Short answer: At $850,000 in 2026, first home buyers can still buy in inner Melbourne, but the budget decides the format, not just the postcode. In the inner west and north, $850k buys a two-bedroom house in Footscray, West Footscray, Preston or Reservoir. In more expensive suburbs like Brunswick, Coburg and Yarraville, the same money buys a two-bedroom unit or townhouse rather than a house. And a purchase at $850,000 sits above the first home buyer stamp duty concession, so roughly $46,000 of that budget goes to the State Revenue Office, not to the property.
Below is what the numbers actually say, and how we would spend $850,000 in this market.
Does $850,000 still buy in inner Melbourne?
Yes, but you have to be honest about what you are buying. Median dwelling values across Melbourne sit a little above $800,000, so an $850,000 budget is close to the middle of the market. It does not stretch to a family house in a blue-chip suburb, and it never will. What it does buy is a foothold in a well-located suburb, which is the thing that compounds.
The single biggest mistake we see at this budget is buyers spreading themselves thin across the whole city. Narrow it down. At $850,000, two corridors do the heavy lifting for first home buyers: the inner west around Footscray, and the inner north from Brunswick and Coburg up through Preston and Reservoir.
The stamp duty trap at $850,000
Before you compare suburbs, understand what your budget really is. The Victorian first home buyer stamp duty exemption applies up to $600,000, with a sliding concession up to $750,000. Above $750,000, first home buyers pay full duty.
On an $850,000 purchase, that duty is $46,070, using the general rate of $2,870 plus 6 per cent of the value above $130,000. Add conveyancing, building and pest, and a small buffer, and your real property budget is closer to $795,000.
This is why the price point matters so much. A purchase at $750,000 costs you a concessional amount of duty. A purchase at $850,000 costs you the full $46,070. That is a genuine reason to consider buying a little lower, and it is worth reading our full breakdown of Victorian first home buyer grants and stamp duty concessions before you set your limit.
What $850,000 buys, suburb by suburb
These are median sale prices over the twelve months to July 2026, from Domain suburb data. They are a guide, not a valuation. Pockets within each suburb vary widely.
| Suburb | 2-bed house | 3-bed house | 2-bed unit | What $850k buys here |
|---|---|---|---|---|
| West Footscray | $695,000 | $910,000 | $420,000 | A two-bedroom house, with room to move |
| Reservoir | $691,500 | $870,000 | $623,750 | A two-bedroom house comfortably, a three-bedroom at a stretch |
| Footscray | $785,000 | $932,500 | $487,500 | A two-bedroom house, or a large apartment |
| Preston | $795,000 | $1,095,000 | $560,000 | A two-bedroom house, or a townhouse |
| Coburg | $910,000 | $1,170,000 | $600,000 | A unit or townhouse, not a house |
| Yarraville | $950,000 | $1,160,000 | $599,500 | A unit or townhouse, not a house |
| Brunswick | $1,004,000 | $1,330,000 | $640,000 | An apartment or townhouse only |
Read the table sideways and the strategy becomes obvious. The suburbs where $850,000 still buys a house on its own land are West Footscray, Reservoir, Footscray and Preston. In Coburg, Yarraville and Brunswick, the same money buys something without land under it.
So should you buy a small house or a nicer apartment?
This is the real decision at $850,000, and the honest answer is that it depends on how long you plan to stay.
If this is a five to ten year home, land wins more often than not. The land component is what appreciates; the building depreciates. A two-bedroom weatherboard in West Footscray on its own title has a resale story that a two-bedroom apartment in a large new tower does not.
If this is a three-year stepping stone, or if the lifestyle of a suburb genuinely matters more to you than the asset, a well-chosen townhouse or a boutique older-style apartment in Brunswick or Yarraville can be the better life decision. Just go in knowing that resale on generic new apartment stock in high-supply pockets is the weakest part of the Melbourne market, and has been for years.
What we would avoid at this budget: brand-new apartments in large towers with high owner’s corporation fees, where you are paying a developer’s margin and competing with hundreds of near-identical resales when you sell.
Which suburbs are out of reach at $850,000?
Being clear about this saves months. At $850,000 you are not buying a house in Northcote, Thornbury, Brunswick or Yarraville. Their two-bedroom house medians are already above your budget before costs.
If those suburbs are where your heart is, you have three options. Buy a unit or townhouse there and accept the trade-off. Buy the house one or two suburbs further out and let the ripple do its work; Preston and Reservoir have both benefited from exactly that pattern as buyers were priced out of Northcote. Or wait and save, knowing that in a flat market that is a more reasonable bet than it was in 2021.
How we would approach an $850,000 search
Set the limit before you fall in love with anything, and set it on the total cost, not the purchase price. Get your finance and your conveyancer sorted early, because the good stock at this price point moves quickly and often sells before auction. Look at the least renovated house in the better street rather than the renovated one in the worse street. And check the things that are expensive to fix and impossible to change: the orientation, the street, the neighbours, the flood and heritage overlays.
If you would rather have someone do this properly, our first home buyer service is built for exactly this budget and this decision, and our full-service buyers advocacy covers the search, the due diligence and the negotiation.
Keep reading
Frequently asked questions
What is the best Melbourne suburb for a first home buyer with $850,000?
There is no single best suburb, but the strongest options in 2026 are West Footscray, Reservoir, Footscray and Preston, where $850,000 still buys a two-bedroom house on its own land. If you want Brunswick, Coburg or Yarraville, the same budget buys a unit or townhouse instead.
Can you buy a house in inner Melbourne for under $850,000?
Yes. Two-bedroom house medians are around $695,000 in West Footscray, $691,500 in Reservoir, $785,000 in Footscray and $795,000 in Preston, all within an $850,000 budget before costs. Three-bedroom houses in these suburbs mostly sit above it.
How much stamp duty do first home buyers pay on an $850,000 property in Victoria?
Full duty of $46,070. The first home buyer exemption only applies up to $600,000 and the concession phases out at $750,000, so there is no first home buyer discount at $850,000.
Is it better to buy a small house or a bigger apartment as a first home?
If you plan to stay five years or more, the house on its own land usually holds value better, because land appreciates and buildings depreciate. If the home is a shorter stepping stone, a well-chosen townhouse or older-style apartment in a better suburb can make sense. Generic new apartments in high-supply towers are the weakest resale proposition.
Is Reservoir a good suburb for first home buyers?
It is one of the few places within about 12 kilometres of the CBD where an $850,000 budget still buys a house, with three train stations and established amenity. It is a middle-ring suburb rather than a true inner suburb, and quality varies street by street, so pocket selection matters.
