There is no single right month to build a house. For a family building a home to live in, the better question is whether you can fund the whole project comfortably and whether you plan to stay long enough that this year's market matters less than the house itself. Melbourne's market has softened through 2026.
Most of the calls we take this year are from people building a home they plan to live in, so this guide is written for them. We won't predict prices.
What the Melbourne market has done in 2026
Cotality's Home Value Index shows Melbourne dwelling values down 0.7% in September 2026 and 6.2% lower than a year earlier, with houses down 7.3% and units 3.8%. The top end has led the fall: Cotality reports upper-quartile house values in Sydney and Melbourne down more than 10% in this downturn.
The Reserve Bank raised the cash rate four times between February and September 2026, taking it to 4.60% in a decision announced on 29 September. Homes are also taking longer to sell. Across the capital cities the median time on market was 39 days in September, up from 23 a year earlier, according to Cotality. Buyers have more time and more choice than they did a year ago, though how much depends on the suburb and the price point.
Is it cheaper to build or buy right now?
It depends on what you would buy instead: compare the cost of the finished home you want with an established home that would suit your family as well. A falling market has lowered established prices while build costs have not followed them down, so the comparison has moved against building.
Building still wins where the market can't give you what you need. That might be a layout that works for your family, a home on the block you already own or a new home built to today's energy rules (our guide to the 7-star NatHERS minimum explains what that standard asks of a design).
Several Victorian rules also treat building and buying differently. Your conveyancer can confirm the duty position for your own purchase.
| Building a new home | Buying an established home | |
|---|---|---|
| Stamp duty | Generally assessed on the land only when you buy vacant land to build on | Assessed on the price paid or the market value if that is higher |
| First Home Owner Grant | Available for an eligible new home, including one built to replace a demolished house | Not available |
| Paying for it | Deposit capped at 5% on most contracts, stage payments capped by law, final payment after the occupancy permit | Deposit and settlement set by the contract of sale |
| Time to move in | Victorian new houses averaged about two and a half quarters from start to completion in 2025-26 (ABS, all builders) | Settlement under the contract of sale |
What a softer market changes when you build
It can make the land cheaper. A softer market may let you buy a block or an older house to knock down and rebuild at a more competitive price. The build still has to be priced on its own, from the site and the design, but money saved on the purchase goes into the overall project budget.
If you are buying land, you usually have more time. Our director's advice to anyone buying a block to build on starts with talking to the builder before making an offer. Slower sales give you room to check the block properly before you commit, which matters most on a sloping or older site. We would put a soil test before you buy at the top of that list, followed by a feature and level survey and a look at the planning rules that apply to the address.
Valuations need more care. Lenders value a new build "as if complete", meaning the land plus the finished home. When values are falling, that figure can come in below what you are paying for the land and the build together. Then you either cover the gap from savings or equity or borrow less.
Borrowing capacity and the cost of waiting
A cheaper property doesn't automatically become more affordable if what you can borrow has fallen at the same time. Here is a simple illustration, in percentages with no dollar amounts. It is arithmetic, not a lender's assessment.
Take one household and compare it twelve months apart. Its income, living expenses and existing debts stay the same. It wants a 30-year principal and interest loan at the average rate on new owner-occupier variable loans, which the RBA puts at 5.5% in September 2025 and 6.2% in August 2026. Banks must check you could keep up repayments if your rate were 3 or more points higher, so the rate this household is tested at goes from about 8.5% to about 9.2%. On those assumptions, the most it can borrow for the same repayment falls by about 6 per cent. That is before the RBA's rise on 30 September, which isn't in those figures yet.
Melbourne house values fell 7.3 per cent over the year to September 2026 on Cotality's index. For a household borrowing most of the price, most of that saving on the house is used up by the smaller loan. If its living expenses have gone up as well, it can borrow less again. Lenders assess every application their own way, so ask a broker to run your real numbers before you decide whether waiting helps.
What a softer market doesn't change
The cost of building has kept rising, only more slowly. Victorian house construction prices rose 3.7% in the year to June 2026 on the ABS producer price index. The ABS points to shortages of bricklayers, carpenters and concreters and to higher fuel and freight costs.
Neither do the protections Victorian law gives you. On most new-home contracts the builder can take a deposit of no more than 5%. Each stage payment has a ceiling too (10%, 15%, 35% and 25% of the price at base, frame, lock-up and fixing for a full build), unless you sign a formal warning agreeing to a different schedule. Nothing is owed for the last stage until the work is complete and the occupancy permit is issued.
