Sydney suburbs where houses cost $2 million-plus and are getting cheaper

Some of Sydney’s ritziest suburbs have been hit by falls in house prices over the past year, affected by the triple whammy of NSW government rezoning, continued high interest rates and uncertainty in the global economy.

Among the most affected has been exclusive Vaucluse in the eastern suburbs, where the median price slumped by 17.2 per cent in the year to March 2025 to settle at $7,322,500, according to the latest Domain House Price Report.

The median price in Vaucluse slumped by a massive 17.2 per cent in the year to March 2025.

Among suburbs with a $2 million-plus median house price, several recorded double-digit falls.

In Glebe in the inner west, house prices have dropped by 14.7 per cent to $2.38 million and Haberfield by 13.1 per cent to $2.7 million. On the northern beaches, Fairlight’s median dropped 12 per cent to $3,125,000.

“I think a lot of people thought the government rezonings would never really happen, but they’re now a reality,” said Alex Lyons of Raine & Horne Double Bay, who sells regularly in Vaucluse.

“Rose Bay is one of the nominated centres and it’s going to change a lot, which obviously puts pressure on residents in Vaucluse too,” he said.

“They know that all the new development is going to mean more traffic and some of the new property could be more attractive than the older-style homes in Vaucluse that might need renovation at a time people are nervous about building costs. Then the uncertainty in the global economy is making people anxious about buying too.”

The new zoning policy encourages development of medium-density housing in nominated town centre and train station neighbourhoods, allowing terraces, townhouses and apartment buildings between two and six storeys.

Lyons just sold a site in Rose Bay of five properties at 23-31 Dover Road to developer Fortis Property Group for $75 million to be turned into a block of units. He says he’ll sell another two to three similar sites in the next couple of weeks.

Glebe is also being affected by the rezonings, with other permitted development areas including the Broadway Shopping Centre and Glebe Point Road south. Fairlight is being affected by proposed development either side, in Manly and Manly Vale.

Persistent high interest rates also tend to affect prices in expensive real estate suburbs more than in affordable areas, said Domain senior economist Joel Bowman.

“Interest rates, borrowing constraints and affordability have certainly become an increasing issue for many households over the last couple of years,” he said.

“As a result, there’s been more competition for homes in the more affordable part of the market which have increased prices there, rather than in the top end, particularly in Sydney, where prices have declined more.

“Higher-priced areas are more sensitive to interest rate changes and we’ve had so many rises and only one cut so far. They also make high-income households less keen to buy real estate as, with an elevated cash rate, they can invest elsewhere for better returns.”

House prices in Glebe in Sydney’s inner west have dropped by 14.7 per cent to $2.38 million in the year to March 2025.Credit: Dean Sewell

In Glebe, which recorded the second-biggest price drop of Sydney’s $2 million-plus suburbs, Matthew Carvalho of Ray White Erskineville / Alexandria / Glebe / Surry Hills said homes needing renovations were not selling strongly, with buyers preferring to hold out for newer properties.

“Stuff that looks new is never selling better,” he said. “But anything that requires renovation is not selling as strongly. Everyone has a fear of building costs.

“It’ll probably take a couple more interest rate falls to see a change.”

In Fairlight, there’s also an appetite for newer properties, particularly with rezonings nearby.

“Newly finished properties, with the government changes and more development happening, means there’s now a lot more choice for buyers,” said Georgi Bates of Cunninghams Real Estate.

“There’s been a lot more development of semis, attached houses, but some of the designs haven’t been particularly brilliant. So we do have situations where one of the semis sells for a good price – in one instance to a downsizer who was selling their house and was stressed about having somewhere to go – but then the other struggles to achieve a price even 10 per cent or 20 per cent less.”

Yet there are signs that the higher end of the market was starting to pick up.

Bowman said prices in the last quarter were beginning to strengthen, and the number of buyer inquiries and searches for $2 million-plus properties were both up.

“It might be the scent of a bargain in some of those sought-after suburbs, but it could also be the anticipation of more interest rate cuts that allows buyers to leverage more,” he said.

“Prices at the top end of the market might then start to adjust.”

Title Deeds columnist Tawar Razaghi is on leave.