This Spring, buyers are looking to leverage today’s changing market to their advantage. So, let’s take a look at the various patterns being seen across our major cooling markets right now, and where buyers can find the best value. 

In our new McGrath Report 2023, Eliza Owen, head of residential research at CoreLogic, explains that during housing market upswings, highly desirable areas are amongst the first to move.

Then, as interest rate conditions change, or people get priced out of these markets, buyers start to look for value next door in the ‘bridesmaid suburbs’. 

For example, in Melbourne’s Bayside local government area, home to the blue ribbon suburb of Brighton which has a median house price of $2.4 million, values in nearby Highett, which has a median price of $1.7 million, took off by 18.9% over the 12 months to April 2022.

In Brisbane, house prices rose in the 12 months to April 2022 by 33.8% in Keperra in the city’s north. Its median price of $851,494 was a more affordable

option than its neighbour, Enoggera, at $1.1 million. 

Eventually, all booms peter out, and by early 2022, house price growth in Sydney and Melbourne had gone into negative territory.

When a housing market moves into a downturn there is often a patchwork effect at the start, as we can see in the latest CoreLogic data. 

Expensive suburbs tend to see a fall in demand first because they aren’t as affordable under tighter credit conditions. Then demand often spills over into the next affordable, nearby market.

Some of these cooling suburbs began offering new value to buyers in the first three months of 2022. 

In Sydney, Melbourne and pockets of Tasmania and the ACT, buyers were discovering improving affordability in suburbs they couldn’t afford in 2021, particularly in inner and middle rings, which were the first into the downturn. 

For example, in Sydney’s inner suburb of Alexandria, the median house price dropped 4.8% in the first three months of 2022 to $1,969,099, while the

neighbouring, more affordable suburb of Mascot (median price $1,812,562) only pulled back 0.5%.

In Canberra, house prices in the middle ring suburb of Mawson dipped 0.9% to a median $1,153,533, while in neighbouring Phillip, where the median was only $637,391, growth over the same period was 9.3%.

In the same time frame, median house prices in Hobart’s Sandy Bay cooled by 0.8% to $1,433,837, while in more affordable Mount Nelson next door, there was an uptick in median prices of 1.7% to $999,320.

At a citywide level in Sydney and Melbourne, many of the outer suburbs continued to grow while the inner and middle rings were cooling. 

During the second quarter of 2022, these cooling prices extended past the inner and middle rings into much of the outer suburbs of Sydney and Melbourne, so that by July more than 80% of suburbs in both cities had recorded declining values.

In these outer areas, we saw the same trend. Some suburbs with higher median values fell faster than their less expensive neighbours, which in some cases continued to grow in value.

But with cooling prices comes opportunity, and many of these more expensive neighbourhoods will come back into contention as values continue to readjust.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

For more information including articles, checklists, guides and more visit McGrath’s Insights Centre.

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