National property markets splintering into varied niches


Property performance in suburbs around Australia is splintering after a few years of universal growth across all national markets.

Property performance in suburbs around Australia is splintering after a few years of universal growth across all national markets.

Widely varying micro-markets are emerging as Sydney, Melbourne and Hobart experience a firm but controlled decline, the markets within the other capitals are fracturing into areas of mixed growth and decline.

Sydney and Melbourne have been the first capital city housing markets to record negative monthly growth rates this year, joined most recently by Hobart in April, its first fall after 22 consecutive months of growth.

Their stabilisation after record-breaking growth periods comes as higher interest rates, rising stock levels, lower confidence, and a limit to how much buyers are willing or able to spend, bring about an unsurprising reality check.

In cities still recording an upswing in values, such as Brisbane, underperforming suburbs are more skewed towards high-density areas weighed down by a high proportion of units. In Adelaide and Perth, suburbs that may be classified as unaffordable dominated the list.

Top 3 capital city HOUSE suburbs by negative quarterly growth

  Quarterly change Annual change
  Rank Suburb Median value % $ % $
Greater Sydney $1,416,960 -0.3% -$4,186 17.1% $207,422
  1 Beaconsfield $1,808,431 -8.5% -$168,263 2.0% $34,883
  2 Darlinghurst $2,282,494 -8.3% -$206,944 2.0% $43,689
  3 Surry Hills $2,131,457 -7.8% -$180,196 2.9% $60,367
Greater Melbourne $1,000,926 -0.5% -$4,639 10.1% $91,769
  1 Park Orchards $2,014,243 -7.1% -$155,061 4.7% $89,846
  2 Balaclava $1,562,276 -5.1% -$84,174 5.1% $76,137
  3 Port Melbourne $1,777,799 -5.0% -$94,544 5.0% $83,866

Top 3 capital city UNITS suburbs by negative quarterly growth

  Quarterly change Annual change
  Rank Suburb Median value % $ % $
Greater Sydney $830,534 -1.2% -$10,007 8.9% $67,603
  1 Dover Heights $1,338,773 -6.2% -$88,741 7.3% $91,279
  2 Cremorne Point $1,761,168 -5.9% -$110,336 6.7% $110,696
  3 Curl Curl $1,499,109 -5.9% -$93,685 14.0% $184,230
Greater Melbourne $630,671 0.6% $3,892 4.7% $28,054
  1 Watsonia $721,598 -7.7% -$60,023 8.9% $58,704
  2 Hampton East $781,765 -5.0% -$41,286 8.5% $61,066
  3 Heidelberg $688,042 -5.0% -$35,837 0.3% $1,902

Data source: CoreLogic. About the data
•     Median value refers to the 50th percentile of valuation estimates observed in the region
•     Growth rates are based on changes in the CoreLogic Home Value index, which take into account value changes across the market
•     Only metrics with a minimum of 20 sales observations and a low standard error on the median valuation have been included
•     Data is at April 2022

Sydney’s price decline began before the others but has more to do with unsustainable price growth, at a time of stagnant wages, than with its broader economy.

Indeed, Savills this week listed the harbour city in its top 15 most resilient cities in the world, based on an assessment of economic strength; knowledge economy and technology; environmental, social, and governance (ESG); and real estate investment.

Paul Craig, CEO of Savills Australia and New Zealand, said the perception that Sydney’ economy was strong was now backed by data.

“Anecdotally, there has been a perception that Sydney’s economy has bounced back from the COVID-19 pandemic stronger than ever and now we have the data to not only back that up, but to compare Sydney to other global cities and measure its resilience,” said.

“Sydney’s relatively diversified base of real estate capital, coupled with strong property rights, has helped it maintain its resilience despite the COVID-19 pandemic, while Sydney’s commercial office and industrial sectors have been particularly buoyant, with both growing by more than 40 per cent between 2020 and 2021 despite the various lockdowns, restrictions and on-going impact of covid.”

Recent signs of life in the auction market also point to any retraction being gradual rather than rapid. Sydney’s auction activity surged this week, recording more than 1,000 auctions for the first time in seven weeks.

Prestige below par

CoreLogic Research Director Tim Lawless the upper quartile of the market nationally has softened out more visibly than the middle to lower end of the market.

“These softer conditions come after a stronger performance across the premium end of the market through the growth phase,” he said.

“Historically, more expensive housing markets tend to lead the upswing but also lead the downturn, which is what we seem to be seeing at the moment.”

Exceptions to the upper quartile trend can be found among Brisbane suburbs. The city as a whole remains in an upswing phase, with values up 29.8 per cent in the year to April. However, among the growth are sectors of the market which haven’t performed as well, such as higher density inner ring suburbs, including South Brisbane and West End, where slight falls in values were recorded in the last three months.

In Darwin, a handful of the city’s more affordable suburbs are ranked lowest for growth rates possibly due to less constraints on housing affordability. Mr Lawless said the dwelling value to income ratio there is far lower, at 3.9, relative to other capital cities, which could be underpinning demand among Top End buyers upgrading.

The biggest common factor across Sydney and Melbourne, and house markets in these cities more broadly, is the potential for higher volatility among more expensive pockets.

CoreLogic Head of Research Eliza Owen said these were also the markets that have experienced some of the most extraordinary gains through the cycle, and have been a bellwether for other parts of the market historically.

“If we take Beaconsfield in Sydney’s inner city for example, it may look like the area has not had much growth, but that’s because it had a much earlier cyclical peak, at annual growth of 33.7 per cent back in the 12 months to October 2021.

“Sharp deterioration in demand across the suburb has now dragged down the annual growth rate to just 2 per cent.

“The same can be said for houses in Surry Hills in Sydney’s inner east, where annual growth peaked at 28.9 per cent in the same month, and nearby Darlinghurst at 26.9 per cent these higher-end house markets generally have higher peaks in growth during boom times and sharper declines in the downswing phase.”

Affordability limits

Considering dwelling values – the combination of houses and units – Ms Owen identifies clear trends particularly among new buyers, who are not able to pay vendor prices due to limited borrowing power and the affordability ceiling, which will impact some of the more expensive parts of each market.

“There tends to be micro-markets where dynamics such as stretched affordability can manifest in a single suburb pushing buyers into the next most affordable suburb,” she said.

“One good example of this is Newtown, a dynamic and popular suburb in Sydney’s inner west it’s also relatively expensive with a median dwelling value of almost $1.5 million yet it recorded a quarterly decline of -5.5 per cent, which suggests buyers may be at their limit and are being forced to find alternative options within their budgets.”

In Adelaide, no suburbs recorded negative quarterly price retraction for houses, although Findon, (-4.0 per cent), Blackwood (-1.2 per cent), and St Marys (-0.7 per cent) topped the list for unit price declines.

The top three Perth suburbs for house price falls for the quarter were limited to declines of between 1.4 and 16 per cent, being Bateman, Peppermint Grove and Como.

The worst performing areas of Darwin, Canberra and Hobart were in the 3-4 per cent range, compared to Sydney and Melbourne’s worst performing suburbs falling by 5.5 to 8.5 per cent.


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