He said areas with a higher supply of “cookie-cutter” apartments had typically seen less growth in the owner-led property boom and could fall into negative territory sooner.
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Little Bay saw the biggest unit price drops, with an average drop of 28.4% to $815,000. It posted some of the strongest growth on the previous year, with agents reporting that a surge in one-bedroom apartments had skewed the average downwards.
Prices fell by more than 10 per cent in Kogarah, Sylvania and Eastwood, and by more than 5 per cent in suburbs such as St Marys, Woolloomooloo and Erskineville.
DJW Property Sylvania Waters director Dave Watkins said the increased supply of homes for sale had reduced competition. As did rising interest rates that made buyers nervous and reduced borrowing power.
“Prices have come back an easy 10 percent for generic non-waterfront homes,” he said, but noted that A-grade properties had seen little change.
In other outlying neighborhoods, prices are much higher than a year ago, and the strongest growth has been in lifestyle locations. The median house price in Erina increased by 64.7% and the other central coast suburbs of Long Jetty, Ettalong Beach and Tumbi Umbi also saw price increases of more than 40%.
Average unit prices rose the most in Darling Point, up 50 per cent, with Newport, Avalon Beach and The Entrance also among the biggest gainers.
Barrenjoey senior economist Johnathan McMenamin said the price falls were largely due to the end of fixed-rate home loans and the Reserve Bank’s warning that the cash rate could rise earlier than expected. The full impact of the three consecutive rate hikes that followed had yet to be seen.
He expected prices nationally to drop 13 per cent from peak to trough, and more in Sydney. Price falls would be steeper in the coming months and are unlikely to stop until early 2024, after an expected cut in the cash rate in late 2023.
“This would be the longest and largest national home price decline on record,” McMenamin said.
The first quarter of the market should see steeper declines, he added, although a pick-up in investor activity combined with a pullback by sellers amid lower prices could moderate the declines.
Hannah Hooper hopes falling prices in Cremorne will make it easier to buy a home in the suburb. Credit: Rhett Wyman
The price drops were welcome news to bidder Hannah Hooper, a 29-year-old investment adviser at Stockspot, who also used the service to invest. He sold a two-bedroom apartment in May and hopes to buy a three-bedroom terraced house with his partner in suburbs such as Cremorne or Neutral Bay.
Although previously unaffordable homes have fallen into their price range, the couple expects their borrowing power to decrease when they renew their pre-approval. However, they are in no rush.
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“I’m hoping to get something in the next six to 12 months … hopefully house prices will continue to fall further and that should offset the rise in rates and the fact that we won’t be able to ask as much.”
Buyer’s agent Peter Kelaher, managing director of PK Property, said more buyers and sellers were sitting on the fence, waiting to see the full impact of the rate hike. However, he warned that buyers would have little luck with low bids and should be wary of trying to pick the bottom of the market.
“This is not the time to pick up a compromised property, this is the time to pick up an A or B grade property at a C grade property price,” he said.