Will house prices fall in Melbourne in 2026?
On MPLC Research's fundamentals model, Melbourne is already cooled to around what it costs to build, and on the freshest quarter of ABS data the market is falling. We separate two questions people always blur together: is it expensive? (versus what households can borrow) and is it about to correct? (versus what it costs to build). Every capital is expensive on the first; the correction risk sits with the cities that ran hardest on the second.
The macro backdrop is the same everywhere: the cash rate is on hold at 4.35% with the 10-year bond around a 15-year high and core inflation stuck near 3.6%, so the market has swung from expecting rate cuts to pricing higher-for-longer. That keeps borrowing power squeezed — a headwind for prices until rates or incomes move.
Is Melbourne over-valued right now?
It's expensive versus incomes like every capital, but it has largely stalled rather than running hot on a cost-adjusted basis. The distinction matters: a city can be expensive but not accelerating or expensive and running hot. We publish which is which, with the exact gap in the report.
Did the model see this coming?
This is the test that matters. Calibrated blind on 2011–2019 data — never shown the 2020s boom — the model independently flagged the 2021 surge as over-valued and the 2023 rate-shock correction as back to fair. It also named the smaller capitals (Adelaide, Brisbane) as the most stretched before the mid-2026 downturn reached them. We call the froth before it unwinds, from public data, with no hindsight.