For two years, the conversation about falling property prices has mostly been about first home buyers and mortgage stress. This week’s data told a different story. According to Cotality’s September housing figures, reported by the ABC, it’s Australia’s most expensive homes that are leading the downturn: the top 25% of the market is now sitting roughly 10.7% below its peak in Sydney and 10.5% below peak in Melbourne, while cheaper homes and units have held up far better.
If you’ve been watching a particular street in Barwon Heads, Queenscliff or Newtown, eyeing a clifftop position in Torquay or Jan Juc, or waiting for Melbourne’s bayside and inner east to come back to earth, this is the market shift you’ve been waiting for. But here’s what surprises many otherwise sophisticated buyers: the finance behind a $1.5 million, $2 million or $3 million-plus purchase doesn’t work like a standard home loan, and in a falling top end the differences matter more, not less. This guide covers how prestige home loans actually work in 2026, where high-value buyers get caught out, and how to structure an upgrade while the gap is open. If you’re weighing timing more broadly, our guide to buying now versus waiting in 2026 pairs well with this one.
The pattern in Cotality’s September data is unusually clean. The top quartile (homes with median values reported around $2.1 million in Sydney and $1.2 million in Melbourne) has fallen hardest, while the bottom of the market has been cushioned by first home buyer demand and affordability-driven competition. Cotality’s head of research noted that declines have now spread to Brisbane, Adelaide and Perth too, though more evenly across price points in those cities. Nationally, sales volumes fell 2.7% over the year to August, with capital city sales down 5.2% while regional sales actually rose 1.8%.
How far Sydney’s top-quartile home values have fallen below their peak, per Cotality’s September figures as reported by the ABC, with Melbourne’s top end close behind at 10.5% below peak. Cheaper homes and units have proven far more resilient. Figures are as reported at the time of writing. Check Cotality’s current indices for the latest data.
Why is the top end falling faster? The explanations in the reporting ring true to what we see with clients: high-end buyers can afford to wait, and many are. Some are deterred by stretched affordability and elevated borrowing costs, some waiting on federal tax policy uncertainty, and some simply because there’s more stock to choose from. Vendors at the top end, meanwhile, have been slow to adjust their expectations, so when they finally meet the market, the adjustments are large. Locally, the same dynamic plays out in miniature: prestige coastal markets on the Bellarine and Surf Coast saw extraordinary growth in the early 2020s, and the properties that ran hardest have generally corrected hardest.
Lenders think about a $2.5 million house differently from a $750,000 one, and not just because the numbers are bigger. High-value properties have a thinner pool of potential buyers, longer selling times and more volatile valuations, exactly the characteristics a credit department worries about if it ever had to sell the property in a hurry. In a top end that’s visibly falling, that caution gets dialled up. In practice, high-value lending commonly differs in a few consistent ways, though every lender draws its lines differently:
| Factor | Typical home loan | High-value / prestige purchase: what to expect |
|---|---|---|
| Maximum LVR | Up to 90 to 95% with LMI for eligible borrowers | Many lenders step the maximum LVR down as the property value or loan size rises; larger deposits are the norm, and policies vary significantly between lenders |
| Valuation | Often a desktop or short-form valuation | Full valuations are standard; some lenders want a second opinion on unique or very high-value homes, and valuers are conservative in a falling market |
| Income assessment | PAYG payslips usually suffice | Prestige buyers often have complex income (business profits, trusts, bonuses, investments), which takes more documentation and favours lenders who understand it |
| Debt-to-income limits | Rarely the binding constraint | Large loans bump into lender DTI policies and APRA’s new 6x debt-to-income cap sooner: total debts, not just this loan, drive the answer |
| Pricing | Advertised rates apply | Larger loans at conservative LVRs can attract sharper negotiated pricing, but only if someone actually negotiates |
| Approval time | Days to a couple of weeks | Allow longer: full valuations, credit sign-offs on large exposures and complex income all add time, which matters for auction deadlines |
Two threads run through that table. First, none of these settings are advertised on lender websites. High-value LVR caps and large-loan pricing live in credit policy documents and pricing desks, which is why broker lender knowledge earns its keep at this end of the market. Second, the borrowers buying these homes are disproportionately business owners and professionals with layered income. If that’s you, our guides to self-employed home loans and borrowing through a trust cover the documentation side in detail, and our explainer on APRA’s 6x debt-to-income cap explains the new rule that bites largest loans first.
Here is the scenario that keeps prestige purchases up at night in 2026. You sign a contract in spring with a 90-day settlement. The lender’s valuation comes in during that window, and in a market where top-quartile values are falling, valuers lean conservative, especially on unique homes with few comparable sales. If the valuation lands below your contract price, the lender lends against the lower number, and the difference comes out of your pocket at settlement.
On a $700,000 purchase, a modest valuation shortfall is an annoyance. On a $2.5 million purchase, a few per cent is real money. The defences are unglamorous but effective: hold a real buffer beyond your deposit rather than committing every dollar; get the valuation ordered as early as the lender allows; be realistic about price in negotiations rather than “winning” an auction at a number no valuer will support; and understand upfront how your lender treats shortfalls. Our property valuation guide explains how valuers work, and if you’re selling one home to fund another, our guide to negative equity in 2026 covers the other side of the same coin.
