Why upmarket suburbs suffered biggest house, unit price falls (2023)

Upmarket suburbs near the city and trendy sea-change postcodes are now the best place to hunt for a bargain home after recording the sharpest drop in property values during the current downturn.

New data analysis has revealed where median house and unit prices fell by more than 20 per cent in 2022, after the Reserve Bank raised interest rates eight times.

House prices bled in Sydney's desirable eastern suburbs and Northern Beaches, along with towns near Byron Bay on the NSW far north coast, including Mullumbimby and Bangalow.

Apartment values also plunged from Bondi to Ballina, with NSW home to Australia's worst-performing capital city and regional property markets.

But Townsville, Geelong and Launceston suffered double-digit falls on unit prices.

Eliza Owen, head of research for real estate data group CoreLogic, said expensive lifestyle markets in NSW had suffered price falls in early 2022 before the rest of Australia, leading to sharper annual declines.

'The New South Wales markets tend to be inherently a little more expensive, even against some of the more expensive markets across Queensland and Victoria,' she told Daily Mail Australia.

'New South Wales moved into its downswing more quickly.

'Most expensive markets have been more sensitive to sharp increases in interest rates because they generally require higher debt levels, higher debt-to-income ratios for people to buy into them.'

Surry Hills, a 3km walk from Sydney's city centre, had the steepest metropolitan decline of 25.2 per cent with the mid-point house price falling back to $1,789,646.

But Mullumbimby, a haven for those seeking an alternative lifestyle on the NSW far north coast, suffered an even steeper drop of 25.7 per cent, taking its median house price down to $1,036,653.

In three months, prices there plunged by 15.2 per cent.

When it came to apartments, Centennial Park in Sydney's eastern suburbs suffered the sharpest annual decline of 23.8 per cent, taking prices to $817,693.

Ballina, on the NSW far north coast, was the worst regional market for units, with the median price falling by 19.3 per cent over the year to $592,438, with values plummeting by 11.1 per cent over the quarter.

Byron Bay suffered double-digit falls for houses and apartments, making the short-list for both categories.

The median house price in Australia's most easterly town dived by 23.9 per cent to $2,258,816 as the mid-point apartment value dropped 11.5 per cent to $1,217,133.

Neighbouring areas also suffered a bloodbath.

Suffolk Park's median house price fell by 22.7 per cent to $1,904,778 as Bangalow, a short drive inland, saw its mid-point values dive by 22.1 per cent to $1,484,437.

Cumbalum's median house price fell by 21.8 per cent to $1,062,017 as Ocean Shores plunged 21.7 per cent to $1,196,903 and Brunswick Heads dropped 20.9 per cent to $1,173,615.

Flood-hit Lismore was the only affordable housing market to suffer particularly sharp drops with Lismore Heights prices diving by 25.2 per cent over the year to $437,806.

Sydney suburbs near the beach also went backwards with Taren Point's median house price declining by 24.5 per cent to $1,934,705 as Bayview on the Northern Beaches suffered a 24.5 per cent drop to $2,279,245.

Ms Owen said lifestyle markets with the biggest price increases during the pandemic were now suffering from the sharpest falls.

'With the work-from-home movement, a lot of value has been unlocked in lifestyle markets more broadly, so areas like the Northern Beaches or the far north coast of New South Wales have grown enormously in popularity,' she said.

'Values are down more than 20 per cent from the peak across the greater Northern Beaches region in the house segment but that follows an upswing of around 45 per cent so the areas that are showing large downturns now are generally also areas that have a relatively large upswing.'

Australia's worst performing capital city apartment markets were all in Sydney's eastern suburbs or Northern Beaches.

Belrose unit prices on the Northern Beaches plunged by 23.4 per cent to $630,652 as Vaucluse apartment values in the eastern suburbs, near the beach and Sydney Harbour, dived by 23.1 per cent to $1,156,167.

Bondi's mid-point unit price fell by 20.4 per cent to $1,210,479.

Upmarket regional postcodes also suffered, with East Ballina's median unit price diving by 16.6 per cent to $669,491 as Lennox Head suffered a 15.9 per cent drop, taking values back to $945,042.

Outside NSW, double-digit falls occurred in regional apartment markets in Queensland, Tasmania and Victoria.

Emerald in central Queensland saw its median unit price fall by 13.2 per cent last year to $183,936 as Townville City's apartment values dropped by 11 per cent to $379,153.

Launceston unit prices fell 11.7 per cent to $507,698 as Geelong West values fell 11.8 per cent to $485,015.

Credit ratings agency Moody's Analytics is expecting a 13 per cent national decline from the peak in mid-2022 to the trough in mid-2024.

'A peak-to-trough decline of 13 per cent doesn't sound too outrageous,' Ms Owen said.

Australia's housing market plunged by 8.4 per cent from the peak in May to January 2023, CoreLogic data showed.

This was worse than the 8.38 per cent downturn between 2017 and 2019 after lending rules were tightened on interest only and investor loans.

Ms Owen said the worst of the downturn had most likely passed, with the market likely to settle once the Reserve Bank stopped raising interest rates in 2023.

'It's fair to say we can expect more downward pressure on property prices as interest rates rise but there will be some elements that keep a floor under those price falls - things like a very tight rental vacancy market which could convert to some investor demand,' she said.

Economists are broadly expecting the Reserve Bank of Australia to raise interest rates in February by another quarter of a percentage point, taking the cash rate to a new 10-year high of 3.35 per cent.

This would be on top of last year's eight consecutive monthly increases that ended the era of the record-low 0.1 per cent cash rate and saw the RBA embark on its most severe pace of monetary policy tightening since it began publishing a target cash rate in 1990.

Inflation data for the December quarter, due out on Wednesday, is expected to show the annual consumer price index hitting a new 32-year high closer to 8 per cent, a level more than double the RBA's 2 to 3 per cent target.