He expects prices for more expensive homes to fall further as interest rates rise, adding the speed of rate rises and level to which they rise will be key for the property market.
“We’re fairly early in the down phase,” he said. “Considering interest rates have a lot further to go, you have to expect the upper end of the marketplace will continue on this trajectory.”
Price falls are also likely to spread to cheaper neighbourhoods, and in previous downturns the top end of the market has led while the rest of the market followed, he said.
But affordable segments could be insulated from larger declines as government help for first home buyers supports demand, he said, while lower-end homes are also attractive to investors.
Ultra-expensive properties – record-breaking mansions that perhaps fetch eight figures or more – are also less sensitive to interest rate rises, he said, as they are bought with old money or wealthy households more influenced by equity markets than interest rates. But these make up only a tiny fraction of sales.
Buyer’s agent and chief executive of propertybuyer.com.au Rich Harvey said the Sydney market is correcting and there is a clear difference between prices paid at auction in October last year and now.
Over that time, many homes in the north shore, Northern Beaches, parts of the eastern suburbs and even the inner west have come back 10 per cent in price, he said.
“Competition is lower, interest rates are rising,” he said.
“The threat of interest rate rises deters people’s confidence and as interest rates rise it will also crimp people’s [borrowing] ability.”
Properties that are poorly positioned, such as on a main road, next to the petrol station, are falling more than the best quality homes, he said. Buyers are also happy to pay more, relatively, for a renovated property than an unrenovated one because of rising construction costs and delays in getting materials and trades.
In Melbourne, Whitefox Advocacy managing director Nicole Jacobs has seen a pullback in prices but said it depends on the property.
Anything renovated is performing well, and anything in need of a big renovation can sit on the market if it is not priced right, she said.
“Unless buyers feel like they’re getting something – a deal – they’re just waiting around,” she said.
“[Vendors] have to be realistic in this market and not overprice … you’re still ahead from where it was in 2020, so it’s all relative.”
Other homes are still selling for well above their asking prices, but she warned that some of these are being quoted at low prices and then appearing to fly at auction.
“It’s a great time to sell and buy and upgrade,” she said. “If you take a slight hit, which – how big a hit is it really, given the growth we’ve had? – you’re still ahead.”