Don’t expect interest rate rises to deliver a luxury property bargain

Cashed-up buyers hoping the change in the trajectory of the property market might deliver them a luxury bargain may have to wait a bit longer in most capital cities.

One agent got a ‘good result’ on this Toorak Georgian-influenced mansion.

Cashed-up buyers hoping the change in the trajectory of the property market might deliver them a luxury bargain may have to wait a bit longer in most capital cities.

Interest rate rises tend to have a lesser impact at the top end of the market because of weaker reliance on credit. But the current housing correction – which is being led by Sydney and Melbourne – has shown signs of rippling through the various price points. But in the smaller capital cities, prestige property is holding its ground.

New analysis by national real estate agency Ray White found that of all Sydney suburbs with a median price point above $3m, 2.8 per cent had recorded declines. In Melbourne, the proportion sat at 12.5 per cent.

Recent strong migration trends and local demand in Brisbane, Perth and Canberra has held up suburbs with medians between $1m and $3m, which have yet to record falls. Adelaide had seen 3 per cent of suburbs between $1m and $2m fall but all those at the top were yet unaffected.

It is still likely too early to see much movement in prices at a suburb level, Ray White chief economist Nerida Conisbee says, particularly given at the top end that Australian median house prices have continued to rise since the start of the year, despite interest rate increases.

“Sydney and Melbourne have only recently seen a very slight decline in prices,” Ms Conisbee said. “Nevertheless, price increases are set to continue to slow over the remainder of the year.

“With inflation remaining high, it looks like we are in for a few more interest rate increases, and with that a calmer market.”

Abercromby's Jock Langley said there were always opportunities in the market, but they weren’t everywhere – it all depended on the property.

“There is always opportunity in the market but it’s slim pickings,” Mr Langley said.

“The blue ribbon areas of Melbourne metro will hold their way. It all depends on the property.”

Despite the market changing, records are still being set.

In Sydney, an off-the-plan apartment in leafy Double Bay sold for $24.95m to a couple of Eastern Suburbs retirees. The penthouse in Hong Kong developer TopSpring’s ODE development smashed the suburb record by around $9m.

Local luxury agent Michael Pallier, managing director of Sotheby’s International Realty, believes the current housing situation is a “storm in a teacup”.

“This isn’t the Global Financial Crisis,” he said. “A lot of owners, unless they get a good price, aren’t going to sell.

“We have a few headwinds that might affect the market in spring but they might not eventuate.”

Mr Langley expects spring to even out the “erratic” market of recent months, with demand from local and overseas buyers remaining competitive for the low number of homes likely to come on to the market through the remainder of the year.

He recently achieved “good outcomes” on two properties – a 150-year-old home at 8 The Vaucluse, Richmond called Howden Lodge and a Georgian-influenced mansion along Toorak’s Douglas St – for undisclosed sums.

A majority of the falls in each of the capital cities were in suburbs valued below $1m, which Ms Conisbee suggested could reflect a pullback in first homebuyer activity, as well as fewer investors.