The Sydney suburbs where house values are falling fastest right now

Sydney house values fell in a string of mid-priced suburbs last month, bucking the trend of more expensive neighbourhoods that rebounded after the interest rate cut.

Auburn, Canterbury, Blacktown and St Marys in the west recorded falls of up to 1.9 per cent, on CoreLogic data, as affordability remained stretched and experts warned one rate cut would not suffice to help cash-strapped buyers there.

Sydney house values fell in a string of middle market and affluent suburbs last month.Credit: Oscar Colman

Manly, Canada Bay and Sutherland fell by up to 1 per cent, offering a small window for opportunistic buying ahead of future rate cuts and greater demand.

Sydney’s auction clearance rate in February was the highest in a year as the Reserve Bank lowered the official cash rate to 4.1 per cent, but gains for property have been uneven, and auction markets have not yet returned to boomtime clearance levels of about 80 per cent as recorded in previous growth spurts.

CoreLogic research director Tim Lawless said middle markets had been resilient over the past 12 months but were starting to lose momentum amid ongoing affordability constraints. A year earlier, Auburn, Blacktown and Canterbury recorded house value growth of up to 5.1 per cent.

“There will likely be a lag effect before interest rates continue to come down and the market responds at a broad level,” Lawless said.

“Rates need to come down a lot more before they flow through to improvements in serviceability and access to credit in the more mainstream suburbs,” he said.

Lawless said a series of rate cuts would be needed to put a floor under housing prices.

He said affluent buyers on the sidelines may feel urgency to purchase ahead of future rate cuts and increased demand. “We could see small opportunistic buying with those who missed out during the growth phase.”

Lawless said vendors needed to be realistic and expect to negotiate.

House values have fallen in Manly, with some buyers feeling urgency to purchase now ahead of future rate cuts and greater demand.Credit: Ben Symons

“It does appear to be more of a buyer’s market in areas where stock levels have risen,” he said. “Apart from getting the price right and meeting the market, there needs to be a good marketing campaign.”

PRD Real Estate chief economist Dr Diaswati Mardiasmo said buyer sentiment had increased only slightly as buyers had waited so long for a rate cut, while the lower cash rate had less impact on those who already bought.

“It was a relief for mortgage holders, but for those getting into the market, we need about three more cuts,” she said.

Mardiasmo said fluctuations could be the result of uncertainty ahead of the federal election. “That’s normally when we see a bit of a stall in the housing market,” she said.

DDP Property founder Zaki Ameer said middle-income earners were affected the most by cost-of-living pressure and higher interest rates.

“Buyers and sellers were surviving on their savings, and now that they have run out, they’re feeling the pressure,” he said.

“They’ve got used to budgeting, so one or two rate cuts isn’t going to make much of a difference.”

Ameer said buyer inquiry had dropped off by late November.

“People are feeling the pain. When the rate dropped, it made no difference in inquiries or interest. People are right at the end, they’re stuck.”

Ameer said some buyers were looking to purchase in Goulburn, past Wollongong and even Tamworth.

Even in more affluent areas, a single rate cut made only a marginal difference for some buyers.

Pilates instructor Robin Tate, founder of M.I.A Studios, began house hunting with his wife 18 months ago. They hope to upsize from a Paddington terrace to a freestanding home with a pool, backyard and parking.

House hunter Robin Tate said the rate cut hasn’t had a significant impact.Credit: Edwina Pickles

“The preference is to buy in Paddington, Woollahra or further east towards Rose Bay, Vaucluse, Bondi or Bronte,” Tate said. “They would be ideal suburbs, but they’re not cheap.”

He said the rate cut has not made a material difference but has increased the urgency to purchase.

“It’s certainly not going to have an impact on what I’m searching for or what I can afford. We were cruising along with our search, and now we are a little bit more focused.”

The father of three said the double-edged sword was that rate cuts might cause prices to skyrocket.

“With more drops, buyer activity could increase and prices might go up. I’m searching more and viewing more houses.”

His mortgage broker, Anthony Roddy of MortgageWorks, said the February rate cut was welcome relief for existing borrowers.

“The vast majority of discussions I’ve had with new borrowers, like Robin, is that they had priced in the rate cut already. One rate cut helps with those mortgage repayments,” he said.

Roddy agreed there was more urgency to purchase in affluent suburbs ahead of future rate cuts and a rise in demand.

“It’s that acute panic in markets where there tends to be low supply, and that one rate cut spurs activity,” he said.