By Michael Yardney January 25, 2026

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If Melbourne and Sydney prices dipped, why am I getting excited?

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If Melbourne and Sydney prices dipped, why am I getting excited?

Key takeaways

Flat or declining median prices often mislead investors into thinking values are falling. In reality, this can reflect a higher volume of cheaper properties being sold (especially entry-level stock), rather than a drop in values of quality assets.

Coined by John Lindeman, the slingshot effect describes a scenario where the market appears soft as cheaper stock is absorbed first.

Once those lower-priced properties clear, stock tightens and higher-quality properties dominate sales, triggering a sharp bounce in median prices—like a slingshot being released.

With schemes like the 5% Deposit Scheme driving first-home buyer activity, and a tight supply of investment-grade properties, markets like Sydney and Melbourne are showing early signs of the slingshot pattern.

Headlines about tiny price dips are masking deeper shifts in demand and stock composition.

Some commentators are already calling the top of the property market.

After all, Sydney and Melbourne finished late 2025 with prices flat to slightly down on the headline numbers - enough to feed the “downturn is coming” narrative.

But here’s the thing: a flat or falling median price doesn’t always mean falling values.

Sometimes it’s the first hint of something far more interesting - the slingshot effect.

Median Price2

What the slingshot effect really is, and why it fools many investors

The “slingshot effect” is a term I first heard from leading property researcher John Lindeman.

He explains it as a market phenomenon where the median price falls or stagnates, not because the market is collapsing, but because a wave of cheaper properties is selling first.

In other words, the market’s not necessarily getting cheaper - the mix of what’s selling is getting cheaper.

And then he explained the following pattern:

1. The “decline” that isn’t a real decline

When conditions shift (rates rise, confidence wobbles, affordability tightens), the first properties to transact are often the cheaper entry level homes. More affordable stock moves because:

First-home buyers stretch for what they can afford
Investors chase yield and lower price points
Upgraders sit on their hands waiting for “clarity”

And the result is that the reported median price dips, because the median is just the midpoint of all sales, not a like for like measure of values.

2. Smart money starts bargain hunting

Savvy buyers look past the headlines and notice something important:

Good properties are still getting interest
A-grade assets are still scarce
The cheapest stock is being absorbed quickly

So they move early to buy “investment grade properties” rather than cheaper stock, while the market is still sluggish.

3. Cheap stock gets cleared out and the market tightens

As those cheaper lower end properties are snapped up listings fall, choices dry up, and buyers who “waited” are now competing for what’s left.

And what’s left is often better quality and higher priced.

4. The “launch”

Now the median price does what a slingshot does when you release it - it jumps sharply, according to Lindeman.

Not because the market changed overnight, but because the earlier activity was quietly setting up this next phase.

The three indicators investors watch

If you want to spot a slingshot phase before the crowd does, I suggest you look for locations that exhibit this trio:

Falling or flat median prices
Rising sales volumes - in other words, more transactions happening
Declining listings - in other words, tightening stock levels for sale

That combination is often the tell that demand is stronger than the median price suggests and that the “cheapies” are being absorbed.

Why this matters right now

A key reason the slingshot effect appears in Australia is our market structure:

We have lots of fragmented “micro-markets” with different suburbs each behaving differently
Thin supply of investment-grade stock – this type of property doesn’t usually come cheaply
FOMO leading to increased buyer demand

And we’re already seeing examples of how the headline numbers can mask what’s really happening beneath the surface.

For instance, Sydney and Melbourne recorded small month-on-month declines in December 2025 (around -0.1%), even as the broader national market continued to rise.

That’s exactly the kind of environment where people misread the cycle.

While some commentators are suggesting “prices dipped, so it must mean the market is turning down, the truth is really that the market’s rotating, and the early movers are buying the affordable stock first.

Now add a second ingredient: policy settings that help pull first-home buyers into the entry level.

We know that the Australian Government 5% Deposit Scheme, introduced last October, is making it easier for more Australians to buy properties up to the median price with a smaller deposit, with the result of concentrated demand in the affordable segment first, which is exactly the part of the market that can trigger the slingshot mechanics.

The investor lesson: don’t let the median gaslight you

Here’s the big takeaway… when you see median prices softening, don’t take the naïve view that “the market” is falling and wait for signs of certainty.

Instead, if you are finance ready, take advantage of the window of opportunity the market is currently offering.

A quick warning: a slingshot doesn’t happen everywhere

Of course, the slingshot effect is not a blanket “Australia property goes up” story.

You still need to undertake detailed suburb by suburb research ,and in fact comprehensive property by property research.

And as always… staring with a time tested, proven strategy is everything.

The slingshot doesn’t reward “any property”.

It rewards the right property, in the right location, bought with the right finance structure and held with the right buffers.

If you want to be proactive, and not reactive, here’s what I suggest…

If you’re sensing the market is at one of those turning points, where the headlines say “soft” but the groundwork says “tightening”, this is exactly the time to get strategic.

At Metropole, we help serious investors build wealth with a data-driven, risk-managed, long-term strategy, and then we support the execution so you’re not making expensive, emotional decisions in a fast-moving market.

And it all starts with a Strategic Wealth Consultation, where we’ll look at:

your goals and timeframes
your current asset position and borrowing power
your risk settings and cash flow buffers
where the best asymmetric opportunities are forming
and what to buy (and what to avoid) in this part of the cycle

Click here now and lock in a time for a chat with a Metropole Wealth Strategist, because if you’re going to act, act with a plan - and if you’re going to wait, make sure waiting is a strategy… not a default.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.