Sydney suburbs where house prices have fallen up to 20 per cent

House values in some of greater Sydney’s sought-after lifestyle markets have fallen by as much as 20 per cent since their peaks about three years ago.

A return to CBD offices at least part of the week has reduced the appeal of coastal or coast-adjacent neighbourhoods, while higher interest rates reduced how much money buyers could borrow.

House values have fallen in some of Sydney’s lifestyle markets.Credit: Nick Moir

Sydney’s property market overall is in a more subtle and recent downturn, but a possible interest rate cut as soon as next week may start to shift sentiment.

The median house value in Bundeena on the edge of the Sutherland shire dropped 21.2 per cent from its peak in March 2022, CoreLogic figures show.

Across the water, Cronulla fell 14.8 per cent, while Kurnell and Sylvania Waters lost more than 13 per cent each.

Several suburbs plunged in the northern beaches since their peaks in late 2021 and early 2022, including Terrey Hills (down 20.8 per cent), Wheeler Heights (down 17.4 per cent), Bayview (down 16.1 per cent), North Manly (down 15.4 per cent) and Bilgola Plateau (down 15.2 per cent).

In the eastern suburbs, Waverley and Bronte’s median house values recorded double-digit drops, the equivalent of $810,000 and $896,000 respectively.

Values also fell in Central Coast pockets such as Killcare, Wamberal and Forresters Beach.

CoreLogic head of Australian research Eliza Owen said many of these areas were popular and perhaps overshot in price during the lockdown years, and had relatively higher values. During the peak period for remote work, home buyers flocked to far-flung beach hotspots.

“The high end of the market has taken more of a hit under rising interest rates,” she said. “Realistically these price points are just not achievable even for a very high-income household.”

Deeper falls in higher priced markets did little to improve housing affordability, she said.

Any rate cut could mean that the upper end of the Sydney market is the first to rebound, but there was scant sign of this in the data so far, and a change would be likely to show up in auction clearance rates and sales volumes before flowing through to rising median suburb values.

Buyer’s agent Peter Kelaher, managing director of PK Property, said the decline in remote work had changed home buyer demand.

“People aren’t looking for the real work-from-home house like they were,” he said. “Before, they were looking for extra bedrooms.

“If they’re only working one day at home during the week they’re turning that study into a bedroom or a TV room.”

He has noticed that home values in the northern beaches have fallen for some properties that are lower quality or on busy roads, but newer homes in desirable locations have held their prices.

“The northern beaches, when you talk 2022 that was the COVID boom, so everything’s adjusted since then.”

He said vendors have become more accommodating and more realistic, although that could change if interest rates fall.

OH Property Group principal buyer’s agent Henny Stier was surprised that more north shore suburbs did not make the list.

“A lot of it is lifestyle suburbs, they did well during COVID, and then the Central Coast. A lot of people that were moving there because they were working from home and didn’t have to go to the office, they could afford to live there and commute,” she said. “But now that more and more businesses are mandating at least two to three days back in the office the whole commute doesn’t seem as appealing any more.”

She said vendors were having to get their head around new prices, and sometimes had to change agents if their home did not sell.

Buyers could not borrow as much, but also did not wish to borrow their maximum, given the high cost of living and other bills, she said.

PRD Real Estate chief economist Diaswati Mardiasmo said higher-end markets tend to get the biggest boost in any property boom, including when the cash rate was the lowest on record a few years ago, and then reverse once mortgage repayments rise.

“Because the price points are huge, so the amount of loan you’ve committed to is also huge, so when there is a cash rate hike, or interest rate hike, it does scare people off because you’re up for a much higher mortgage repayment,” she said.

Once interest rates fall, she thought there some homes may start to sell faster, but she thought the improvement would be slight as rates would remain at high levels.

“If there is a cash rate cut of say 25 basis points and we’re going down from 6.5 per cent owner-occupier [home loan rates] to 6.25 per cent owner-occupier, it’s still a much higher interest rate than post-COVID.”