Buy the dip: Blue-chip suburbs where homes are selling for less

House prices in some of the nation’s most expensive suburbs are lower than a year ago, creating an opportunity to buy into premium markets for less.

Typical houses in several pricey suburbs are selling for hundreds of thousands dollars less than a year ago, and in a handful of suburbs, house prices dropped by more than $1 million.

PropTrack data shows many of the suburbs with the biggest house-price declines in the past year were among the most expensive in the country, revealing major savings for wealthier buyers.

Many of these suburbs were clustered around Sydney’s eastern suburbs and lower north shore, where even entry-level homes require multi-million dollar budgets. 

The biggest house-price declines were in Vaucluse (down $1.7 million), Bellevue Hill (down $1.6 million) and Dover Heights (down $1.1 million).

The suburbs where house prices fell most in the past year

Outside of Sydney, prices declined by $600,000 in Austinmer, the most expensive suburb in Wollongong, while Melbourne’s priciest suburb, Toorak recorded a drop almost as large.

Big falls also occurred in Sorrento (down $525,000) on the Mornington Peninsula and Barwon Heads (down $465,000) on the Bellarine Peninsula – suburbs where prices boomed during the pandemic but then peaked as interest rates rose.

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While the size of these drops is partly a result of already-high home values magnifying the effect of price falls, these suburbs also recorded some of the most rapid declines in the past year, with median prices falling by between 15% and 18%.

To put those numbers into perspective, the value of a typical Sydney house rose by 3% in that period to $1.425 million, according to the latest PropTrack Home Price Index. 

Are prices falling at the top end of town?

Despite declines in some of the most expensive suburbs, prices in the majority of Australia’s higher-value suburbs rose in the past year.

“In many of our top-end suburbs we have seen pretty significant growth,” said REA Group senior economist Anne Flaherty. 

“In two thirds of suburbs with median prices over $2 million, we saw prices either grow or stay steady.”

This film producer's mansion in Bellevue Hill was snapped up for close to its $50 million price guide – a strong result in a suburb where the median house price has fallen more than $1 million in the past year. Picture: realestate.com.au/sold

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Ms Flaherty said buying capacities of people looking to purchase in higher value suburbs often weren’t as impacted by high interest rates as the rest of the market.

“We know there’s a lot of people selling to buy a new home and may have the equity behind them to help support those higher purchases.”

Nonetheless, buyers who were borrowing to purchase in suburbs such as Vaucluse, Bellevue Hill and Dover Heights were still conscious of the effect of high interest rates, according to local real estate agent and Ray White Double Bay managing director Elliott Placks.

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While many people purchasing at the top end of the market are cash buyers, about 45% of homeowners in these three suburbs have mortgages, according to the Australian Bureau of Statistics.

“People are still taking significant amounts of debt over these assets, and $1 million of extra debt is now costing $55,000 to $60,000 per year,” Mr Placks said.

Softer conditions meant there were fewer ultra-expensive sales in these suburbs, which could further influence median values, he said.

“You may find that there's less of those top-end properties that are transacting – that's then affecting the pricing of the suburb,” he said. “When it’s strong, you probably have more.”

Price movements in high-value suburbs can be influenced by the types of homes that are selling. Picture: Getty

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Ms Flaherty said the wide range in property values in Australia’s most expensive suburbs meant changes in the types of homes selling could have a larger effect on median prices.

“Composition has a bigger impact that we would see in other suburbs,” she said. “The homes in these suburbs have incredibly high prices, so depending on which homes head to auction, there's a greater spread of price points.”

Pricey suburbs still record strong long-term growth

Even though prices have fallen recently, most of these suburbs are still well up over the long term, with strong growth over the past five years.

Since the onset of the pandemic, the median price in Vaucluse has risen more than any other suburb and is still up $2.855 million, while Bellevue Hill is up $2.863 million.

Prices in Bayview on Sydney’s northern beaches are still up 72% compared with March 2020, despite a $300,000 drop in the past year.

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Sorrento house prices are still 23% higher than 2020 prices, while Austinmer prices are up 55%, despite the median house price in both suburbs declining by more than half a million dollars in the past year.

Where to from here?

The February interest-rate cut could represent a turning point in the market. 

While the boost to borrowing capacities of a 25-basis-point cut is relatively modest, the beginning of the rate-cut cycle has improved buyer confidence.

The Westpac-Melbourne Institute Consumer Sentiment Index reached a three-year high in March, with a big lift in the number of people who think it’s a good time to buy a home.

With market conditions improving, the recent softness in pricey suburbs may not last long.

“Generally speaking when we see interest rates come down that pushes home prices up,” Ms Flaherty said.

Home prices in Sydney and Melbourne rose in February after declines over the previous few months, PropTrack data shows.

“We know it has been a big boost to the confidence of buyers out there,” Ms Flaherty said.

“Having said that, we’ve seen one interest-rate cut but we’re not going to see a series of interest-rate cuts this year.”

Mr Placks said he expected a steadier market in the year ahead.

“I can't see prices running away, but I think we've hit a bit of a floor,” he said.