Sydney suburbs where real estate prices are primed to fall

Overpriced real estate and rate rises have created unsustainable market conditions in a group of once booming Sydney suburbs and the local home prices are primed to fall, research shows.

‘Lifestyle’ locations where home prices boomed last year after attracting cashed up remote workers have become the Sydney suburbs with a high risk of home price falls.

The select suburbs spread across the north shore, Sutherland Shire, Central Coast and Hills district “overheated” during last year’s record boom in prices, data provided exclusively to The Daily Telegraph showed.

This led to unsustainable imbalances between the price of homes in these suburbs and their neighbours.

There was now a strong chance prices would drop this year as interest rates continued to rise, according to the measures of neighbour price imbalances and housing supply relative to demand by Select Property Group.

Suburbs flagged as risky locations for homebuyers included North Wahroonga, South Turramurra, Waitara, Terrey Hills, St Ives Chase and Lane Cove West in the city’s north, along with Dural in the northwest.

An auction in Caringbah last year. Picture: Simon Bullard.

Southern suburbs with similar issues included Taren Point and Caringbah South, along with Thirroul in northern Wollongong.

Central Coast suburbs reported to have peaked in value were Shelly Beach, Erina and Ettalong Beach.

Many of these areas last year attracted considerable buyer interest from upsizers vacating inner city homes for further flung or less accessible areas were they could get larger houses and blocks.

Prices spiked by an average of more than 30 per cent annually, in some cases.

This led to average price differences of up to $250,000 compared to neighbouring suburbs with similar homes, settings and infrastructure.

Select Property Group analyst Jeremy Sheppard said these areas were risky locations to buy into because they were overpriced compared to neighbouring areas offering similar amenities.

“People will have a reality check in times like this when rates are going up,” he said.

“If one suburb is head and shoulders more expensive than similar neighbours, other options will be seen as more reasonable.”

He added that sellers in these markets would likely have to drop their prices to attract buyers, considering purchasers had other alternatives and could afford to take their time.

Real Estate Buyer’s Agents Association president Cate Bakos said home seekers would need to be patient and avoid jumping into purchases in the current market.

Waitara was considered a peaking market.

“It’s all well and good while the market is strong, but now it’s slowing,” she said.

“(Other) buyers don’t have the same willingness to stretch themselves, there’s not that appetite to try beat everyone like there used to be … the last person who pays peaking prices will feel remorse.”

PropTrack data showed home prices across Sydney as a whole stopped growing late last year after ballooning at the fastest annual rate since 1989.

SQM Research director Louis Christopher said there could be more falls this year given that buyers would be more cautious in an environment where rates were poised to go up.

Realestate.com.au senior economist Paul Ryan said fewer buyers were seeking real estate in outer or regional areas with larger houses – the dominant trend during the early Covid pandemic.

This was partly due to the prices in some areas rising at such a rapid rate that it diminished one of the draws of buying in these markets: the perception buyers could get better bang for their buck.

Other buyers were also beginning to “re-appreciate what inner and more densely populated areas had to offer”, Mr Ryan said.