The Melbourne property market in 2026: What buyers need to know

If you’ve been watching the Melbourne property market closely, you’ll know 2026 is shaping up to be a year of contradictions.

Interest rates are likely to rise, making borrowing more expensive and homeownership harder. At the same time, supply remains constrained, particularly in established inner-city areas where homeowners will likely choose to hold rather than sell.

For buyers navigating this environment, it’s important to understand these dynamics and how to overcome them if a move is on your to-do list this year.

Rate rises and what they mean for buyers

The prospect of an interest rate increase is a challenge for most people, as higher rates mean stricter lending criteria and reduced borrowing capacity, which can price out buyers who don’t already have substantial equity or cash reserves.

For first home buyers, it adds another layer of difficulty to an already competitive market. For upgraders, it may mean reassessing budgets or timelines.

But the reality is that those who can act will continue to secure properties. The difference is that competition becomes fiercer, and decisiveness becomes key.

Supply constraints in blue chip areas

One of the defining features of the current market is low supply, particularly in Melbourne’s established blue-chip suburbs across Bayside, Stonnington and Boroondara.

Homeowners in these areas are holding onto their properties, choosing to ride out uncertainty rather than sell. This isn’t surprising as these suburbs have long been insulated from broader market volatility, and owners know the long-term value of their holdings.

The result? Less stock on the market, which means the properties that do come up for sale will see strong competition.

For buyers, this means patience and precision. You can’t afford to miss opportunities when they arise, and you need to be prepared to move quickly and confidently when the right property appears.

Where competition is fiercest

The market and competition varies significantly depending on price point and location.

Under $1.5 million, competition remains intense as it’s accessible to a wide range of buyers – first home buyers stretching their budgets, investors and upgraders. Below $1 million, momentum is particularly strong, driven in part by renters who’ve been squeezed by rising rents and are now entering the market as buyers.

Suburbs like Armadale, Malvern East, Brighton East, Albert Park, Middle Park and Elsternwick will continue to see strong buyer activity. Brighton, which has experienced some adjustment as newer money entered the market, is starting to pick up again as fundamentals reassert themselves.

The investor shift

Another interesting development is the changing composition of buyers in the investment space.

A significant number of landlords are exiting the market, worn down by regulatory changes, the administrative burden of managing rental properties, and a sense that investor rights have been eroded. Some are selling because they’ve reached the end of their investment cycle. Others are liquidating to help with school fees or other financial priorities.

At the same time, we’re seeing expats and interstate buyers circling Melbourne with renewed interest. They’re looking past the negative sentiment around taxes and regulation and focusing on what Melbourne offers: capital growth potential that, in their view, will outweigh the challenges.

It’s a reminder of an old investing truism: when an area is “on the nose,” that’s often when the opportunity is strongest. I remember not long ago when people didn’t want to buy in Brisbane. Sentiment shifts, but fundamentals eventually win.

What this means for buyers in 2026

If you’re buying in Melbourne this year, here’s what matters:

Be strategic about timing. In a market with rising rates and low supply, waiting for the ‘perfect’ moment can mean missing out entirely. If you have the capacity to buy, acting decisively when the right property appears is critical.

Understand the suburbs. Not all areas are experiencing the same dynamics. Blue chip established areas are holding strong. Emerging pockets are seeing different patterns of demand. Know where you’re buying and why.

Get the inside edge. When stock is low and competition is high, having access to off-market opportunities and insider knowledge makes a tangible difference. Volume matters, and buyers advocates who transact regularly have visibility and relationships that individual buyers simply can’t replicate.

Don’t underestimate the value of advocacy. In a market where every advantage counts, working with someone who knows the landscape, understands pricing, and can move quickly on your behalf is a strategic tool that can save you stress, money and missed opportunities.

The bottom line

The Melbourne property market in 2026 isn’t likely to be easy. But for buyers who understand the landscape and act strategically, opportunities remain — particularly in established blue chip areas where long-term value has always been proven.

The key is knowing where to look, when to move and who to trust to help you get there.