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Sydney & Melbourne prices continue to fall

Jun 3, 2022 |GODFREY DINH

Nationally, we saw the first monthly fall in average values since September 2020.

However, Australia is made up of many property markets, so a decrease in the national aggregate probably doesn’t tell you much.

Let's break down long-term market performances across the country, throwing the spotlight on suburbs which are cheaper now than they were 5 years ago.

  • Property investors are breathing a sigh of relief and buying property with confidence, knowing that the new government won’t touch negative gearing and depreciation laws.

  • According to the RBA, first home buyer subsidies can have a “pervasive” impact on housing, specifically on demand & prices.

  • In Sydney’s Vaucluse, a waterfront trophy home spanning over 1000sqm has been listed for the first time in 60 years for $55 million.

  • This year, 28,200 new apartments are scheduled to be completed across Sydney, Melbourne and Brisbane, adding fresh supply to these markets, according to Charter Keck Cramer.
  • This figure is expected to more than halve to 11,400 by 2024 due to a pullback in development and construction during the pandemic.

Diving Deeper

  • A few weeks ago, we looked at capital cities where you can find freestanding houses at lower prices seen in 2021. Property investment is a long-term game, so let’s take a look at the bigger picture and identify price falls over the longer term. According to Domain, there are areas which are cheaper now than what they were 5 years ago, if you know where to look.
  • Such suburbs exist in NSW, Victoria, Queensland, ACT, the Northern Territory and Western Australia. The list excludes South Australia & Tasmania, as all suburbs in those regions have been rising in value since 2017.

Top 3 suburbs in each state where property prices fell the most since 2017

Source: Domain Group

  • Unit prices in Victoria’s East Melbourne fell the hardest, down by 44.4% since 2017 to $767,250. This was followed by Victoria Park in Western Australia, where unit values were shaved by 26.3% to $295,000.

  • While not in the table above due to a smaller price fall, Brisbane’s Woolloongabba will be on the watchlist of many seasoned property investors. That’s because it’s confirmed to be the home of the 2032 Brisbane Olympics and is set to capitalise from the global attention. Unit prices here have dropped by 3.9% since 2017. But look in the past year and you’ll see prices shot up by 11.1% to a still relatively affordable $482,000.

  • Separately, expensive suburbs have been more impacted from the market downturn than the middle or lower end of the market, according to CoreLogic. However, suburbs on the higher end also usually experience stronger price increases in market booms. Take Melbourne’s affluent Park Orchards, which has a median house price of over $2 million - it dropped by 7.1% in the 3 months to April 2022.

What does this mean for you?

  • The heat in the market lasted for years, so for some, this correction is a long-awaited opportunity to snap up a quality investment. It’s an opportunity to buy at pre-2017, pre-boom prices.

  • It’s important to point out that just because prices are down in some neighbourhoods in the past 5 years, doesn’t mean they’re not rising now. Melbourne’s Carlton, for instance, has recorded a price drop of 20.3% in the past 5 years but values have shot up by 17% in the past 12 months. Property investors can identify these areas through research to find bargain growth areas.

  • Another caveat is this: while the data is important, it’s vital to know the perceived value of the suburb, especially when investing interstate. For example, while it appears that East Melbourne has shown the biggest price drop in the past 5 years, the suburb is traditionally known as a ‘prestige’ market. Getting into a top-end suburb 44% cheaper than it was 5 years ago can be appealing for investors who know the market and understand its long-term potential.

  • Unit markets dominate the list of markets recording price drops. When buying a unit, investors should think long-term and understand: what is its point of difference? Who are the potential buyers? Is there a big buyer pool for this type of property in this location? It might seem silly to think about selling before buying but understanding this will help prevent poor investment decisions.

  • Investors should also take into account the higher chance of price volatility in expensive markets. This is because people who own property in these areas tend to have bigger debt and so these markets are more sensitive to interest rate rises and borrowing restrictions.

Prices at a glance



Source: CoreLogic data - May 2022

Brisbane, Adelaide and Hobart saw values climb across both houses and units. For a second month in a row, Adelaide property values grew the fastest across the capital cities for both houses & units.

Over the year, Sydney’s median house price eased from 17.1% in April to 12.0% in May. Melbourne’s house prices saw a comparatively steadier decrease rate in the past 12 months, from 10.1% down to 6.9%. Brisbane’s annual house value growth also slowed but is still above 30%.

Interestingly, across all markets except Adelaide and Darwin, unit markets performed better than that of houses.

The capital city average values are starting to decline in both house and unit markets. Regional dwelling prices are still growing, albeit at a slower pace of 0.5% in May compared to 1.4% in April.

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