The price of a typical Sydney property has taken its steepest quarterly tumble in four years, as higher interest rates and persistent affordability pressures dent buyer confidence and vendors reconsider plans to sell.
Sydney’s median house price dropped 4.7 per cent, or about $82,000, over the three months to September to $1,661,167, the latest Domain House Price Report released on Thursday showed. Prices have now fallen for three consecutive quarters, and have hit a two-year low. Over the year, house price growth fell by 5.8 per cent, the largest decline of any capital city.
The price of the harbour city’s typical unit was also down, although not as much, falling 3 per cent, or about $25,000, to $820,890 over the quarter to September. Prices have now dropped back for two consecutive quarters, and on an annual basis prices declined 2.1 per cent.
Sydney’s property price slump is now entrenched, with unit and house prices recording their steepest quarterly falls in four years, Dr Nicola Powell, Domain’s chief residential economist, said.
“Houses are definitely more into an established downturn than units, but the downturn’s broadened geographically, and it’s broadened across property types ,” she said.
“Prices for houses are now 7.9 per cent below their December 2025 peak. So this is an established downturn, and we are still expecting prices to continue to fall.”
It comes as Morgan Stanley analysts on Wednesday downgraded their forecasts, and now expect Australian housing prices to fall by 10 to 15 per cent by the end of next year.
A spate of interest rate rises has sliced borrowing capacity across the country, while cost-of-living pressures and the federal budget reforms to tax policy have combined to weigh on market confidence, Domain said. In Sydney particularly, higher stock levels, weaker clearance rates, increased time to sell and more discounting have been shifting negotiating power towards buyers .
September’s auction clearance rate was 51.1 per cent, Domain data shows, the lowest for that month since 2018, while one in four auctions were withdrawn - the highest withdrawn result ever for September.
Home stock was building in Sydney, while demand had weakened, Powell said.
“Sydney is probably the clearest example of a fear of overpaying influencing behaviour,” she said.
“This is creating more favourable conditions to buy for buyers ... It creates less urgency. Buyers have got more choice, and I think that weak sentiment is the reflection of Sydneysiders really believing waiting may result in a better buying opportunity.”
The only Sydney region where house prices rose over the year to September was the Central Coast – part of Greater Sydney – up 3.5 per cent to $1,025,000. The outer west and Blue Mountains followed (down 1.6 per cent to $1,045,000).
Despite the deepening downturn, every region of Sydney still has a median house price of at least $1 million.
For units, the biggest annual growth was also on the Central Coast, up 15.2 per cent to $720,000, followed by the south west, which jumped 3.0 per cent to $520,000. Only four Sydney regions recorded positive unit price growth over the past year.
PRD Real Estate chief economist Dr Diaswati Mardiasmo said listings and appraisals were continuing, but converting them into sales remained difficult.
“With the higher interest rates … it does make a difference whether your home loan is over a million dollars or whether your home loan is $600,000, $700,000,” she said. “Buyers are taking their time and buyers are more cautious … and that’s where the price reduction happens when there is that hesitance from buyers.”
Steve Giblett, 53, who works in engineering consulting, said he and his wife Melinda Giblett, a visual artist, were glad to have sold their family home in the Illawarra region late last year when the property market was busier.
“In this weaker market, our property in Thirroul … could have sold for hundreds of thousands of dollars less, in which case, we wouldn’t have sold, and we wouldn’t have moved,” he said.
Steve and Melinda, with their two daughters, settled on a duplex in Kirrawee in Sydney’s south earlier this year, after their Thirroul property sold. Although they bought their new home around the market peak, Steve was not concerned about prices being lower now.
“Markets are cyclical,” he said, expecting prices to come back eventually.
“I actually feel lucky that we did it then because we could have been stuck. I think people are in this situation right now. They’re stuck with properties, they want to move, but they’ll feel like, ‘I’m just not making enough of a profit from when I bought it and then paying stamp duty as well, it’s just not worth it.’ ”
Powell said vendors were now starting to question their selling decisions.
“I think they’re pausing,” she said. “When you do have weak selling conditions, sellers just hold off. You’re a downsizer, and you don’t need to sell, you just wait until market conditions improve.”
Aaron Christie-David, managing director of Atelier Wealth Mortgage Brokers, the Giblett family’s mortgage broker, said some buyers were sitting on the sidelines amid higher rates and concerns over unemployment.
“So, the buyers are retreating … there’s not that urgency in the market,” he said. “They don’t have to act now because the urgency isn’t there.”
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