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Many Melbourne family homes have lost more than $100,000 of value in the past three months, with suburbs in the east and south-east dropping by almost 7 per cent.
House values in Blackburn, Beaumaris and Mont Albert have dropped by 6.9 per cent over the June quarter, as properties across the Melbourne market fell 2.6 per cent, new Cotality data shows.
Units have been hit even harder in Murrumbeena, where the median value has fallen 7.1 per cent since March, while Kew, Elsternwick and Carnegie are all down by 5.5 to 5.6 per cent over the same period.
Cotality head of research Tim Lawless said with Melbourne’s median property value at $808,486 – much lower than Sydney’s ($1,265,608) and below medium-sized cities such as Brisbane, Adelaide and Perth – the city’s already “vulnerable” market was feeling the impact of both rate rises and the changes to negative gearing and the capital gains tax discount announced in the May budget.
“I think the hangover of the federal budget has added some additional fuel to a market that was already very fragile and weakened,” he said. “And deeply pessimistic consumer confidence is another thing.”
Lawless thought the concentration of the impact in areas with values well above the Melbourne median – for both house and unit markets – suggested greater sensitivity to interest rate rises for buyers of family homes and higher-end apartments.
“Markets where it’s expensive seem to be wearing the biggest downturn at the moment,” he said, noting affordable entry-level homes were probably softening the impact on the overall Melbourne median.
Buyer’s advocate Tonya Davidson said it was clear homes in the upper-end of the market were bearing the brunt of a lack of confidence.
“If we’re looking at the landscape as a whole, it is a buyers’ market,” she said.
“There’s a big percentage of [prestige vendors] that have just pressed pause to wait and see, and there are others that have shelved their plans altogether because it just doesn’t make sense for them at the moment.”
Fletchers Blackburn director Ben Williams said the fall in Blackburn’s value matched what he had seen over the past three months, and was sure other agents in the eastern suburbs would be experiencing similar impacts.
“Throughout COVID, Blackburn and Box Hill probably went up in value far greater than the rest of Melbourne,” he said. “So when it turns … it’s also easier for it to drop back a greater percentage as well.”
Williams thought the market had already started to cool in November, as expectations grew that rate rises were on the horizon in 2026 thanks to stubbornly high inflation.
“Once that belief became popular, we saw an easing of the market,” he said.
“And then this year we have had three interest rate increases, which has done what it’s designed to do – pull property prices back.”
Davidson thought an ongoing downturn would have an impact on the property industry as a whole, particularly in the higher end, as agents who had started their career during a house price boom experienced selling in a down market for the first time.
“When you start in a recession, you develop skill sets that are pretty robust,” she said, noting agents who knew how to explain the market to vendors and help them set a fair price would continue to do well.
Lawless said that another rate rise this year would put more downward pressure on a “sensitive” market, but pointed to the ANZ-Roy Morgan consumer confidence index trending upwards in recent months, after hitting a record low in March of this year.
“I think if we did see some certainty returning to some of the geopolitical tensions, then that would help to support confidence,” he said.
“But I don’t think that would be enough to get confidence anywhere near optimistic territory. For that to happen, we need to see domestic economic conditions and inflation improve.”
Williams thought Blackburn and other areas that had seemingly been most affected by rate rises would turn around almost as quickly when the Reserve Bank decided it was safe to cut interest rates again.
In the meantime, he said, the resurgence in confidence could mean buyers were adjusting to the new normal, and taking advantage of lower prices.
“We noticed that at open inspections last weekend: there were just a few more buyers out on the ground, a few more people prepared to put their hand in the air,” he said.
“Maybe we’ve found a new level and a different wave of buyers are slowly coming in.”
