Australia’s high-end property market is experiencing a rare price correction, with upper-quartile house values in Sydney and Melbourne dropping more than 10% from their peaks. Property data shows that while expensive homes lead the downturn, lower-priced properties and units remain remarkably resilient amid shifting buyer demographics and affordability pressures.
Sydney and Melbourne Prestige Markets Lead the Downturn
Australia’s property market is undergoing a rare price correction. Higher-value dwellings in Sydney, Melbourne, and Canberra were the first to turn and continue to record the largest cumulative falls, according to analysis from Cotality. Upper-quartile house values in the country’s two biggest markets are now down more than 10% from their peaks.
Property data shows that homes valued in the top 25 per cent have dropped 10.7 per cent below peak levels in Sydney and 10.5 per cent in Melbourne. Cotality’s September housing charts report that the median value of these expensive homes sits at $2.1 million in Sydney and $1.2 million in Melbourne, where upper-quartile houses are priced at $2.1m and above and about $1.2m and above respectively.
Downturn Spreads to Brisbane, Adelaide, and Perth
The property correction is no longer confined to the southeastern capitals. Home values have also started declining across Brisbane, Adelaide and Perth, demonstrating that the market shift is affecting a broader geographic range.
However, the nature of the decline differs in these centers. Unlike the sharp divergence seen in Sydney and Melbourne, price declines across Brisbane, Adelaide, and Perth have been more evenly distributed across all price points, reflecting their later entry into the broader downturn.
Affordable Housing and Units Prove Resilient
While prestige properties stumble, lower-priced homes and units continue to show notable resilience. House values in Sydney’s and Melbourne’s lower quartiles were down less than 6% and 4%, respectively, from their peaks.
Buying activity remains robust at lower price ranges, particularly for properties situated below the caps of the government’s first home buyer 5% deposit scheme. The scheme cap is $1.5m in Sydney, $950,000 in Melbourne, and $1m in Brisbane. Experts note that households looking for affordable housing still need places to live and face narrow buying options, whereas elite buyers can delay purchases.
“At the higher end, buyers are more able to delay, compromise or simply decide that a property is not worth the asking price.”
Emma Baker, Director of the Australian Centre for Housing Research, via ABC News
Similarly, the unit market has absorbed market pressures better than detached housing. Units have generally proven more resilient throughout the downturn, supported by relative affordability and lower entry price points, though Canberra’s unit market bucked the broader pattern by seeing its lowest-priced units record larger relative declines than its upper-tier units.
Shifting Buyer Demographics and Negotiating Power
The broader property landscape is being shaped by changing participation rates. Investors have largely stepped back from the market amid rising interest rates, less favorable tax settings, and anticipation surrounding federal budget tax changes regarding negative gearing.
At the same time, owner-occupiers and first-time buyers previously priced out are returning. Peter Esho, an economist and chief executive at 13x, pointed out that there is a rotation of buyer types occurring as budget noise clears.
“When buyers become more cautious and have more choice, they are less willing to chase a vendor’s price. That shifts negotiating power towards the buyer and can put downward pressure on values.”
Peter Maloney, Group CEO at Herron Todd White, via ABC News
National Sales Volume and Economic Risk Factors
National annual sales fell by 2.7 per cent over the year to August, with capital cities down 5.2 per cent, according to the Cotality data. Meanwhile, regional sales rose 1.8 per cent, though researchers note regional localities vary widely from areas near major cities to large regional hubs.
Overall housing affordability has slipped to the lowest rate on record, leaving typical income-earning households able to afford roughly one in every ten properties sold last financial year. While economic headwinds include rising oil prices tied to the Iran conflict that threaten interest rates, analysts emphasize that employment levels remain robust.
Market experts maintain that employment stability remains the critical variable determining whether the current price correction remains orderly or develops into a systemic economic issue.
