Australia’s most expensive suburbs are leading a downturn in prices

Key takeaways

As we move into the next phase of the property cycle, Australia’s most expensive suburbs are leading a downturn in prices.

Some of Australia’s most expensive coastal suburbs along east-coast Australia more than doubled national gains in property prices from the trough to the peak of the COVID-19 pandemic as a sea- and tree-change shift saw buyers flee the city and inner-city areas in search of safe havens and lifestyle suburbs.

But some of those same suburbs which experienced the largest gains amid the pandemic property price surge are now facing double-digit drops as pandemic fears are being replaced by growing concerns about sky-high inflation, the rising cost of living, and falling stock markets.

The COVID-19 price boom is over for some of Australia’s most affluent suburbs as buyer demand wears off and price falls begin to pick up speed.

Some of Australia’s most expensive coastal suburbs along east-coast Australia more than doubled national gains in property prices from the trough to the peak of the COVID-19 pandemic as a sea- and tree-change shift saw buyers flee the city and inner-city areas in search of safe havens and lifestyle suburbs.

But some of those same suburbs which experienced the largest gains amid the pandemic property price surge are now facing double-digit drops as pandemic fears are being replaced by growing concerns about sky-high inflation, the rising cost of living, and falling stock markets.

Corelogic analysis, given exclusively to the AFR, shows the 20 best-performing suburbs in Victoria, NSW and Queensland posted gains of nearly 70% in March 2020-February 2022, compared to the national 25% average.

For Sydney, Copacabana on the Central Coast ranked in the first place as the suburb with the biggest trough to peak change (up 61.2%), however, prices have already dropped 5.4% since their peak.

The largest price drop on the list for Sydney was Taren Point in Sutherland, which enjoyed a 56.6% rise over the pandemic boom but has already suffered a 16% drop in prices from the peak.

Newport, Kurnell, North Narrabeen, Avalon Beach, Elanora Heights, and Tamarama all also feature on the top 20 list for NSW, and each has price drops between 10.1-13.8% from their peak.

For Melbourne, the top 20 suburbs with the highest COVID-19 trough to peak change in upper quartile values was headed up by St Andrews Beach which saw prices rise 63.8% over the boom.

Prices in the suburb have now fallen 6.6% from their peak.

Interestingly, Melbourne’s top 20 list is made up entirely of suburbs in the Mornington Peninsula.

Aside from St Andrew's Beach, the suburbs of Somers, Balnarring, Fingal, Mount Eliza, and Tyabb were the areas which have seen the biggest price falls from their peak, at between 5.7-9.3%.

“The trend in Sydney and Melbourne during the pandemic very much favoured outer-fringe lifestyle markets, especially those with a coastal location,” Tim Lawless, research director at Corelogic told the AFR.

“Sydney’s northern beaches and Central Coast, and Melbourne’s Mornington Peninsula featured predominantly in the top-performing lists.”

But for Brisbane, inner-city and middle-ring suburbs were among the top performers.

Brisbane’s inner city suburb of Hawthorne recorded a 69.9% rise in its house prices over the March 2020-February 2022 period, but it is also the suburb where prices have fallen most from their peak (7.7%).

In fact, price falls in Brisbane’s affluent suburbs aren’t quite as extreme as their Sydney or Melbourne counterparts, with falls from peak mostly around 1-3%.

Two suburbs - Ceder Vale in Logan-Beaudesert and Heathwood in South Brisbane - remain at their price peak after a 63.1% and 60.5% increase respectively.

This is likely because the cooling in Brisbane’s property market lagged the rest of the country by several months - only posting a loss in August.

Australia’s sea- and tree-change shift

What we saw during the pandemic is property owners and buyers reevaluate what they want in a home.

Sea- and tree-change markets saw immense price growth over 2021, as the prevalence of remote work amid the pandemic, the relative affordability of regions and the potential for retirement decisions being brought amid labour market disruptions contributed to elevated levels of migration to regional Australia through 2021.

Instead of easy access to the city for work and nightlife, people increasingly opted for larger spaces in lower-density areas along the coast or in lifestyle suburbs where prices were cheaper and remote working was easy to do.

And while the tide has turned for some of these suburbs, many businesses have adopted a more permanent work-from-home and flexible working structure, meaning that even after prices have fallen, demand for property in some of these areas could still hold prices up higher than pre-COVID.

“There is a good chance this shift in demand could be a structural one,” Lawless said.

A point to remember

While the rises and falls recorded in these suburbs might seem attractive for some, it’s important to remember that the more expensive suburbs always lead to a boom in prices….

And then they also lead the downturn.

When investing in property, it’s important to focus attention on investment-grade or A-grade suburbs and properties.

And these more volatile suburbs are not what we would call investment-grade locations.

You see… buying an investment is not the same as buying your forever home.

You don’t need to love the property, you just need to make sure the numbers and figures stack up, so leave your own likes and dislikes at the door and focus on capital growth drivers and make sure you buy an investment-grade property in a location primed for strong long term capital growth.

And we at Metropole can help you with that.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.