Emerging buyers' market causing pricing anxiety in affluent suburbs
A shortage of quality family homes is emerging as the defining issue in Melbourne’s high-end market.
RT Edgar Stonnington director Sarah Case said demand from upsizers remained strong across several price brackets, but supply was not keeping pace.
“I have a lot of buyers on my list for the price brackets $3 million to $5 million, from $5 million to $8 million, and $8 million to $10 million,” Case said. The bottleneck, she explained, is on the seller side.
“The problem is, we’re not getting the downsizers who are selling houses and saying, ‘Oh the market is really buoyant, we’re going to put our house on the market’. There is not a lot of that confidence there.”
There’s a perception that they downsizers will not get the price they want for their existing homes. Sydney and Melbourne home prices have softened in 2026, while auction clearance rates have fallen to post-pandemic lows, as rising interest rates, mounting mortgage stress and the shortage of family homes reshape conditions in Australia’s two largest housing markets.
Case noted that well-priced, renovated homes in desirable locations — particularly those close to transport — were still attracting strong results. To unlock supply, she has been contacting past vendors directly.
“I’m ringing up my old clients and saying to them, ‘If I can still get you a premium for your home, a 2021 price, would you consider selling?’” she said.
She also reported a rise in interstate investor activity but said the rental sector had not been flooded with investor exits despite changes in legislation and taxation.
“From the rental side of things we’re not frantic with investors selling their investment properties,” she said.
ANZ Research now expects Melbourne housing prices to fall 1.7% in 2026, revised down from earlier forecasts, citing interest rate rises, geopolitical tensions and weaker consumer confidence. Melbourne dwelling values fell a further 0.6% in April, according to Cotality data.
Sydney: Buyers wait as stock remains tight
In Sydney’s exclusive Bondi and North Bondi markets, TRG sales agent Zac Rabin described conditions as solid for upsizers, but tempered by a cautious vendor mindset and Budget uncertainty.
“It’s not the greatest time in the history of the world to be selling a property, and vendors know that,” Rabin said. “However, if they are looking at upsizing, then it is a fantastic market to look to sell your property in order to finance a property to upsize into.”
He said some properties had been sitting on the market, but well-priced homes continued to attract demand.
“There has been quite a bit of uncertainty about the budget outcomes and how that will reflect in the market, so a lot of vendors, and buyers in particular, are sitting on their hands,” Rabin said.
“However, due to low stock levels, properties that are put out there at the right price are attracting a lot of demand and selling well.”
Cotality data shows advertised listings in Sydney remain about 20% below the five-year average, underpinning competition for quality stock despite softer prices. Affluent eastern and northern suburbs have recorded the steepest quarterly declines, while outer western and south-western areas with more affordable housing have held up comparatively better.
National auction market cools
The broader auction market reflects the wider caution. Australia’s national clearance rate averaged just 52% in May 2026 — the lowest level since April 2020 — with Sydney recording 49% and Melbourne 54%, its weakest result since July 2022, according to Cotality research director Tim Lawless.
ANZ economists Adam Boyton and Madeline Dunk said Sydney and Melbourne housing prices remain below their October 2025 levels, with top-quartile properties declining for five consecutive months. They described both cities as likely to “underperform in 2026”.
ANZ forecasts housing prices will rebound in 2027, with Sydney expected to rise 2.6% and Melbourne 2.9%.
