Key takeaways:
Premium houses have fallen further. Sydney’s upper-quartile house values are 10.7% below their peak, while Melbourne’s are 10.5% below peak.
The upgrade gap may be narrowing. Some homeowners selling in a more resilient price tier and buying at the premium end may face a smaller price difference.
Finance remains critical. A lower purchase price does not necessarily make an upgrade achievable once borrowing capacity, transaction costs and repayments are considered.
Timing carries trade-offs. Selling first may provide greater certainty, while buying first may require bridging finance or the ability to cover both properties temporarily.
Australians looking for a larger or higher-value home may be finding an unexpected opening in the property downturn.
Cotality's September 2026 city and price-tier analysis shows the property downturn has been concentrated at the premium end of Sydney and Melbourne's housing markets.
Upper-quartile house values are 10.7% below their peak in Sydney and 10.5% below peak in Melbourne. The difference between the declines across the upper and lower quartiles is 5.3 percentage points in Sydney and 6.6 percentage points in Melbourne.
This does not mean every premium property is now more affordable or every upgrader is better placed to buy. However, homeowners whose existing property has held its value more firmly than the home they want to purchase may find the gap between the two has narrowed.
Cotality Research Director Tim Lawless said both cyclical and structural factors were contributing to the sharper falls at the premium end.
“It’s historically typical to see the upper quartile of the market leading the cycles, both into the upswing and into the downturn,” he said.
However, affordability and serviceability pressures were also directing more demand towards lower-priced properties. Cotality analysis to June 2026 found a household earning the median income and buying a median-value home with a 20% deposit would need to dedicate 51% of its pre-tax income to mortgage repayments.
Across the combined capitals, upper-quartile house values were 112% higher than lower-quartile values in August 2021, compared with 69% higher in August 2026. In Sydney, the difference narrowed from 130% to 84%.
Lawless said this may make upgrading more practical for some homeowners, particularly those with accumulated equity. However, servicing a larger loan and selling an existing property remained potential barriers.
“Selling conditions remain challenging amid higher stock levels, low clearance rates and longer selling times,” he said.
Is the cost of upgrading getting smaller?
Melbourne-based Aussie Broker Rod Peirce said he was seeing a clear difference between activity below and above the premium price threshold in parts of the city.
“Houses at $2 million-plus are really struggling in some pockets, whereas houses around $1.5 million and below are relatively active and still transacting well,” he said.
An upgrader's existing home may also have fallen in value. However, the move could still cost less if the intended purchase has declined by a larger dollar amount.
Aussie Broker Greg Shortland is assisting a Sydney client who is trying to sell and buy in the same area. The client has already reduced their asking price by about $150,000 after receiving limited interest.
“It's a little bit conflicting, but the benefit for them is that they're looking to purchase in a similar area,” Greg said.
“If the price point on their sale is coming down, then hopefully the price point on their purchase will also be adjusted by the same margin.”
However, softer conditions do not apply to every property. Greg said fewer premium homes were coming onto the market in the areas he was monitoring, while demand remained for desirable properties.
“As much as the price points are coming down, the volume of stock coming to market is also reducing in that price point,” he said.
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The difference between price tiers also varies considerably within each city.
Lawless said the largest gap in Sydney was across the northern end of the eastern suburbs, where upper-quartile house values were 111% higher than lower-quartile values. In Melbourne, Stonnington East recorded the widest gap at 73%.
However, buyers should not assume a property is good value simply because it has fallen 10% from its peak.
Lawless said buyers may remain uncertain about how much further values could fall before stabilising. Interest-rate uncertainty and low consumer confidence could also make households more cautious about committing to a higher-value purchase.
Why a more affordable home may not be easier to finance
Property values are only one part of an upgrader's calculation. The amount a household can borrow may also change as interest rates, lender policies, income and expenses shift.
Greg said borrowing capacity was one of the largest constraints facing clients. This means a lower asking price may not translate into a larger or more manageable loan.
Rod said ongoing repayments could ultimately determine whether an apparent upgrading opportunity was manageable.
“The cost of ongoing repayments and interest rates could stifle the upgrading opportunity because cash flow is already stretched by basic cost-of-living pressures,” he said.
Buyers also need to allow for stamp duty, conveyancing, inspections, selling costs and moving expenses. Depending on the state, property and transaction, these costs may absorb part of the saving created by a narrower price gap.
Should you sell before buying?
A slower premium market may also make the order of transactions more important.
Selling first can provide certainty about the sale proceeds and usable equity available for the next purchase, but it may leave the homeowner needing temporary accommodation or competing for a new home within a fixed timeframe.
Buying first may help secure the preferred property, but the household could need bridging finance or enough funds to carry both properties if the existing home takes longer than expected to sell. Bridging finance is not suitable or available for every borrower and may carry additional costs.
Greg said he had arranged three bridging loans during the past six months, compared with none or possibly one in the preceding 12 months. Other clients were waiting for their properties to sell before proceeding with a purchase.
“That's probably split down the middle,” he said. “Some have fallen in love with a property, in which case we're looking at bridging and having a conversation about the cost of doing business. Others are preferring to sell first.”
Rod said the choice often depended on how much equity the homeowner held.
“Clients with strong equity are generally more comfortable buying before selling,” he said. “Those with less equity may need to sell first before buying.”
Five figures to calculate before upgrading
Before treating softer premium prices as an opportunity, homeowners may want to calculate:
a conservative sale price for their current home;
the mortgage balance and likely usable equity after selling costs;
the maximum purchase price they could comfortably afford;
stamp duty and other transaction costs; and
potential repayments and temporary holding costs if they buy before selling.
Greg recommended modelling the transaction using a conservative sale result rather than relying on the best possible outcome.
“I'd be looking to discuss the absolute minimum you're going to be happy to take, so that we can look at the worst-case scenario on both sides,” he said.
“What's the maximum you're going to look at for a purchase and what's the minimum you're going to accept for a sale? If we set those parameters beforehand, we know what we're working with.”
For some homeowners, the uneven downturn may bring their preferred upgrade relatively closer. Whether it is achievable will depend on their sale price, usable equity, borrowing capacity, transaction costs and ongoing repayments.
An Aussie Broker can help you estimate your usable equity, understand your borrowing power and compare potential buy-first or sell-first scenarios before you begin making offers.