly between suburbs, property types and price ranges.
Falling dwelling values and weaker overall buyer demand can improve negotiating conditions.
That does not mean every seller will accept a heavily discounted offer.
A renovated family home in a tightly held suburb may still attract several competing buyers, while a property that has been listed for an extended period may provide considerably more room for negotiation.
This is why buyers should look beyond Melbourne-wide median prices and assess recent comparable sales and demand within the specific suburb they are considering.
Is 2026 a better opportunity for first-home buyers in Victoria?
Lower Melbourne property prices can potentially help first-home buyers by reducing the purchase price, required deposit and overall loan amount.
However, trying to identify the exact bottom of the property market is extremely difficult.
For a first-home buyer, more useful questions include:
- Can I comfortably afford the repayments?
- How much can I currently borrow?
- Do I have enough deposit plus purchasing costs?
- Would I be comfortable if the property temporarily fell further in value?
- Am I likely to own the property for the longer term?
Someone who has their borrowing position established may be better placed to respond if they find a suitable property at a reduced price.
LoanBrix can help first-home buyers understand their borrowing capacity, deposit position and available lending options before making an offer.
What does the RBA rate hold mean for existing mortgage holders?
For most variable-rate borrowers, the August RBA hold means there was no additional cash-rate increase flowing directly from that meeting.
However, an RBA rate hold does not mean your existing home loan is necessarily competitive.
Different lenders can offer different rates, fees and loan features.
A rate hold can therefore be a useful time to review:
- Your existing interest rate
- Monthly repayments
- Annual and ongoing fees
- Offset and redraw facilities
- Your remaining loan term
- Available property equity
- Alternative lender options
If property prices have declined in your suburb, your property’s current valuation and loan-to-value ratio may also affect your refinancing options.
You can also review the broader Melbourne mortgage market or speak with LoanBrix about comparing your current loan against other lender options.
What do falling Melbourne property prices mean for investors?
Property investors face a different calculation from owner-occupiers.
A lower purchase price may improve the initial numbers on an investment property, but investors also need to consider:
- Rental income
- Interest expenses
- Loan structure
- Victorian land tax
- Property management fees
- Maintenance and insurance
- Potential vacancy periods
- Future property value movements
A falling property market does not automatically make every property a good investment.
However, buyers with finance organised may have greater negotiating opportunities than they would during a rapidly rising market.
Investors considering their next purchase can read more about residential investment property finance and how borrowing may be structured for an investment purchase.
Could Melbourne property prices fall further?
Yes. Melbourne property prices could fall further, but current data cannot tell buyers exactly where or when the market will bottom.
Interest rates, employment, property listings, population growth, housing construction, investor activity and consumer confidence can all influence future property prices.
Cotality’s August Housing Chart Pack showed that Melbourne has a relatively small buffer compared with some other capital cities because its property market experienced less growth over the previous five years.
Cotality modelled several possible downturn scenarios and found that a decline of more than 10% from Melbourne’s peak would take dwelling values towards pre-pandemic levels.
Importantly, this was a scenario analysis rather than a prediction that Melbourne property prices will fall by 10%.
Should buyers wait for the RBA to cut interest rates?
Waiting for lower interest rates can appear attractive, but property prices and interest rates do not necessarily move in the same direction at the same time.
If rates eventually fall, borrowing capacity may improve for some buyers.
However, lower interest rates can also encourage more buyers back into the property market. Increased demand could reduce some of the negotiating advantage buyers currently have in softer parts of Melbourne.
Buying while rates are higher may mean paying more for finance but potentially facing less competition for the property. Waiting for lower rates may improve borrowing conditions but could also mean competing with more buyers.
Rather than trying to perfectly time both the property and interest-rate cycles, buyers can establish what they can comfortably afford under current lending conditions.
Is now a good time to buy property in Victoria?
For financially prepared buyers, softer Melbourne property prices may create opportunities, but there is no single answer that applies to every Victorian property buyer.
The current market has two competing forces.
On one side, property values have fallen in Melbourne and sellers may have less pricing power than they did during stronger market conditions.
On the other, the RBA cash rate remains at 4.35%, meaning borrowing conditions remain restrictive.
A buyer with a suitable deposit, stable income, manageable expenses and finance organised may be in a stronger position to take advantage of softer property prices.
Someone already borrowing near their maximum capacity may find that higher rates continue to limit what they can purchase.
Frequently asked questions about Victorian property prices and interest rates
Are house prices falling in Melbourne in 2026?
Yes. Cotality reported that Melbourne dwelling values fell 1.2% during July 2026. REIV data also showed Melbourne median house prices declining during the June quarter.
What is the RBA cash rate in August 2026?
The RBA cash rate target is 4.35%. The Reserve Bank left the cash rate unchanged at its meeting on 11 August 2026.
Are property prices falling everywhere in Victoria?
No. Melbourne has weakened, while regional Victoria has recorded stronger annual price growth. REIV’s June-quarter data showed regional house and unit prices increasing over the year.
Does an RBA rate hold mean mortgage rates will fall?
No. An RBA hold means the Reserve Bank did not change the cash rate at that meeting. Individual lenders can still change their home loan rates independently.
Do lower house prices increase my borrowing capacity?
Not directly. A lower purchase price can reduce the loan you need, but borrowing capacity is primarily determined by your income, expenses, liabilities and the lender’s serviceability assessment.
Should I wait until Melbourne property prices stop falling?
There is no reliable way to identify the bottom of the market in advance. Buyers may be better served by focusing on whether a particular property is suitable, whether its price is supported by comparable sales and whether the required loan is affordable.
Know your borrowing position before making an offer
Falling Melbourne property prices and the RBA’s decision to hold interest rates create a very different environment from a rapidly rising property market.
Some buyers may now have additional negotiating power, but finance remains an important constraint.
Before making an offer, understanding your borrowing capacity, estimated repayments and lender options can help you determine what you can realistically afford.
LoanBrix can help you compare home loan options, review your borrowing position and prepare your finance before you start negotiating on a property.
If you are looking at an investment, you can also review residential investment property finance.
Information is general in nature and does not take into account your objectives, financial situation or needs.
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