Meanwhile, the top quarter could be impacted more by rising interest rates. Previous research from the Reserve Bank of Australia found more expensive areas, and those with a higher concentration of investment, were more sensitive to changes in the credit environment, Owen said.
However, she noted price growth for more affordable homes was slowing and would follow the upper end. Cheaper prices in Sydney already dipped a marginal 0.2 per cent over May but were still up over the three-month period.
“They will eventually follow the high end, the only difference is the downturn probably won’t be as severe … the lower end is more of a slow and steady performer,” she said.
ANZ’s head of Australian economics David Plank said the upper end of the market usually led upswings and downswings, and was more sensitive to interest rate changes as buyers were often more leveraged.
“Our expectation, though, is that we will see more widespread falls across all segments of the market as interest rates move up and reduce affordability more; that’s a story for later this year and into next year,” Plank said.
ANZ last week tipped property prices would fall 15 per cent from April this year to the end of 2023, revising down a previous forecast for a 12 per cent drop, following a sharper than expected lift to the cash rate. Sydney was expected to take the biggest hit, with prices tipped to drop about 20 per cent.
Plank said the nation’s most expensive, most leveraged markets, were most exposed to the impacts of rising rates, and that increasing fixed mortgage rates had already affected such markets well ahead of the official cash rate hikes. While Sydney and Melbourne were leading the downturn, other cities would follow in the coming months.
Melbourne auctioneer Ned Nikolic, a partner at Barry Plant Melton, said price growth had eased at the more affordable end of the market.
“Prices over here are definitely stabilizing, which was always inevitable, but at the same time they are not looking like they are going down anytime soon,” he said.
Nikolic was still seeing good buyer demand in his market, particularly from first-home buyers, due to the region’s affordability. However, he noted the outlook could change depending on how high inflation and interest went rates.
“When the [global financial crisis] kicked in our prices didn’t really drop, but stabilized because when people can’t afford the other areas they have to come somewhere,” he said.
Western Sydney real estate agent Blaze Dejanovic, director of Blaze Real Estate, said prices in his market were holding up well, but noted inquiries from buyers were drying up. With house hunters aware the boom was over, there was no urgency to purchase.
“We’re still averaging 3 to 4 registered bidders per property [at our auctions]which is better than other parts of Sydney like the inner west,” Dejanovic said.
More affordable price points had a larger buyer pool, Dejanovic said, and first home buyers especially were still keen to purchase.
On the divergence between price brackets in the broader Sydney market, he added: “The saying is – the bigger they are, the harder they fall.”