What changes depending on when you sign
Some rules depend on the date, which is the one part of timing anyone can be sure of.
- Building contracts signed from 1 July 2026 carry Home Warranty cover from the Building and Plumbing Commission, which you can claim on when work is defective or unfinished and the builder won't fix it.
- Auctions held from 16 October 2026 must publish the seller's reserve price at least seven days beforehand, which helps when you are bidding on land or an established home.
- The Domestic Building Contracts Amendment Act 2025 is due to start on 31 March 2027. Among other changes it ties each progress payment to the value of the work done. Its regulations, including any change to deposit limits, are still in draft.
If you are building to invest
This guide is written for families building a home to live in. Investors should know the tax rules now treat new builds differently. Changes announced in the May 2026 Federal Budget are law and start on 1 July 2027. From then, negative gearing on residential property is limited to new builds, so an investor in a new home can still offset rental losses against other income. The 50% capital gains tax discount is being replaced with indexation and a 30% minimum tax, but investors in new builds can choose to keep the 50% discount. That is a discount, not an exemption: the gain is still taxed. Properties held before 7.30pm on Budget night, 12 May 2026, keep the old negative gearing rules.
A new rental property can also claim capital works deductions of 2.5% of the construction cost each year. It can claim depreciation on its brand-new fixtures and fittings too, which buyers of established rentals generally can't do for items already in the house. The definition of which homes count as "new" for the 2027 changes is still in a bill before Parliament. A straight knockdown rebuild that replaces one liveable house with one new house is not among the cases it lists. If you are building to invest, talk to a tax accountant before you commit.
Questions that decide whether it is a good time for you to build
- How much will a lender actually lend you once it adds the serviceability buffer to the rate on offer? A broker can tell you before you commit to land or a design.
- Does your budget cover the whole project? Land, the build contract, site costs, permits, landscaping and a margin you don't plan to spend.
- How long do you expect to live in the house? A home you will be in for many years is a different decision from one you might sell soon.
- Is the price fixed? What is still an allowance or a provisional sum that could move?
- Is the builder registered with the Building and Plumbing Commission, with a registration number you can check?
How we price a home in this market
Our process is the same in a soft market as a busy one. We price the site from the soil report and the survey, work through the design with you and fix the contract price once the design and permits are settled. Under a fixed-price contract the price only moves through variations you agree to in writing and any provisional sums the contract lists. Our custom homes service starts with a first look at your block. We're happy to look at one before you buy it too. To talk through the timing, get in touch with our director.
Frequently Asked Questions
Should I wait for prices to fall further before I build?
That depends on your own finances. Nobody can promise where prices go next. Our view as a builder is that trying to pick the bottom of the market rarely helps a family building a long-term home. Most buyers can't tell where the bottom was until prices are already recovering. While you wait, your borrowing capacity, construction pricing and the land on offer can all change. If you plan to live in the house for many years, whether you can afford it comfortably and whether it suits your family usually matter more than short-term price movements. A mortgage broker or licensed financial adviser can test the decision against your position.
Will building costs come down if house prices keep falling?
Not on the published measures. ABS figures put Victorian house construction prices up 3.7% in the year to June 2026, over a period when Melbourne dwelling values fell 6.2% on Cotality's index. On our own jobs we have started to see more competitive quotes in some trades, though costs are still well above where they were before COVID. Our guide to why building costs haven't followed prices down goes through the reasons.
Should I get finance approved before I buy land to build on?
Speak to a broker or lender before you commit to anything, so you know what you can borrow in total. Then talk to a builder about how to split that budget between the land and the build. The trap we see most is a block that looks cheap until its slope, access, restrictions or other site conditions make the build cost far more than expected. We're happy to look at a block with you and talk through indicative construction costs before you buy.
How much money do I need to build a house in Melbourne?
Think of it as three separate amounts. The first is the builder's deposit. Victorian law caps it at 5% of the contract price on most new-home contracts. Ours is 5%. The second is the deposit or equity your lender wants, which depends on the lender and your loan. Having around 20% of the value in savings or equity, so you borrow no more than 80%, usually avoids lenders mortgage insurance, though it isn't a universal rule. Eligible first home buyers can also use the Australian Government's 5% Deposit Scheme, which covers vacant land with a building contract and has no lenders mortgage insurance. The third is everything else: site costs, permits and fees, landscaping and a contingency you keep in reserve. We don't publish build prices because no two blocks or designs are the same.