Interest rate rise slams into top-tier homes as lower valued homes show opposite trend

The state’s top-end housing markets are delivering a shock to the system of investors and homeowners as low-end properties deliver a surprising trend. See how your region fared.

The most expensive housing markets in Victoria led the rise in price growth during the pandemic but now those same markets are leading the fall.

Melbourne’s upper quartile, the highest value quarter of the market, recorded a two per cent drop in values since the interest rate rise early this year, while the lower end of the market recorded a 1.1 per cent increase in the three months to the end of May.

According to property data analytics provider CoreLogic, the most affordable areas of the city remained the most resilient with some growth in values over the past three months.

“Especially inner Melbourne, where higher density styles of housing were generally much weaker during the worst of the pandemic,” CoreLogic research director Tim Lawless said.

“We can also see this trend in our stratified hedonic index, which measures movements in housing values across the lower quartile and upper quartile of the market.”

Mr Lawless said expensive markets falling quicker was not unusual.

“We have seen this trend through previous growth cycles where the more expensive markets tend to lead the growth phase but also lead the down phase,” he said.

Mr Lawless said based on the median dwelling value for Melbourne at the end of May, a new borrower with a 20 per cent deposit would be facing an average rise in their monthly mortgage repayments of about $1103 if interest rates increased by three per cent.

He said the road ahead looked bleak for households struggling with mortgage payments.

“With non-discretionary inflation also set to rise further, its likely indebted households will be cutting back on their discretionary spending in order to meet their debt servicing obligations as well as purchase essential items such as fuel and food,” he said.

The suburbs in Melbourne that are experiencing the lowest quarterly growth value for dwellings are predominantly in the east while in regional Victoria, Geelong and the north west area are seeing the lowest growth.

When it comes to the highest quarterly value growth for dwellings inner Melbourne takes the lead and regionally Warrnambool and the south west is slowing.