Waterfront discounts: Sydney suburbs where property values are falling fastest

Waterfront homes in desirable neighbourhoods are leading Sydney’s downturn, with values falling by as much as 10 per cent in the past three months in some areas, fresh data reveals.

Buyers’ limits are being tested at the upper end of the market as higher interest rates for longer weigh on the ability and appetite to pay top dollar for blue chip real estate.

A string of waterfront suburbs topped the list of largest house value falls in the three months to October, including Balmain East (down 6.9 per cent), Glebe (down 6.5 per cent), Rodd Point (down 9.7 per cent) and Abbotsford (down 8.1 per cent) on CoreLogic data.

Zetland recorded the largest fall, at 10.1 per cent, in that period. The data included suburbs with a minimum of 20 sales.

It was a similar trend for units, with the fastest falling suburb being Kurraba Point – its median, almost double the Sydney-wide value, fell 6.9 per cent to $1,537,771.

That was followed by McMahons Point (down 5.3 per cent), Mosman and Neutral Bay (both down 4.1 per cent).

CoreLogic head of research Eliza Owen said the steepest declines were in suburbs where values were much higher than the citywide median.

“It’s the high end of the Sydney market where most declines have been concentrated,” Owen said. “The median house value is $1.5 million, and the high end, the top 25 per cent of house values in Sydney, start at $1.8 million.”

Aside from Zetland, the rest of the suburbs in the top 10 sit in the top quartile of the market where values are falling the most, Owen said.

“This represents premium areas like Fairlight in the northern beaches, Glebe and Forest Lodge. A lot of these suburbs are extremely desirable markets within the parts of Sydney,” she said.

The auction of a three-bedder in Zetland: It sold for $2.33 million, some $20,000 below its reserve.Credit: Rhett Wyman

“There is a lot more investor concentration in the market, and investors tend to target lower value properties and units.

“It’s also a reflection of affordability constraints, high interest rates, high cost-of-living pressures pushing buyers out of the high end, and [that] has them seeking the next most affordable market.”

Owen said it was a similar trend with units: a string of suburbs that have double Sydney’s median unit value fell fastest.

“Affordability is exhausted across the high end and the buyers are just not there, and I do think it’ll spread,” Owen said. “That’s because it’s a natural progression of the cycle, where the higher values go at the low end of the market, the more out-of-reach they become, so demand begins to weaken there as well.”

McGrath Maroubra’s Simon Nolan said even rare houses in a unit-heavy market such as Zetland were struggling to find willing buyers because they were at the top end of the suburb.

“I’m at a price point that’s barely tested in the suburb,” he said. “It’s a price point where very few people have ever paid that sort of price. It’s never easy to get two of them.

“People in Zetland don’t have that budget. It’s quite a rare person to have that money in the upper end. Overseas money doesn’t seem to be coming in either. Even they are not getting involved.

“It’s certainly not an oversupply problem but a price point problem because of affordability and interest rates, and I’m seeing that across the board.”

Warwick Williams’ Samuel Williams said the supply and demand balance had flipped in tightly held Rodd Point.

“We’ve had a lot more supply in the last 12 to 18 months,” he said. “There were a couple of outlier sales as well … when stock levels were very low so we were getting a premium too.”

Williams said that turnkey homes were commanding a premium because the cost and availability of labour was proving difficult.

Since rates had remained steady, the number of homes hitting that market in this pocket was piling up.

CobdenHayson Balmain’s Matthew Hayson said that even in the exclusive peninsula of Balmain East, there were more buyers for the lower end of the market than the top as affordability was being tested.

“We’ve said the depth of the buyer pool has been tested for the past six months,” Hayson said.

“Supply and demand has fallen in favour of buyers, and any agent will tell you ‘you’ve got a two-week window to secure a buyer’, and if you don’t, you’re in for a tricky time,” he said. “That’s very much evident at the top end.”

As a recent example, he said that a property in Balmain East hit the market with a guide of $15 million, the auction was postponed, and the guide dropped to $12 million before selling for $10 million in a private treaty sale.