The Melbourne suburbs where house prices fell and rose most this year

Melbourne house values have fallen by as much as 10 per cent over the past year in a string of sought-after suburbs in the city’s south and east.

The weakening neighbourhoods include bayside spots and pockets where the typical house costs more than $1 million, CoreLogic figures show.

It comes as Melbourne’s property market has been softening this year, under pressure from sustained higher interest rates, higher taxes on secondary homes, and an increase in the volume of homes for sale. Melbourne home values are 2.3 per cent lower than a year ago.

The biggest fall in house values was in Chelsea, down 10.2 per cent in the 12 months to November. Neighbouring Bonbeach lost 8.9 per cent.

There were falls of at least 8 per cent in Dromana and Rye on the Mornington Peninsula, plus Doncaster, Mont Albert North, Ormond and Prahran across the eastern and south-eastern suburbs.

CoreLogic head of Australian research Eliza Owen said Melbourne’s property market was the softest of the capital cities this year.

Beachside suburbs like Chelsea and Bonbeach recorded house price falls this year.Credit: Joe Armao

She highlighted uncertainty around taxes for investment properties, the vacancy tax, and soft demand from buyers in the wake of weaker population dynamics over the past few years.

The lifestyle and peninsula markets in particular were off their peaks, while lending conditions were prohibitive for some of the more expensive suburbs.

“The flip side of that is these could be some of the markets that start to emerge as some of the first to recover in 2025, just because well-capitalised buyers who are interested in this price point, they’ll prob be watching it closely, and, once it falls enough, be keen to buy back in,” she said.

By contrast, house prices rose over the past year in several outer suburbs with a million-dollar median or much less. Beaconsfield, Pearcedale, Noble Park, Gembrook, Jacana and Coolaroo are all at least 3 per cent higher over the year, bucking the broader trend.

Owen thought Melbourne’s market overall looked more affordable now, which is attractive to buyers and could result in some stabilisation in pricing over the next year.

“What we’ve seen at the low end of the Melbourne market is it’s actually been the most resilient over the course of the year,” she said.

“Cheap markets in Melbourne are just down to a point where they look attractive to buyers again and that could be contributing to green shoots.

“The more affordable areas on the list could represent people looking to buy reasonably priced family homes and find good value.”

A couple of the more exclusive neighbourhoods managed to post price rises, including Balaclava and Middle Park.

Ray White Chelsea partner and auctioneer Ruben Gueli said his area has been a tale of two markets.

“Anything that’s compromised, whether it’s location, condition … 18 months ago people would overlook the fact that a house didn’t have car accommodation, whereas now they aren’t,” he said. “They’re saying if I’m going to buy, I want a second toilet or a bathroom, I want a garage, and they’re not compromising.

“Everything that is turnkey and uncompromised is essentially performing unchanged.”

He said building costs have risen, and both working families and developers have stopped buying knockdown-rebuild houses. Properties that need work are lingering on the market for longer.

“It’s all down to price sensitivity, so if the property is priced correctly within the market it will perform well and as it should. If it’s not, then that’s when days-on-market blows out.”

He feels buyers and sellers are waiting for interest rates to come down, but he has noticed investors start to come back to the market due to commentary about Melbourne being in a buyers’ market.

“That buyers’ market is probably going to go on for a little longer than traditional trends because of the interest rates.”

In Beaconsfield, OBrien Real Estate corporate director Dean O’Brien said the suburb has been bucking the trend as it has limited sellers and high demand from local families who stay for the long term.

“It’s just a great suburb, it’s a small suburb that’s very family-oriented,” he said.

“There’s been very limited stock over the last year because it’s an aspirational area. Once they get to Beaconsfield they don’t need to sell.”

He was unsurprised to hear that prices are rising, saying homes sell faster in Beaconsfield than in surrounding suburbs and the buyers are less worried about interest rates.

“They’re not first home buyers,” he said. “Interest rates aren’t a discussion. It’s more about, ‘Do we want to buy this house?’”