House prices in some of Melbourne’s most prestigious suburbs have taken a surprising turn, dropping by up to $100,000 in the past year. While the city’s overall market has seen gains, these areas are experiencing significant downturns. Here’s why.
Big Drops in High-End Areas
Some of Melbourne’s most sought-after suburbs, including Toorak, have seen steep price reductions. In Toorak, the median house price dropped by a massive $700,000, from $4.85 million to $4.15 million. It’s a striking decline, especially considering that Melbourne’s broader property market has been on the rise. This kind of drop in high-end markets is unusual, but it seems to reflect the changes in buyer demand and the types of properties being sold.
Dr. Nicola Powell, Domain’s chief of research and economics, explains to The Age that while these price falls are significant in dollar terms, they’re relative to the higher median prices in these areas. Other suburbs like Hawthorn East, Malvern, and Armadale also saw price drops, but not as drastic as Toorak’s 14.4% decline. These areas recorded single-digit reductions, but the fact that high-end markets like these are cooling off shows how the luxury property market is adjusting.
House Prices: Why Are They Falling in Certain Suburbs?
According to experts, the main reason for these drops is that fewer high-value homes are changing hands. There’s been a shift in sales towards lower-priced homes within these suburbs, which skews the median prices downward. Additionally, Victoria’s property taxes and changes in market conditions are also thought to be affecting buyer behavior. Business in the state has been tough, and that has reflected in demand for high-end properties, which is weaker than before.
On a more general level, areas that saw a price surge during the pandemic—such as Sorrento and Rye—are now facing cooling. These coastal suburbs benefited from the pandemic-era trend of people fleeing the city for a sea-change lifestyle. But as remote working normalizes and interest in second homes fades, these prices are correcting. Sorrento’s prices fell by $350,000, and Rye saw a decrease of $140,000. Experts say these fluctuations were expected given how inflated prices had become during the COVID-19 lockdowns.
In Maribyrnong, the floods of 2022 had a lasting effect on property prices. The median house price in the area dropped by more than $150,000. Kevin Nguyen from Nguyen Real Estate Footscray noted that property sales haven’t fully recovered, and this has driven down the area’s overall median price.
The Unit Market Struggles, Too
It’s not just houses feeling the pinch. In the inner-city unit market, suburbs like West Melbourne, Southbank, and the CBD have seen significant price drops. A large portion of this decline is attributed to a retreat from investors, particularly foreign buyers who are now looking to exit due to high land taxes and reduced returns on investment. Scott McElroy, an agent from Belle Property Carlton, says many of these larger, high-rise units simply aren’t appealing to owner-occupiers. With so many apartments on the market, young buyers are reluctant to purchase in buildings with hefty body corporate fees and poor amenities.
