Melbourne suburbs where house prices are falling fastest right now

A cluster of well-heeled suburbs on Melbourne’s bayside have recorded the steepest house price falls in the city over the past three months, and experts say a sluggish market and high interest rates are to blame.

CoreLogic data shows Albert Park’s median house value fell 9 per cent in the three months to October, the most rapid decline in Melbourne. It was followed by South Melbourne (down 8.6 per cent) and Port Melbourne (8 per cent).

Balaclava, Elwood and St Kilda were among the top 10 suburbs with the fastest house price declines, and their median values went backwards between 7.6 and 5.9 per cent. All six bayside suburbs had median values of more than $1.3 million, and were within the top quartile of house prices in Melbourne.

Unit prices fell the most in Malvern East, down 6.4 per cent. It was followed by Flemington (down 6.1 per cent) and Ascot Vale (down 5.9 per cent).

CoreLogic head of Australian research Eliza Owen said the price falls in Albert Park were significant.

“It’s a massive shift and it’s the equivalent to over $200,000 taken off the median value. Albert Park firmly sits in the higher end of house values where, broadly, through this cycle values have fallen the fastest,” she said. “You could say the same for Elwood with both suburbs’ house medians sitting above the $2 million mark.”

Albert Park has recorded the steepest decline in house values over the past three months. Credit: LUIS ENRIQUE ASCUI

“It looks like the price falls across this market are deepening at the moment. The market was fairly steady in the [previous] three months to July.”

Morrell and Koren buyers’ advocate Matt Cleverdon said Albert Park and surrounds had had little sales activity recently, which could contribute to weakening prices.

“There’s still a bit of caution and people are looking for clear direction,” he said. “They’re probably still operating with caution towards transacting, making sure they’re not overpaying and there’s competition for the property.

“There’s a lot of want to move and not a lot of need to move.”

Cleverdon said the majority of properties selling in the area were ex-investments, which were considered lower quality than family homes and attracted lower prices.

“They’re inner-city suburbs where people are less under pressure to sell. Some of the people who have investment properties in that area are looking to sell before land tax comes in at the end of the year.”

Belle Property Albert Park director David Wood agreed. “If you talk about Albert Park, there’s a higher percentage of people who own their homes, i.e. they don’t have a mortgage.

“For those people, if they perceive the market isn’t at a good level of price compared to what it might have been, they are reluctant to sell. The increase of unrenovated homes that were previously rental properties has been a big influence on the price point.”

Wood characterised the falls as a “blip” the expensive markets would easily recover from when interest rates fell.

Clifton Hill and Abbotsford, two neighbouring, inner-north suburbs, were among the 10 locales with the deepest declines over the past three months. There, values fell 6.2 per cent and 6 per cent, respectively.

Nelson Alexander Fitzroy agent Roland Paterson said the suburbs were facing a similar market dynamic to the bayside cluster.

“Really good apartments are flying out the door because people can’t get the money and don’t have the capacity to buy a terrace home,” he said. “The unrenovated terrace homes are down about 10 per cent.”

Patterson said fewer family homes were being listed, which meant there were fewer big sales to buoy the market.

“I do think when there’s less turnover in the family home sector, that does choke up the market a little bit. There’s a lot of couples, for example, that want to upgrade, but there’s not a lot of offerings to make it worth their while,” he said.

While prices were going backwards, Patterson said he felt property became overvalued in the COVID-era boom.

“When you look at what people paid for things in 2020, 2021, it’s often you’ll see it and say: ‘oh well that’s what it’s worth now’,” he said.

Owen said expensive suburbs tended to have more volatile median prices, and often led downturns. She said high interest rates and their resulting cuts to borrowing capacity could be affecting would-be buyers’ ability to pay for expensive homes.

“Even in very high-end markets, when economic conditions are softer, if you have executives buying into the very high end, their compensation can be affected by business performance,” she said. “It’s not insulated from weaker market conditions.”

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