House prices in some of Sydney and Melbourne's most prestigious suburbs have recorded double-digit annual falls, with Toorak down 25.2 per cent and Marsfield 22 per cent, while some other suburbs have seen price rises, according to the latest Domain House Price Reports.
The downturn has become more widespread, with price falls extending beyond the usual prestige enclaves to more affordable suburbs. In Sydney, Marsfield in the Ryde-Hunters Hill area recorded the greatest house price drop, falling 22 per cent in the 12 months to September, followed by Bronte, down 15.2 per cent. Across Sydney, the cost to buy the typical house fell 5.8 per cent to $1,661,167. For units, Darling Point fell most (16.8 per cent), followed by Redfern (16.2 per cent).
In Melbourne, the median house price in Toorak fell 25.2 per cent to $4,190,000, followed by Hawthorn (16.4 per cent), Mont Albert (14.1 per cent) and South Yarra (13.7 per cent). Fitzroy and Carlton North also made the top 10 suburbs for deepest falls.
Yet not all suburbs are declining. Sydney's Prospect and Richmond in outer western Sydney, and heritage suburb Haberfield, all recorded house price gains above 23 per cent. For units, Wahroonga rose 25.1 per cent. In Melbourne, Riddells Creek rose 16.3 per cent, Maribyrnong 15.4 per cent, and Monbulk 14.2 per cent.
Domain chief residential economist Dr Nicola Powell said the higher end of the market tended to show weakness first during downturns. "Premium buyers can afford to wait [to sell] so at the top end, buyers are often purchasing by choice rather than necessity. So they're more willing to sit on the sidelines when market conditions are uncertain," she said. She said that in a weak market, buyers shift from "fear of missing out to fear of overpaying".
Ray White chief economist Nerida Conisbee said the scattered nature of price falls across all parts of the housing market indicated the downturn had become more entrenched, with the impact of rate rises, higher inflation and Federal budget changes playing out. She noted fewer listings week on week and longer days on market as both vendors and buyers navigate uncertainty.
PRD chief economist Dr Diaswati Mardiasmo said it made sense that blue-chip suburbs were falling while those around $700,000 to $900,000 were rising. "It's always the higher-end blue chip suburbs that get hit the most, or that will see the highest decline in prices, simply because they are the more expensive stock," she said.
Some buyers have taken advantage of the downturn. Allanah Zitserman bought a studio apartment in Potts Point for $380,000 in August after waiting eight years. Sales agent Nuri Shik said his last half a dozen sales had all been to owner‑occupiers. In Melbourne, electrician Rohan McLeay purchased a house in South Morang for $796,000 and said he had been "putting the feelers out" for three months.
Powell added there was a strong possibility Melbourne's median house price could dip below $1 million by year end due to a "collision" of policy changes, housing taxes, an upcoming state election and predictions of another cash rate rise.
Analysis
Why This Matters
- The broadening downturn means homeowners in formerly stable suburbs are now seeing equity losses, while first-home buyers in affordable areas face competition that pushes prices higher.
- The divergence between prestige and affordable suburbs shows the downturn is uneven, with the market's bottom end still supported by demand from those reliant on borrowing.
- Further interest rate rises or policy changes could accelerate price falls in the middle market, where buyer sentiment is already fragile.
Background
Sydney and Melbourne have been in a housing downturn since interest rates began rising in 2022, with the Reserve Bank raising the cash rate from 0.1 per cent to 4.35 per cent. The downturn initially hit high-end suburbs, but it has since spread to more affordable areas. The Domain House Price Report for the September quarter showed price falls in all Australian capitals. The Federal budget announced in May included changes to housing policy, and Victoria faces a state election that has added uncertainty.
Key Perspectives
Dr Nicola Powell (Domain): Says the higher end shows weakness first because premium buyers wait; notes a shift in sentiment from FOMO to fear of overpaying, and says the market is a mix of psychology and economics.
