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$200,000 drop: The suburbs seeing the sharpest property falls

·3-min read
Surry Hills in Sydney
Historically, more expensive housing markets tend to lead the upswing in property prices but also lead the downturn. (Source: Getty)

The premium inner-city areas of the residential property market in Australia’s biggest cities are cooling off faster than the low and middle sections of the market.

Inner-city house prices in suburbs such as Darlinghurst and Surry Hills in Sydney, and Balaclava and Port Melbourne in Melbourne have seen some of the sharpest downturns in the past quarter, according to CoreLogic data.

In Darlinghurst, house values were down 8.3 per cent in the past quarter, a fall of more than $200,000 to a median price of $2,282,494.

House values in Surry Hills have fallen $180,195, or 7.8 per cent, to a median price of $2,131,457.

House prices in Beaconsfield have dropped $168,263 in three months, or 8.5 per cent, with the median house price now $1,808,431.

The Melbourne market is also softening, but at a slower rate.

House prices in the inner-Melbourne suburbs of Balaclava and Port Melbourne have both dropped off, falling $84,174 (5.1 per cent) and 94,544 (5 per cent), respectively.

House values in Park Orchards, a suburb in the city’s east, have seen the biggest falls, dropping by $155,061, or 7.1 per cent. The median house price is now $2,014,243.

Corelogic data
Corelogic data

CoreLogic research director Tim Lawless told Yahoo Finance premium markets had historically led downturns.

“The top end of the market tends to be more volatile,” he said.

“It leads the upswings and also leads the downturns.”

That’s because as housing becomes more unaffordable - due to higher interest rates, rising stock levels, lower confidence and a limit to how much buyers are willing or able to spend - demand is skewed towards the middle-to-lower end of the market.

The cyclical nature of the property market also plays a role in this trend.

During a growth phase, the top end of the marketplace leads an upswing and then “growth generally ripples outwards to what you might describe as … the next best thing or the next best suburb, which tends to be a little bit more affordable”, Lawless said.

CoreLogic head of research Eliza Owen also said higher income households tend to hold more debt-to-income, as do property investors, so tend to be more sensitive to rising interest rates.

Quarterly change in dwellings values
Source: CoreLogic

What this means for first home buyers

For first home buyers that typically target the middle to lower end of the market, that means they are buying into a marketplace with more stable trends.

“So that means, on the downside, not quite as much capital growth through an upswing but also probably some insulation for that segment of the marketplace as we move into the down phase,” Lawless said.

He said each of the other quartiles were slowing but just not quite as quickly as the upper end.

“So chances are we probably will see the remainder of the market moving into softer growth conditions and ultimately see some level of a correction,” Lawless said.

As to when that will happen, Lawless said each capital city looked different.

“I think in markets like Sydney and Melbourne, for example, we'll probably start to see the broad middle of the market moving into negative quarterly growth over the coming months,” he said.

He expected it to take until later in the year to start seeing a growth slowdown in the lower quartiles in those major cities, however.

“But in markets like Brisbane or Adelaide, where we're still seeing housing values rising at more than 1 per cent, month on month, it'll probably take a lot longer for the broader market to move into its down phase.”

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