Why prices have fallen in some of Australia's most expensive suburbs

Median prices in some of Australia’s ritziest neighbourhoods have dropped over the past year, but that is still unlikely to translate into an opportunity to buy into those markets for a bargain-basement outlay.

While prices have plummeted by as much as 16.7 per cent in blue-chip Killara on Sydney’s upper north shore – one of 20 out of the 30 most expensive suburbs in the country where values have dropped over the past 12 months, according to Domain Group research – it could be a reflection of how few high-end homes are making it to market.

“The data is certainly showing that prices have fallen in Killara,” said Ray White upper north shore agent Lisa Davies, where the median price has fallen to $3.5 million. “But the lack of prestige stock coming onto the market is affecting the median sales price.

“I think the prestige market there is still as strong as ever. We recently broke the Killara sales record with the sale of 31 Springdale Road at $19 million, and the property had sold 18 months before for $16.3 million. 

“It’s just that the owners of high-end homes can’t find anything they want to move into, so they’re not selling.”

It’s a similar issue in Melbourne’s Canterbury, which has seen its median price ease by 6.9 per cent to $3,068,500. To observers, it doesn’t feel as though the market is softening, but the figures tell a different tale.

“I suppose there is a different mix of properties coming on to the market at the moment, which may have affected the median price,” said David Banks of Jellis Craig Canterbury. 

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“But, really, the market does feel very resilient and prices for individual properties are stronger than they were a year ago.

“There now seems to be a lot more confidence in the market, with interest rates having increased and now generally on hold, and a lot of people at our opens, keen to buy. But stock levels are down.”

Domain’s latest report shows that the majority of Australia’s fanciest suburbs are facing median price slides and, with most of the highest-priced suburbs located in Sydney, that city is feeling much of the brunt of the drops.

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There, Killara experienced the biggest fall, with Rose Bay in second place, down 14.7 per cent to $5,010,000. Nearby Vaucluse, the nation’s second most expensive suburb with a median price of $8.1 million, after Bellevue Hill’s $8.6 million, had a hit of 11 per cent. Woollahra had a 10.4 per cent fall to $4.3 million.

It’s a surprise when most commentators believe the prestige market has proved the most resilient, and has been kicking prices up in the middle and lower reaches of the market.

Alex Lyons of Raine & Horne Double Bay/Bondi Beach, who sells in Rose Bay and across the eastern suburbs, says he’s convinced the falls in median price aren’t anything to do with values falling generally. 

“The reason the medians have come down in these areas is that there aren’t as many big homes being sold,” he said.

“The turnover in the volume of houses has halved since last year, which has driven the medians down. People don’t want to sell their house because they can’t find anything to move into, which is causing a bit of a stalemate in the market. 

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“We are getting some new house-sized units in Spencer Street in Rose Bay but some house owners aren’t ready yet to move into apartments.”

In Victoria, there are only two other blue-chip suburbs that have seen price falls: Toorak which is down 5.3 per cent to a new median of $4.925 million, and Brighton, down 3.4 per cent to $3,073,500.

“In Brighton and the Bayside, it’s definitely a lack of stock that’s the reason,” said agent Gary Yue of Buxton Real Estate – Brighton. “Whenever something happens, economy-wise, people in Bayside in general sit on their hands and do nothing.

“They don’t want to sell without finding something even better to live in, and they can afford to wait. Unfortunately for others, there are no fire sales happening!”

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In Perth, the well-heeled suburb of Dalkeith has also seen prices fall 9 per cent to a new median of $3.05 million. In that area, there are different pressures at work, however, says Mack Hall of Mack Hall Real Estate.

“In Dalkeith, a lot of the houses that were constructed in the 1980s are coming of age and need to be rebuilt,” he said. 

“But that’s a very time-consuming and expensive proposition and is not that attractive to many people. The delivery time for a reasonable kind of house, with planning and architects and the build, could be around four years.

“As a result, they’re losing a little value , even though it is a phenomenal suburb, only five to 10 minutes from the city and with the river on three sides and great schools. 

“But it’s going a little bit out of fashion, and in other suburbs you can get good views. And the top end of property in Perth is definitely affected by the stock market … If that’s only dribbling along, that affects things.”