‘Overheating’: price falls imminent in once trendy suburbs

Demand may have peaked in certain markets after years of eroding affordability. Picture: Sam Ruttyn

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They were once an affordable refuge for home buyers crushed under the weight of mounting bills and higher interest rates, but exhausted property seekers are increasingly bailing out.

New figures have revealed parts of Sydney’s “mortgage belt” of more affordable middle-ring suburbs have begun to overheat after years of runaway home price rises that defied then higher interest rates.

There was a similar trend in parts of Perth, where demand has begun to cool after close to three years of extreme price hikes, along with isolated pockets of Melbourne and regional NSW.

Property sales in these areas are now on a downward trajectory with five quarters of decreasing sales volumes and the prospect of an adjustment in prices, according to data from researcher Hotspotting.

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Recent interest rate cuts have driven up home prices in most areas, but local conditions vary and the rises haven’t occured everywhere. Picture: Richard Walker

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Hotspotting noted that 17 of the 50 national markets with the steepest declines in property transactions were in Sydney, with falling demand suggesting imminent price falls in some cases.

Another 17 of the 50 markets with the fastest declines in transactions were in WA, mostly in Perth, with an additional five suburbs in Melbourne.

Many of Sydney’s worst performers were spread across the Greater Parramatta region and included Auburn, Granville, Lidcombe, North Rocks and Wentworth Point.

Others were in the southwest, including Bankstown, Greenacre and Bexley, and in the inner west, Newtown and Leichhardt.

Melbourne suburbs included Box Hill, Broadmeadows, Doncaster, Glen Waverley and Thornhill Park.

Hottspotting analyst Terry Ryder said prices in these areas were likely to “stagnate or fall” for some time.

Some of the Sydney suburbs had lost the relative affordability that had once made them sought after, he added.

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“These were areas that were more affordable and were popular because of it, but they’re not so affordable anymore and there has been an exodus to (other) markets,” Mr Ryder said.

It was no surprise that the bulk of the national markets with falling transaction levels were in Sydney – given how much higher prices were in the Harbour City relative to other capital, he added.

“What’s happening in a lot of these once more affordable areas follows a trend that’s happening across the wider Sydney market, where the lack of affordability is pushing people out.”

Mr Ryder said there has been a spike in Sydney tenants becoming “rentvestors” rather than first-home buyers.

He attributed this to rises in the costs of buying homes in even cheaper Sydney markets, which often made an investment property in a lower-priced regional market more attractive.

Hotspotting property analyst Terry Ryder.

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A similar trend, albeit less advanced, was appearing in Perth – a market that has boomed in recent years and, which was until last year, the nation’s hottest property market, Mr Ryder said.

“Parts of Perth became frenzied. Too many investors were piling into that market buying anything they could,” he said.

“Some reckless buying caused overheating of the Perth market and prices are passed their peak. That strong growth we once had has evaporated because prices went up so much over two to three years.”

SuburbData analyst Jeremy Sheppard said an adjustment in prices was common in markets that had seen sustained rapid growth over a long period of time.

“Eventually markets run out of puff,” he said. “Buyers will see they get better value somewhere else and there’s an adjustment.”

SUBURBS WITH STEEPEST DECLINES IN TRANSACTIONS

NSW: Auburn, Banktown, Bexley, Carlingford, East Lismore, Gledswood Hills, Granville, Greenacre, Helensburgh, Leichhardt, Lidcombe, Lismore, Mascot, Mittagong, Mosman, Newtown, North Rocks, South Lismore, Tallawong, Wentworth Point

QUEENSLAND: Bargara, Broadbeach Waters, New Auckland

VICTORIA: Box Hill, Broadmeadows, Doncaster, Geelong West, Glen Waverley, Thornhill Park, Trafalgar, Williamstown

WESTERN AUSTRALIA: Applecross, Aubin Grove, Balga, Bicton, Cannington, Claremont, Eden Hill, Gosnells, Greenwood, Joondalup, Kelmscott, Rivervale, Rockingham, South Perth, Subiaco, Swanbourne, Tapping