Melbourne’s property market in 2026 has entered a clearer correction phase. Median house prices sit around $1.04 million, with recent quarterly declines of approximately 3% recorded after a period of softer performance. Units trade lower, typically in the mid-to-high $500,000s. For first home buyers and upgraders, the combination of lower prices relative to Sydney and the ongoing availability of the 5% Deposit Scheme creates both challenges and opportunities.
The expanded Australian Government 5% Deposit Scheme carries a $950,000 price cap for Melbourne and Geelong. This is lower than the Sydney and Brisbane caps, so a smaller portion of the detached house market sits under the threshold. Townhouses and units remain more accessible for many first home buyers using the scheme.
This guide gives you a clear, practical picture of home loans in Melbourne right now: current market conditions, how the 5% Deposit Scheme applies locally, realistic borrowing power examples, strategies for buying in a correcting market, stamp duty and other costs, and the steps that actually move applications forward.
If you are looking to buy in Melbourne in 2026, the most useful next step is a personalised borrowing capacity and scheme eligibility assessment. Book a free, no-obligation consultation with one of our brokers experienced in the Melbourne market.
Melbourne Property Market Snapshot 2026
Melbourne house prices have recorded consecutive quarterly declines in 2026, with the median now around $1.04 million. The correction has been broad-based across both houses and units in many segments. Higher-priced inner and middle-ring suburbs have been more exposed, while some outer growth corridors have shown greater resilience. Key features of the current market include softened clearance rates and longer selling times in many areas, increased discounting as vendors adjust to lower demand, affordability still constrained by high absolute prices and the 3% APRA serviceability buffer, and continued demand from first home buyers targeting townhouses and units under the scheme price cap.
First Home Guarantee (5% Deposit Scheme) in Melbourne
The expanded scheme allows eligible first home buyers to purchase with a minimum 5% genuine deposit and no Lenders Mortgage Insurance. Single parents and legal guardians can access a 2% minimum deposit pathway. The Melbourne price cap is $950,000 for Melbourne and Geelong. This is lower than the caps applying in Sydney and Brisbane, so a higher proportion of the detached house market sits above the threshold. Townhouses, units and selected outer-suburb houses remain the most common entry points under the scheme.
Realistic Borrowing Power Examples for Melbourne Buyers
Example 1 – Professional couple: Combined gross income $185,000, strong savings, minimal debts, clean credit. Approximate capacity under the Scheme: frequently $780,000–$950,000 depending on exact living expenses and the chosen lender.
Example 2 – Single buyer: Gross income $115,000–$125,000, small existing debts, good credit. Typical capacity: $480,000–$600,000 range.
Example 3 – Self-employed couple: Verified income $170,000–$190,000 via tax returns and BAS. Capacity often supports purchases in the $700,000–$880,000 range when financials are clearly presented.
Strategies for Buying in a Correcting Market
Successful Melbourne buyers in 2026 typically focus on townhouses, units and outer or middle-ring houses that sit comfortably under the $950,000 cap, obtain realistic pre-approval before making offers so they know their true ceiling, allow for valuation risk, maintain a cash buffer beyond the minimum deposit for stamp duty, legal costs and unexpected issues, and work with a broker who can compare lenders with different overlays for high-income or self-employed applicants.
Stamp Duty, Grants and Upfront Costs in Victoria
Victoria offers stamp duty concessions or exemptions for eligible first home buyers on properties below certain value thresholds. Transfer duty, legal and conveyancing fees, building and pest inspections, and moving costs still need to be budgeted in full. The total cash required beyond the deposit can be material, so a clear cash-flow plan is essential before making an offer.
Fixed vs Variable Loans in the Current Rate Environment
With the cash rate holding at 4.35%, many Melbourne buyers are choosing variable or split loan structures. Variable loans provide full access to offset accounts and redraw facilities and allow easier refinancing if rates or personal circumstances change. Fixed rates can deliver repayment certainty for a portion of the loan, but break costs remain a material consideration if you may sell, refinance or need to access equity within the fixed term.
What Most Melbourne Buyers Get Wrong
Assuming the $950,000 price cap means every property under that figure is automatically affordable. Underestimating living expenses when the lender applies the Household Expenditure Measure. Focusing only on the purchase price without calculating total cash required for stamp duty, legal costs and buffers. Not allowing for possible valuation shortfalls in a correcting market. Choosing a lender purely on the lowest advertised rate rather than policy fit for their income type and the Melbourne market.
Step-by-Step Buying Process with a Mortgage Broker
1. Detailed borrowing capacity assessment and confirmation of Scheme eligibility for the target postcode. 2. Pre-approval with participating lenders that suit the buyer’s profile. 3. Targeted property search within realistic price, location and scheme parameters. 4. Offer, contract, building and pest inspection, formal loan application and valuation. 5. Unconditional finance approval and settlement.
Conclusion and Next Steps
Melbourne in 2026 offers a more balanced market than the peak growth years, with the expanded $950,000 First Home Guarantee price cap and Victorian first-home concessions creating genuine pathways for buyers who understand realistic borrowing power and focus on the right property types. Success depends on accurate serviceability assessment, genuine savings, and a clear strategy.
At Finstac we help Melbourne clients structure applications correctly, compare lenders, and move from pre-approval through to settlement with clarity and confidence. Book a free consultation to review your borrowing capacity, Scheme eligibility, and the most suitable loan options for your Melbourne purchase.
Questions answered.
$950,000 for Melbourne and Geelong (confirm the exact current figure for your target postcode)
Yes, if you meet all Scheme and lender criteria and the property is at or below the $950,000 cap.
It depends on income, expenses, debts and credit. A personalised assessment is the only reliable way to determine capacity.
Recent data shows quarterly declines. Conditions are more balanced and favour selective buyers in many suburbs.
Local market knowledge is helpful. A broker with strong experience in the Melbourne market and access to a wide lender panel can deliver excellent results.
The complete guide
First home buyer loans in Australia. The plain-English guide.Everything on this topic in one place, with worked examples. No form required.
Written by
Jonathon Radford
Director
- Master of Applied Finance, majoring in Investment Management
- Advanced Diploma of Financial Planning
- Diploma of Finance and Mortgage Broking Management
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