The affordable neighbourhoods starting to shine in the property market downturn

Home values are much higher than a year ago in a string of affordable outer suburbs of Sydney and Melbourne despite both cities leading the recent market slowdown,new figures show.

But some local agents have a cautious outlook,saying their local markets have started to cool recently as interest rates rise.

Property values in the Frankston area are higher than a year ago.

Property values in the Frankston area are higher than a year ago.Simon Schluter

In Sydney,the highest growth over the past 12 months has been in pockets of the Hills District,south-west,Central Coast and Blue Mountains,CoreLogic’s latest Home Value Index released on Friday found.

For Melbourne,many of the top gains have been in the outer south-east and outer west,along with the more expensive Mornington Peninsula and the recovering CBD.

Absent from the list are other sought-after areas,often by the beach,which boomed during the earlier days of the pandemic and the shift to remote working. Their stellar price growth has not been sustained at the same pace,leaving cheaper locations to catch up – although this may not last.

The Rouse Hill – McGraths Hill area topped the list for Sydney,with a 19.5 per cent rise over the year to June.

“Over the course of late 2020 and through 2021,we saw in some cases,I would say,about a 30 per cent increase at least in values,” Harcourts Hillside selling agent Shad McMillan said,adding the turnaround began once the idea of future interest rate rises started to be on buyers’ minds.

“The market peaked maybe January,February 2022 … Buyers became more cautious,more anxious.”

He has seen prices for some homes drop 10 per cent since peaking,albeit to levels that are still higher than a year ago,supported by buyers from the city and North Shore moving further out to work from home part of the week. Someone looking for a four-bedroom house could expect to pay $1.4 million to $1.6 million,or $1.5 million to $1.8 million for two storeys.

He expects an adjustment period of another four to six months,with prices to fall a little further,depending on the path of interest rates.

Home buyers have been moving out of the inner city to neighbourhoods such as Rouse HIll.

Home buyers have been moving out of the inner city to neighbourhoods such as Rouse HIll.Dallas Kilponen

In the south-west,property values are at least 16 per cent higher than a year ago in the Bringelly – Green Valley area,in Camden and in Wollondilly.

On the Central Coast,Wyong is still up 15.9 per cent and Gosford is up 13.4 per cent.

Stone Real Estate Wyong’s Shaun Coffey said the market has been strong for almost all of the last 12 months,with about 80 per cent of his buyers from Sydney.

“It’s just the last month since the election,and interest rate rises have definitely had an effect on the amount of buyers we are getting now,” he said.

He said the holiday home trend is tapering off and some owners of weekenders are deciding to sell given the uncertain economic outlook.

In Melbourne,some of the neighbourhoods where prices are highest compared to last year are in the south-east. The regions of Casey south,Casey north and Cardinia are all up more than 8 per cent. Frankston is also up 6.6 per cent.

OBrien Real Estate Berwick’s Marc Oliver said pockets of the Casey area have increased in price by 10 per cent to 20 per cent during the boom,but in the last couple of weeks the time taken to secure a sale has started to slow.

“It has just slowed recently since the interest rate lift,but properties are still selling,” he said.

Almost all his buyers are moving from the inner suburbs looking for more space. In Clyde North,for example,a budget of about $800,000 would stretch to a four-bedroom house.

Prices are also higher than last year in the west,where the Melton – Bacchus Marsh area and Wyndham are each up more than 8 per cent.

Melbourne’s CBD bucked the outer suburb trend,where an apartment market recovering from COVID-19 lockdowns pushed the area’s median dwelling value up 11.4 per cent in a year.

The Mornington Peninsula was another outlier. The more expensive area is still up 10.6 per cent on a year ago after soaring during lockdowns and has managed to stay in the limelight aftertopping earlier price growth rankings.

Mornington Peninsula properties are still attracting buyers.

Mornington Peninsula properties are still attracting buyers.iStock

Peninsula Sotheby’s International Realty managing director Rob Curtain said the upper-end beach market was not as sensitive to interest rate changes and would continue to field demand from retiring Baby Boomers keen to buy and hold,even if a family home in Sorrento or Portsea can cost $3 million to $4 million.

“People aren’t selling so that is holding prices quite firm,” he said.

“I have seen a small pullback in prices … I haven’t seen a significant pullback in prices.”

Elizabeth Redman is the national property editor at The Age and The Sydney Morning Herald.

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