Where are they now? Property prices drop in Melbourne’s boomtime suburbs

The Mornington Peninsula dominated the list of greater Melbourne suburbs where house prices rose most during the boom, but the lifestyle hotspot has not been spared in the downturn.

House values in a dozen coastal suburbs jumped by 40 per cent-plus when the pandemic hit, but some have already fallen as much as 15 per cent, CoreLogic figures show.

Portsea on the Mornington Peninsula was a popular pandemic retreat.Credit: Jessica Shapiro

But values are well above where they were prior to the pandemic, and are expected to remain there, despite the interest rate-induced market downturn, experts say.

The biggest jump in values was in St Andrews Beach, up 72.8 per cent between March 2020 and its peak in March this year, CoreLogic data shows.

But values there have since come back 15 per cent to a median $1.391 million, holding 46.9 per cent above pre-pandemic levels.

All the top 20 suburbs where house values rose most were found along the peninsula, as were seven of the top 20 by unit value jumps.

CoreLogic head of Australian research Eliza Owen said St Andrews Beach’s prices have only come back by 15 per cent so far, with those who bought in 2020 or earlier now sitting pretty.

It was a similar story in other peninsula suburbs including Rye, Dromana, Sorrento and Tootgarook, where values peaked 49.5 per cent or more above pre-pandemic levels and have fallen by between 8.5 per cent and 14.1 per cent since.

“The Mornington Peninsula is definitely a market that dominated the housing boom,” Owen said. “On average dwelling values rose 45 per cent higher in the peninsula, from trough to peak, much higher than Greater Melbourne which rose 17 per cent across all dwellings.”

Owen expected house values in the peninsula to remain above pre-pandemic levels once prices reach the bottom of the downturn.

Unit values in East Melbourne boomed thanks to returning overseas migrants.Credit: iStock

Unit values, she said, were more varied in location. East Melbourne topped the list of the biggest 20 rises since 2020, and values rose in inner-city Kensington and Carlton as well as peninsula hotspots such as Rosebud.

East Melbourne values skyrocketed by 36 per cent to a median $816,908 by November 2022 and have not yet started to fall.

“East Melbourne had a later upswing and that’s been driven by the return of overseas migration,” Owen said.

“But some of the units are still close to the coast, like Rosebud and Somerville, and it’s giving people the seaside lifestyle while they’re buying into a relatively affordable property.”

The Mornington Peninsula has always been popular but was inundated after the pandemic began, agents said.

Significant sales included a grand estate featuring a tennis court and soccer pitch in Red Hill South that fetched $26 million in March.

A record was set in 2021 when a cliff-top mansion in Sorrento sold for $30 million. The home, known as Westbank, was reportedly snapped up by BGH Capital founding partner Ben Gray.

Westbank, a clifftop mansion in Sorrento, sold for $30 million.Credit:

Many buyers were searching for a beautiful spot to spend lockdown, while others wanted somewhere to holiday while overseas travel was mostly banned.

“We were selling to five people at a time and having 80 through an open for inspection,” Kay & Burton Portsea director Liz Jensen said. “Now we’re selling to one person, maybe two.”

Jensen said fewer owners were listing their houses for sale, and Melbourne’s unseasonably cold weather in December had also taken its toll.

Most buyers were Melburnians, she said, and many who had looked during the pandemic, but not found what they wanted, were now returning.

“Some people have been in the market for two years and have now bought off market,” Jensen said. “They were competing all through the boom and couldn’t get a toe on anything let alone a foothold because of the competition.”

Home buyers fled to the Mornington Peninsula for a better lifestyle during 2020 and 2021.Credit: iStock

McEwing & Partners Mornington Peninsula director Dean Phillips said there had been a “ginormous rush to top-end properties” including those priced between $10 million and $20 million, but the market had since slowed as people returned to international travel for holidays.

Phillips said he expected a delayed kick-off to the summer market this year, amid rising interest rates and the rising cost of living.

“It should pick up by the end of January and last until May,” he said. “Come winter, I feel the market will change and normalise.”

Though the overall market was slower, those wanting to buy were still making a move quickly, with one home on the peninsula selling within an hour of being listed, Phillips said.

“It really depends on the property right now and finding the right buyer,” he said.

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