Sydney Home Prices Fall for Eight Months as 2021 Levels Return in Some Suburbs

Sydney has become Australia’s weakest capital market, with home values falling for an eighth consecutive month and some suburbs giving back all the gains made since 2021. The October decline was modest at 0.4%, but the annual drop reached 6.6%, according to realestate.com.au’s Home Price Index. The figures point to a market losing ground over time, even as the latest monthly change looks small in isolation.

A citywide index gives a useful measure of direction, but it can conceal sharp differences between property types and locations. Sydney’s results show that distinction clearly: houses have fallen further than units, while some apartment markets have retreated to earlier price levels. That unevenness matters to anyone trying to read the correction from a single headline figure.

Houses absorb the sharper correction

The pullback is concentrated in houses. Sydney’s median house value is down 8% over the year, leaving a typical house at $1.505 million, compared with $1.64 million a year earlier. That represents a $131,000 reduction. It’s a substantial change in the price buyers and sellers are negotiating around, although a median doesn’t describe the result for every home or suburb.

Units have proved more resilient, though they also slipped: values declined 0.1% in October and 2.9% across the year, to a median of $851,000. The gap between the annual falls for houses and units suggests the correction isn’t moving through the two segments at the same pace. Citywide averages obscure substantial differences between suburbs and dwelling types, with some established eastern and coastal markets recording steeper losses.

In parts of Sydney, unit prices have fallen below their 2021 levels. The CBD is down 18% over five years, equivalent to about $215,000. Darlinghurst has dropped 18.1%, while Paddington is down 22%. The same pattern appears in middle-ring apartment markets including Olympic Park, Macquarie Park, Eastwood, Kogarah, Carlingford, Thornleigh and Ryde.

Those examples span different parts of the city, which makes it harder to describe the weakness as confined to one small pocket. Still, the figures don’t establish a single cause for each suburb’s decline, and they shouldn’t be read as a forecast for every apartment nearby. The clearer point is that some unit markets have lost ground over several years while the wider city’s correction has continued.

Auction clearance rates took another hit on the weekend after it became clear last week that there was likely to be another rate hike. Picture: Sam Ruttyn

Rate expectations add pressure

The market’s next test is borrowing capacity. Economists expected the Reserve Bank to raise rates on Melbourne Cup Day, a move realestate.com.au economist Eleanor Creagh said would “certainly reinforce the downward pressure already weighing on home prices around the country”. The expectation itself matters to buyers weighing up what they can afford, even before any change to repayments takes effect.

Canstar.com.au data insights director Sally Tindall said buyers’ budgets had shrunk over the year. If rates rose again on Tuesday, a person earning the average wage could lose a further $10,700 in maximum purchasing power. After five increases in a year, borrowing capacity could be nearly $60,000 lower than at the start of the year.

That estimate describes potential purchasing power, rather than a guaranteed change in what every household can borrow. But it helps explain why the rate outlook has become part of the price story: a smaller borrowing limit can narrow the choices available to buyers and change the amount they’re prepared to offer. For sellers, that can make buyer expectations harder to meet.

RBA Governor Michele Bullock is expected to announce a rate hike this week. Picture: Nikki Short

Andrew Wilson of My Housing Market said the correction had already matched the intensity of the 2018 downturn, which he described as the deepest in recent history. Even minor additional falls, in his view, would make the current decline the worst since 1987. He cited the Iran War, property tax reforms and interest rates as market headwinds. Those are his assessment of the pressures at play; the price figures alone can’t show how much each factor has contributed.

Creagh said a downturn that began in Sydney and Melbourne prestige markets had spread nationally. Sydney has now overtaken Melbourne for the deepest capital city correction, she said. That shift changes the story from one centred on high-end homes to a broader pattern of weakening prices across capital markets, although Sydney’s own results remain varied by location and dwelling type.

What the correction means for buyers and sellers

That shift matters for buyer and seller expectations: Sydney’s headline fall is no longer confined to a narrow set of high-end areas, while the return to 2021 prices in several unit markets shows how unevenly the correction is playing out. A further change in rates could deepen the squeeze on purchasing budgets and keep pressure on values.

This is more significant than it looks. An eighth straight monthly fall suggests the market hasn’t yet found a clear floor, while the difference between house and unit results cautions against treating Sydney as one uniform market. If you’re working in this space, the suburb and property type are doing real work behind the citywide average.

Here’s the thing: a lower median can reset expectations, but it doesn’t tell buyers whether a particular home is now affordable or sellers what their property will fetch. The reported declines are evidence of a broad correction; they don’t erase the variation between individual markets. And yet, the longer that weakness persists, the harder it becomes to frame the fall as a brief monthly wobble.

For now, the rate outlook is the clearest near-term pressure described in the figures and commentary. If borrowing capacity falls further, buyers may have less room to compete at previous price levels. Whether that translates into another broad decline will depend on how the market responds. Still unsettled.

Treasurer Jim Chalmers has come under fire for the timing of his budget reforms, which have put additional downward pressure on prices. Picture: Martin Ollman