The Melbourne suburbs where house prices have fallen most

Most Melbourne suburbs have recorded house price falls or only marginal increases over the past 12 months, amid high interest rates and a build-up of homes for sale.

Some of the largest falls in median price were in sought-after suburbs in Melbourne’s inner south-east, where owners of more expensive houses often choose not to sell during a weak patch for the market. Sales of lower priced properties continue, pushing down the median.

The biggest median house price fall was recorded in South Yarra, where prices fell 20.7 per cent over the year to September to a median of $1.8 million. It was followed by Riddells Creek, near Gisborne, down 17.3 per cent, and Armadale, down 15.8 per cent.

Double-digit falls were recorded in Elsternwick, Toorak, Caulfield North and Elwood.

Domain chief of research and economics Nicola Powell said suburb markets were typically much more volatile than the wider city. House prices fell 1.5 per cent across Melbourne over the year and units rose 1.5 per cent.

“What you’ve got is the vast bulk sitting between that 5 per cent and negative 5 per cent,” she said. “Melbourne’s housing market has gone sideways.”

Powell said it was a difficult time to move to a larger home.

“The financials of someone looking to upgrade have become hard. They haven’t seen a boost in equity and the cash rate has been higher for longer,” she said.

Melbourne’s property market has traded sideways since the Reserve Bank began hiking interest rates in 2022, and resulting cuts to borrowing power have lessened buyer enthusiasm.

Changes to land tax which made it more expensive to hold an investment contributed to a sell-off of rental properties, which added to market weakness.

Jellis Craig partner Michael Armstrong said median prices had fallen in South Yarra and Armadale because fewer expensive properties were coming to the market. It was a higher-income area, and home owners there were less affected by high interest rates, he said.

“South Yarra remains an under-leveraged market and a lot of people there are very discretionary about what they choose to sell. They’re just not taking calls from agents at the moment,” Armstrong said. “It’s a lack of activity at the top end this year.

“And then also we might have been dragged down a bit by increased supply. Anything with land tax attached to it is for sale.”

Armstrong predicted the suburbs would pick up when the RBA cut rates. “There should be some clearer air for a lot of sellers next year.”

Unit prices had the biggest falls in Chadstone (down 24.5 per cent to $540,000), Toorak (22.1 per cent to $915,000) and Sunshine (15.3 per cent to $470,000).

Recent home buyer and builder Dale Cheesman said the weak market had given his family of five a chance to upgrade to a larger home. He said moving from Carnegie into one of his goal suburbs of Malvern, Malvern East or Glen Iris was harder to justify when prices were more expensive.

“I had to save 20 per cent to 30 per cent more to upgrade into the suburb I wanted to, and that 30 per cent was really out of reach when property prices were really booming,” he said. “The fact that the heat’s come off … that has just meant that the gap is more towards the 20 per cent for me.”

The upgrade was easier because the Cheesman family was willing to compromise, trading their renovated Carnegie home for a Glen Iris fixer-upper they hope to renovate.

Gemma Sampson and Dale Cheesman and their children (from left) Angus, Stella and Hugo at the Carnegie home they just sold.Credit: Joe Armao

“Everyone’s quite scared of how fast building costs are increasing, and I’m experienced enough to know where I can get the most cost-effective build and know the most cost-effective way of renovating,” he said.

Both Carnegie and Glen Iris recorded house price drops this year, down 2.1 per cent and 5.7 per cent, respectively. That didn’t deter Cheesman when the right property came along.

“I would have liked to have gotten more for the property I sold, but I had to realise that everyone needs to drop their expectations on what their property is worth, me especially,” he said. “I felt like I got a pretty good deal with the purchase I made.”

Cheesman’s broker, Entourage director Damien Roylance, said an excess of listings had tipped the market in buyers’ favour, but only if they were willing to avoid the highly sought-after new and renovated homes.

“People who are not scared of getting their hands dirty, they’re still getting good land size in a good part of town,” Roylance said. “It’s definitely a buyers’ market at the moment and especially as we come into spring.

“I think it’s a good time to buy. If we get any rate decreases next year, people will move like lemmings.”