Housing values in some wealthy Australian suburbs have slumped more than a quarter, data reveals

Nationwide data shows that many of the same wealthy areas that enjoyed exuberant price runs in the years leading up to and the initial period of the pandemic have now retraced the furthest.

Housing prices across the country have fallen 8% from their pandemic peaks, according to the Reserve Bank. Similar trends are evident in comparable markets around the world, with prices in New Zealand falling 16% after rising interest rates cooled demand.

Australian state and territory capitals that did not see the same heady rises in recent years as homes in the eastern seaboard, including Perth and Darwin, have recorded more modest falls in response to rising borrowing costs.

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And while the biggest declines in Sydney apartment prices were clustered in beachside suburbs, the suburbs with the largest house price declines are dotted across greater Sydney. City-edge suburbs Redfern and Newtown lost around one-quarter of their value from peaks hit in late 2021 and early 2022, but so did Killcare in the north and Taren Point to the south.

In greater Melbourne, some coastal suburbs on the Mornington Peninsula recorded near 20% falls from peak pricing. The southern areas of Brisbane also experienced steep drops, with Fairfield seeing a decline of 33% from its recent high.

The data has been released at a pivotal time in the property market, with price falls moderating, and in some cases reversing, in early 2023.

There are mixed data and forecasts predicting what will happen next. On the one hand, a worsening housing shortage is contributing to rising rents and underpinning a view from some analysts that prices will start rising again due to strong demand.

But a series of rapid-fire interest rate hikes is also putting pressure on many mortgage holders, with a sizeable cohort at risk of becoming forced to sell in a scenario that would depress prices.

Many of these households are also stuck with loans at uncompetitive interest rates and may be in homes worth less than when they bought them, due to the recent price falls.

Historically, financial stress is most evident across mortgage belts, where first home buyers and lower-income households are concentrated, according to CoreLogic.