Sum sets in the west: House prices starting to plunge in capital cities’ more affordable suburbs

House prices are now plunging in more affordable suburbs of Australia’s biggest cities with the downturn contagion spreading as rate rises deter first homebuyers and Budget property tax changes turn off investors.

The biggest falls are no longer just in Sydney’s wealthy suburbs by the beach and the harbour with postcodes in the western suburbs now seeing steep declines, despite being within the price cap for the Federal Government’s scheme to help property newcomers.

Blacktown’s median house price has fallen by 6.7 per cent during the past three months to $1.083 million, Cotality data showed.

In the city’s south-west, Punchbowl prices have dived by 7.5 per cent to $1.349m.

Both suburbs are within the $1.5m cap for Sydney for first homebuyers to qualify for the Federal Government’s 5 per cent deposit scheme.

Even if the Reserve Bank of Australia leaves rates on hold next Tuesday, its three hikes in February, March and May were particularly turning off dual income, first homebuyers who would traditionally be considering more affordable suburbs.

“There’s some affordability constraints in that regard and the broader impact of the demand side pressures are building for a lot of people,” Cotality’s head of research for Australia Gerard Burg told The Nightly.

“First homebuyers are the most rate sensitive of the buyers — they need the largest deposit saved up, they’re often borrowing towards the upper end of their capacity to begin with.”

In more affordable suburbs, the downturns are even more severe than falls occurring in some of Australia’s most expensive suburbs on Sydney Harbour, after Labor restricted negative gearing to brand new homes from July 2027 if they were bought after the May Budget.

“They’re absolutely having an effect too. There’s little doubt that investors will have stepped away,” Mr Burg said.

Bellevue Hill in Sydney’s eastern suburbs has suffered a 6.2 per cent fall since early May in an area where the median house price of $10.975m is almost 11 times Australia’s mid-point price for a capital city house.

In current trends continue, Sydney could be in for its biggest downturn since property prices fell by 13 per cent between 2017 and 2019 following a bank regulator crackdown on interest-only loans, with NAB predicting a 5 per cent drop this year in capital city markets and a 10 per cent decline in Sydney.

“It’s not out of the realms of possibility given historical trends,” Mr Burg said.

“If you’re sitting on the sidelines thinking to yourself, ‘Is now the time I want to buy a house?’ and you think, ‘Perhaps, if I wait six months, it’s going to be considerably cheaper’ — you’re probably more likely to wait.”

Melbourne’s more affordable suburbs are also seeing steeper declines with Werribee South’s mid-point house price declining by 4.6 per cent during the past three months to $808,660, which is under the $950,000 cap for the 5 per cent deposit scheme.

The decline there was more severe than the 4.2 per cent drop over the same period in the upmarket, inner-east suburb of Hawthorn which has a median house price of $2.521m.

In Brisbane, affordable suburbs near Ipswich are now suffering sharper declines with prices at White Rock falling by 3.2 per cent over three months to $1.014m, which is below greater Brisbane’s $1.207m mid-point but slightly above the 5 per cent deposit scheme cap of $1m.

This is occurring as prices continue to rise in more upmarket postcodes with St Lucia values still climbing by 3.2 per cent since May to $2.34m.

In Adelaide, house prices at Ottoway in the city’s north have fallen by 5.1 per cent during the past three months to $797,310, which is well below the South Australian capital’s mid-point of $1.008m and under the 5 per cent deposit cap of $900,000.

This occurred as price continued to climb by 1.1 per cent in upmarket Norwood to $1.678m.

In Perth, declines in more affordable suburbs are less severe but in the city’s east, Gosnells prices have fallen 1.3 per cent over three months to $810,488, which is under the $850,000 price cap for the first-home deposit scheme.

Peppermint Grove prices on the Swan River meanwhile still rose by 3.4 per cent to $4.713m.