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- Sydney suburbs with the biggest drop in house prices
- Melbourne suburbs with the biggest drop in house prices
- Unit prices have also dropped, but not as far
- Sydney suburbs with the biggest drop in unit prices
- Melbourne suburbs with the biggest drop in unit prices
- Brisbane suburbs with the biggest drop in unit prices
- Will prices continue falling in 2023?
- Planning to invest? Remember this
- Location, location, location
Australia’s property market boomed during the height of the Covid-19 pandemic through 2020-early 2022, driven by ultra-low borrowing rates and high demand.
But the Reserve Bank’s swift and continuous cash rate hikes this year have dented demand, pushing many would-be buyers off the table at a time when the supply of properties was rising.
Despite the downward pressure on property price growth, the median values in most suburbs are still higher than before the pandemic.
That’s unsurprising given the rate of price growth was as high as 69% in some areas.
But starting with price falls in Sydney at the beginning of the year, property values have from peak levels around Australia.
And a few suburbs have even seen a double-digit fall with a return to price levels below March 2020 when the pandemic hit.
Sydney and Melbourne have a list of suburbs with house and unit values now below those recorded at the beginning of Covid-19, CoreLogic data shows.
Some Brisbane suburbs also make the list… but only for units.
Sydney’s inner-city suburbs of Darlinghurst, Surry Hills, Forest Lodge, and Redfern recorded the city’s sharpest median house values declines since the pandemic hit, with -13.7%, -12.8%, 19.7%, and -9.7% declines respectively.
Sydney suburbs with the biggest drop in house prices
In Melbourne, house prices in Windsor, St Kilda, South Melbourne, and Malvern East experienced the largest price falls over the same period, with -14.1%, -12.4%, -12.4%, and -11.3% drops respectively.
Melbourne suburbs with the biggest drop in house prices
Unit prices have also dropped, but not as far
Throughout the pandemic period, a shift in consumer preferences towards more space along with overseas migration dropping sharply saw housing value growth skew towards the low-density sector.
National house values rose 32.5% between September 2020 and April 2022, while national unit values rose by a milder 16.1% over the same period.
Since peaking in April, house values are now reversing at a more rapid rate, falling -5.3%, while values across the medium to high-density sector have declined by a more moderate -3.0%.
It makes sense then that the steep decline in house prices hasn’t quite translated to the unit market also.
CoreLogic’s data shows that in Sydney, unit prices fell sharpest in Epping, Lakemba, Macquarie Park, and Wiley Park, by -11.5%), -9.1%, -7.9%, and -7.9% respectively.
Sydney suburbs with the biggest drop in unit prices
In Melbourne, unit values in Kew East recorded the largest fall, down 18.5% since the pandemic began.
Meanwhile, unit values in Melbourne’s Hawthorn East, Ascot Vale, Hawthorn, and Moonee Ponds fell 18.1%, 17.1%, 16.4%, and 16.3% respectively over the same period.
Melbourne suburbs with the biggest drop in unit prices
And for units, the price falls aren’t only concentrated in the two markets which experienced the biggest hikes (Sydney and Melbourne), two Brisbane suburbs also make the list.
Brisbane suburbs with the biggest drop in unit prices
Will prices continue falling in 2023?
While some commentators believe property price falls still have some way to go, I think Australian capital city property prices will start to recover in 2023 as inflation peaks and the RBA stops raising interest rates.
There are already signs that our housing markets are looking for a floor with Dr. Andrew Wilson reporting steady “asking prices” in the months of October and November, and Corelogic reporting that although home values are continuing to trend lower, the rate of decline has been consistently moderating over the last few months.
I believe early next year many prospective buyers will realise that interest rates are near their peak, and inflation will have peaked and be under control.
And, at that time, pent-up demand will be released as greed [the fear of missing out] overtakes fear [the fear of buying early], as it always does, and the property cycle will move on.
At the same time, I also see strong rises in rents for most capital cities in 2023 with asking rents are forecast likely to rise by more than 10% again.
Planning to invest? Remember this
While this is an interesting list to look over, these aren’t areas where I’d recommend investing.
Because despite these areas being where prices have dropped versus prior to the beginning of the Covid-19 pandemic, this isn’t enough alone to warrant a good investment opportunity.
Volatile suburbs where properties suffer massive price falls will always be that way so don’t get lured into thinking you’re getting a bargain.
Also, don’t expect investment-grade returns from secondary locations and properties.
Location, location, location
By now you would know that location will do about 80% of the heavy lifting of a property’s capital growth.
And not all locations are created equal.
Some suburbs will be more popular than others, some areas will have more scarcity than others and over time some land will increase in value more than others.
That’s why it’s important to buy your investment property in a suburb that is dominated by more homeowners, rather than a suburb where tenants predominate.
And you’ll find suburbs where more affluent owners live will outperform the cheaper outer suburbs where wages growth is likely to stagnate moving forward.
This is because the more established suburbs with better infrastructure, shopping, and amenities tend to be close to the CBD and the water and that’s where the wealthy want to and can afford to live, and they’re prepared to pay a premium to live there.
Overall, by focussing your research on what those often overlooked owner-occupiers are doing, you may just find an investment that outperforms the market and delivers strong value and growth over the long term.