Property prices are falling in Sydney and Melbourne — is this actually a good time to buy?

What are Sydney and Melbourne prices actually doing?

They are softening, but gently. National home values fell 0.4% in June 2026, the third monthly decline in a row since values peaked in March 2026, and the falls were led by Sydney (down 1.2%) and Melbourne (down 1.0%). That figure comes from the Cotality Home Value Index, a monthly measure of how much homes are worth across the country.

Put the drops in context. Melbourne values sit 1.9% below their November 2025 high and 2.3% below their March 2022 peak. Sydney is 1.0% below its recent peak. These are single-digit moves, not a collapse, and they change the price you might pay to get in.

Should negative equity scare you off?

Probably less than the headlines suggest. Negative equity means you owe more on your loan than your home is currently worth. According to the RBA Financial Stability Review (March 2026), fewer than 1% of mortgaged Australian households are in that position — a lower share than before the pandemic.

That matters because negative equity is mostly a problem if you are forced to sell at the wrong time. If you plan to hold, a paper dip in value while you keep making repayments is a very different thing to a realised loss. The fear is real; the exposure, for most households, is smaller than it feels.

Can you still afford the loan if rates move?

That is the question lenders are already asking on your behalf. Home loans in Australia are assessed at your actual interest rate plus a 3-percentage-point buffer — a setting APRA has held since 2021. This is called the serviceability buffer, and it is a stress test to check you could still meet repayments if rates rose.

The buffer exists specifically so borrowing stays manageable through price and rate cycles. It also means the amount you can borrow may be lower than a simple rate calculation implies, so it is worth knowing your real number before you fall for a listing.

• Work out repayments at your actual rate, then at that rate plus 3 percentage points.
• Leave room for rates, insurance and rising strata or council costs.
• Depending on your circumstances, a smaller loan with breathing room may serve you better than the maximum on offer.

Does a softer market matter if you're holding for years?

For a long-term buyer, a softer market mainly changes your entry price, not the long-run risk. Australia's current slowdown is its ninth downturn since the mid-1990s. Historically these downturns have been short and shallow and have not unwound the growth that came before them, according to Cotality long-run cycle analysis.

Two cautions, though. Past cycles are not a guarantee of how this one plays out, and "long-term" only works if you are not forced to sell early. Buying in a dip can lower your starting point, but the plan still has to survive a few years of ordinary life.

Is the whole country falling?

No — the softness is concentrated, not national. While Sydney and Melbourne ease, regional Australia, Perth and Darwin were still recording price growth in June 2026 (Cotality Home Value Index). "Falling prices" is really a two-city story right now.

So the answer to "is it a good time to buy" depends heavily on where you are looking. A dip in Melbourne and a rise in Perth are happening at the same time — and for the right buyer with the right goals, either market can be a yes. It comes down to what you are trying to achieve and whether the numbers in that specific market work for you.

Could the pull-back in your area be the window you've been waiting for?

National headlines rarely tell you what is happening on the streets you actually watch. If a suburb or postcode you have had your eye on has come off its peak, that local movement can matter far more to your numbers than the citywide average — sometimes it is the difference between a purchase that felt out of reach a year ago and one that fits your budget today.

The only way to know is to look at the actual number, not the headline. A current valuation on a property you are considering, or on your own home if you are thinking about using its equity, tells you where things genuinely stand in your market right now.

The bottom line

A softer Sydney or Melbourne market changes what you pay to get in, not the fundamentals of buying well. The negative-equity headlines are frightening, but RBA data shows fewer than 1% of mortgaged households are exposed, and the serviceability buffer is designed to keep repayments manageable through the cycle. If you are buying to hold, know your real borrowing capacity, keep a margin for rate moves, and judge your local market on its own numbers rather than the national mood.

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