The mathematics of upgrading in a falling market is counterintuitive but powerful: if the top end falls further than the middle, the dollar gap between your current home and your next one shrinks, even though both are worth less on paper. A 10% fall on a $2.2 million Barwon Heads home is a much bigger dollar move than a 5% fall on a $900,000 home in Ocean Grove or Highton, so the upgrader who was priced out in 2024 may find the bridge suddenly crossable in 2026. We unpacked this in detail in our guide to upsizing in a falling market, and the same logic applies with larger numbers at the prestige end, in Geelong and on the coast just as much as in Melbourne’s blue-chip suburbs, where our Melbourne market guide looks at whether it’s time to buy the dip.
The sequencing question (sell first or buy first) gets sharper at the top end, because prestige homes take longer to sell and settlement timelines rarely line up. Selling first gives you certainty on your equity but risks renting between homes; buying first locks in today’s softer purchase price but leaves you carrying two properties if your sale drags. Bridging finance can hold the two ends together, but lenders assess it conservatively in a falling market. Expect cautious “end debt” calculations based on realistic sale prices, not 2022 nostalgia.
Picture a professional couple in Ocean Grove (she runs an allied health practice, he’s a PAYG engineer) who have watched a particular pocket of Barwon Heads for five years. In 2024 the homes they loved were selling well above $2.5 million; this spring, comparable listings are being quoted meaningfully lower and sitting on the market longer. Their own home has softened too, but by less. The work happens before the offer: their broker maps which lenders will do the required LVR at that price point on their mix of business and PAYG income, gets their pre-approval set with headroom under the debt-to-income rules, budgets the Victorian premium stamp duty into cash-at-settlement, and stress-tests the plan against a conservative valuation. When the right home lists, they can negotiate hard and move quickly, while cashed-up but unprepared rivals are still waiting on credit sign-off. The scenario is illustrative, not a real client file, but it’s exactly how prestige purchases come together.
Transaction costs scale brutally at the top end, and Victoria is one of the more expensive states to buy in. Under the general rates that have applied to contracts since 1 July 2021, land transfer duty runs at a flat 5.5% of dutiable value between $960,001 and $2 million, and above $2 million it’s $110,000 plus 6.5% of the excess. On a $3 million purchase that’s around $175,000 in duty, before conveyancing, moving and lending costs. Rates and thresholds change, so confirm current figures with the State Revenue Office of Victoria or via our Victorian stamp duty guide before you budget.
Then there’s the loan itself. With rates moving in 2026, repayments on a seven-figure loan deserve stress-testing at higher rates, not hopeful ones. Structure does a lot of quiet work at this scale: offset accounts against a large loan, split fixed and variable portions to hedge rate risk, and interest-only periods used deliberately rather than by default. None of it is exotic. It’s the same toolkit as any home loan, with more zeroes and less room for set-and-forget.
At the prestige end, get your finance fully assessed (not just calculator-checked) before you fall in love with a specific home. High-value approvals involve full valuations, large-exposure sign-offs and often complex income verification, all of which take time you won’t have between auction day and settlement. A properly prepared pre-approval with the right lender for your price point and income structure is what lets you negotiate like a cash buyer in a market where vendors are finally listening.
More than for a standard purchase, usually. While mainstream loans can stretch to 90 to 95% LVR with lenders mortgage insurance, many lenders reduce their maximum LVR as the property value or loan size rises, so high-value purchases typically need a larger deposit percentage, and the thresholds and caps vary significantly between lenders. Equity in an existing home often does the job for upgraders. A broker can map which lenders will do the LVR you need at your price point before you commit.
They can. Larger loans at conservative LVRs are attractive business for lenders, and pricing on big loans is frequently negotiated below advertised rates, but it doesn’t happen automatically, and the sharpest lender for a $2 million loan is often not the one advertising the sharpest headline rate. It’s one of the places a broker’s pricing requests visibly pay for themselves. There’s no standard discount, so treat any specific figure you read online as a starting point for negotiation, not a promise.
Nobody can call the bottom, and this isn’t personal advice, but the reported data is unambiguous that the top end has repriced more than the rest of the market, with Sydney and Melbourne’s top quartile roughly 10 to 11% below peak on Cotality’s September figures. For buyers with secure income, real buffers and a long ownership horizon, that’s a materially better entry point than 2024; for stretched buyers, a falling market with elevated rates deserves caution. The honest answer depends on your finances, timeframe and the specific property, which is exactly what a proper finance assessment works through.
Under Victoria’s general land transfer duty rates for contracts entered into since 1 July 2021, duty above $2 million is calculated as $110,000 plus 6.5% of the amount over $2 million, so a $2.5 million purchase attracts around $142,500, and a $3 million purchase around $175,000. Between $960,001 and $2 million, duty is a flat 5.5% of the dutiable value. Concessions rarely apply at these price points, and rates and thresholds can change. Confirm current figures with the State Revenue Office of Victoria before budgeting.
We arrange high-value home loans for upgraders, professionals and business owners, mapping the right lender for your price point, structuring complex income, and stress-testing the numbers before you bid. Local experts for the Bellarine, Surf Coast, Geelong and Melbourne, serving clients Australia-wide. Plain English, no obligation.
With years of experience in mortgage broking and finance, Melanie helps first home buyers, refinancers, investors and business owners across Geelong, the Bellarine, the Surf Coast, Melbourne and regional Victoria make their money work harder. Contact our team on 03 9020 2699.
