The Victorian coastal towns where house prices plunged 20 per cent

Buyers can now secure beach houses at a 20 per cent discount in some of Victoria’s most sought-after coastal towns, thanks to rising interest rates, increased land taxes and workers returning to city offices.

Popular spots such as Port Fairy, Barwon Heads and a handful of Mornington Peninsula postcodes have recorded double-digit price drops since their 2022-23 post-lockdown peaks.

The biggest fall was in Port Fairy, where the median house value fell 23.8 per cent from its peak in March 2023 to $876,000 in November 2024, CoreLogic figures show.

There were falls of at least 20 per cent in Barwon Heads (a median price of $1.4 million in November), Mount Eliza ($1.59 million), Rye ($1.03 million), Sorrento ($1.9 million), Blairgowrie ($1.29 million) and Tootgarook (nearly $926,000).

CoreLogic research director Tim Lawless said prices in beach towns soared during the lockdown years, but demand and growth fell as fewer people migrated regionally, affordability became strained and land taxes increased.

“Many of these areas overshot fair value. It was more than just interest rates quelling these markets,” Lawless said.

A string of Victorian coastal towns, such as Sorrento, have recorded double-digit price drops.Credit: Domain

Affordability issues and reduced migration were already slowing growth before rate hikes began in May 2022. The end of lockdowns also cooled demand as fewer people left the cities.

While the 2024 land tax increases didn’t spark the initial declines, Lawless said they had added to costs, pushing some owners to sell in a slower market.

“Selling conditions remain subdued due to higher-than-average stock levels,” he said.

Lawless predicted affordability might attract buyers to these areas, particularly those within commuting distance of Melbourne. Still, he issued a caution.

“As long as the new land tax regimen continues, it’s unlikely we’ll see a material rise in holiday home or investor buyers,” he said.

RT Edgar Bellarine director Brock Grainger said some buyers were seizing the moment to take advantage of price falls. “Savvy people are. People who buy the dips. The Australian property market doesn’t stay down for long,” he said.

“A 20 per cent discount on a property is a really good opportunity.”

In Ocean Grove alone, there were 300 to 350 properties listed, and only interstate or international buyers were making sight-unseen purchases.

“Every month, there are more listings than the last – that’s part of the battle for vendors,” Grainger said.

“What we’re seeing is a lot of overpriced properties creating oversupply and fear of weak competition. If agents have honest conversations with vendors and price properties correctly, they’re selling really well.”

Grainger nominated his listing at 115 The Terrace, Ocean Grove, as an example of what buyers could snap up now. Its listing price between $2,595,000 and $2,795,000 is discounted from $3.2 million to $3.4 million.

Carman Real Estate director Jarrod Carman agreed the price plunge presented real value.

“Anyone prepared to do a little bit of work on a place can buy great properties down here [on the Mornington Peninsula]. Predominantly 1970s homes that need updating,” he said.

Carman said buyers could purchase a family home for much less than the high pandemic prices. He recently sold an updated four-bedroom home in Wensleydale Drive, Mornington for $1.11 million.

This Mornington home recently sold for $1.11 million.Credit: Carman Real Estate

“If you have the money, it’s a good time to buy,” he said.

Still, prices aren’t exactly rock bottom. Pandemic gains were substantial, with values jumping across these coastal towns, and some places – such as Venus Bay, Sorrento and Tootgarook – had increases above 70 per cent. Even after recent drops, current values remain higher than pre-pandemic levels, ranging from a 10.8 per cent gain in East Geelong to 49 per cent in Lakes Entrance.

“Yes, prices are falling, but they’ve come off a massive base,” Carman said.

Unrenovated properties are the best bargains because of high building costs. Some properties linger unsold for weeks, while similar ones sell in two weeks.

The sight-unseen purchases that were common during COVID are now rare. In Carman’s patch, listings are down by 30 per cent while the time on market has doubled from 18 to 36 days.

On the Bellarine Peninsula, some homes now linger close to 100 days on the market, compared to just 25 days during COVID.

“There are fewer buyers, so they have the pick of the litter,” Carman said. “Vendors are having to discount and negotiate, but if buyers hit their top price and vendors want $20,000 more, buyers just disappear. They’ll go rent or move on.”