Nerida Conisbee (Ray White): Says the downturn has become more entrenched, with the lower end now falling as investors withdraw; she notes the upper end may be stabilising after the budget.
Dr Diaswati Mardiasmo (PRD): Says blue-chip suburbs fall most because buyers hesitate over large debt levels; affordable suburbs see growth as first-home buyers remain active.
What to Watch
- Whether Melbourne's median house price dips below $1 million by end of 2026, as Powell predicts.
- The impact of the Victorian state election (timing unknown) on buyer confidence and housing taxes.
- Any further cash rate rises by the Reserve Bank, which would tighten borrowing capacity further.
Checked
12 claims in this story checked against 1 source: 8 supported.
Show each claim
- Partly supportedSydney and Melbourne prestige suburbs are leading the downturn.The Age - Latest News: “Property price falls have extended beyond Sydney’s prestige enclaves to more affordable suburbs as the downturn becomes more widespread.”
- Partly supportedThe opening groups Marsfield with Sydney and Melbourne’s most prestigious suburbs recording double-digit falls.The Age - Latest News: “Property price falls have extended beyond Sydney’s prestige enclaves to more affordable suburbs as the downturn becomes more widespread. Marsfield in the Ryde-Hunters Hill area experienced the greatest price drop”
- SupportedToorak’s median house price fell 25.2 per cent to $4,190,000 in the 12 months to September.The Age - Latest News: “The median house price in well-heeled Toorak , sitting at $4,190,000, has fallen by 25.2 per cent in the 12 months to September.”
- SupportedMarsfield had Sydney’s greatest house-price drop, falling 22 per cent in the 12 months to September.The Age - Latest News: “Marsfield in the Ryde-Hunters Hill area experienced the greatest price drop, falling 22 per cent in the12 months to September”
- SupportedSome suburbs recorded double-digit house-price gains.The Age - Latest News: “house prices in Prospect and Richmond in outer western Sydney, and inner west heritage suburb Haberfield all rose more than 23 per cent in the past year.”
- SupportedSydney’s typical house price fell 5.8 per cent to $1,661,167.The Age - Latest News: “Across Sydney, the cost to buy the typical house fell by 5.8 per cent over the year to $1,661,167.”
- SupportedPowell said premium buyers can afford to wait to sell and are more willing to sit out uncertain market conditions.The Age - Latest News: ““Premium buyers can afford to wait [to sell] so at the top end, buyers are often purchasing by choice rather than necessity. So they’re more willing to sit on the sidelines when market conditions are uncertain,” she said.”
- SupportedPowell said buyers in a weak market shift from “fear of missing out to fear of overpaying”.The Age - Latest News: ““When you go into a market of weakness, this is when buyers shift from fear of missing out to fear of overpaying.”
- Partly supportedConisbee said rate rises, higher inflation and Federal budget changes were playing out in the downturn.The Age - Latest News: “Ray White chief economist Nerida Conisbee said the scattered nature of the price falls across all parts of the housing market indicated that the downturn had become more entrenched, as the impact of rate rises, higher inflation and Federal budget changes announced in May played out.”
- Partly supportedConisbee noted fewer listings week on week and longer days on market as buyers and vendors navigated uncertainty.The Age - Latest News: “This has been coupled with fewer listings, week on week, and longer days on market as both vendors and buyers navigate an uncertain market .”
- SupportedMardiasmo said higher-end blue-chip suburbs get hit hardest because they are more expensive stock.The Age - Latest News: ““It’s always the higher-end blue chip suburbs that get hit the most, or that will see the highest decline in prices, simply because they are the more expensive stock,” she said.”
- SupportedZitserman bought a studio apartment in Potts Point for $380,000 in August after waiting eight years.The Age - Latest News: “She bought a 19 square metre studio apartment in Potts Point in August for $380,000. “I have been manifesting this for at least eight years,” she said.”