Sydney’s top quartile has dropped 5.7 per cent since its peak in October 2025, and Melbourne’s has topped 8.4 per cent since November 2021. · Source: Getty/Newswire
Affluent Sydney and Melbourne suburbs are seeing the biggest house price falls, with suburbs on Sydney’s northern beaches and those in Melbourne’s east and Mornington Peninsula dropping the fastest. Some analysts are predicting a price drop of as much as 10 per cent, which would mark one of the largest price corrections in decades.
The federal government’s overhaul of negative gearing and the capital gains tax discount, along with high interest rates, has already helped push clearance rates down. Auction clearance rates fell to 47.4 per cent last week across the capitals, the lowest it’s been since April 2020, as Covid rattled the market.
New analysis of Sydney and Melbourne market segments by Cotality for The Australian Financial Review revealed that suburbs in Sydney and Melbourne’s top quartiles are falling the fastest.
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Sydney’s top quartile has dropped 5.7 per cent since its peak in October last year, while Melbourne’s top quartile has slumped 8.4 per cent since its peak in November 2021.
Sydney’s northern beaches suburbs have seen the biggest falls, with the median house price in Terrey Hills dropping 22.3 per cent to $2.7 million from its peak of $3.5 million in October 2021.
North Curl Curl and Avalon Beach have dropped 15.1 and 13.7 per cent, respectively, from their peaks in 2025 and 2022. Eastern suburbs have also experienced sharp falls, including Kensington down 15.1 per cent and Bronte down 13.8 per cent.
In Melbourne, the biggest price drop was seen in Flinders on the Mornington Peninsula, where prices have dropped 31 per cent to $2.3 million from a peak of $3.2 million in November 2021.
Caulfield North has dropped 19.2 per cent from its post-pandemic peak, while Deepdene is down 17.6 per cent.
Where are house prices falling the fastest?
Here are the Sydney and Melbourne areas where house prices have dropped the furthest from their peak, according to Cotality’s May data.
Sydney suburbs
Terrey Hills: 22.3 per cent drop since 2021 to $2.69 million
Bundeena: 20 per cent drop since 2022 to $1.47 million
Waverley: 15.9 per cent drop since 2022 to $3.9 million
Malabar: 15.6 per cent drop since 2025 to $3.06 million
Kensington: 15.5 per cent drop since 2024 to $3.15 million
North Curl Curl: 15.1 per cent drop since 2025 to $3.61 million
Little Bay: 14.7 per cent drop since 2024 to $2.57 million
Bronte: 13.8 per cent drop since 2022 to $5.65 million
Avalon Beach: 13.7 per cent drop since 2022 to $2.85 million
Chifley: 13.1 per cent drop since 2025 to $2.49 million
Story continues
Melbourne suburbs
Flinders: 31 per cent drop since 2021 to $2.26 million
Tootgarook: 24.6 per cent drop since 2022 to $870,000
Rye: 23 per cent drop since 2022 to $980,000
Sorrento: 22.56 per cent drop since 2022 to $1.84 million
Blairgowrie: 22.3 per cent drop since 202 to $1.23 million
St Andrews Beach: 20.8 per cent drop since 2022 to $1.33 million
Caulfield North: 19.2 per cent drop since 2021 to $2.28 million
Portsea: 18.8 per cent drop since 2022 to $2.77 million
Dromana: 18.6 per cent drop since 2022 to $990,000
Deepdene: 17.6 per cent drop since 2024 to $$3.06 million
Home values face $100,000 drop: ‘Economic fallout will be ugly’
The major banks have lowered their house price forecasts, with each expecting bigger drops in Sydney and Melbourne.
NAB has the bleakest outlook and is expecting a nationwide drop of 2 per cent this year across the capitals, led by a 6 per cent fall in Sydney and 7 per cent in Melbourne.
According to some modelling, a drop of 7 per cent could wipe around $100,000 from the value of a median house in Sydney and $75,000 in Melbourne.
Morgan Stanley has forecast the national market could drop by 5 to 10 per cent, while SQM Research forecasts Sydney housing prices could fall by up to 9 per cent this year and Melbourne by up to 7 per cent.
SQM Research managing director Louis Christopher’s final auction results revealed Sydney’s clearance rate was 31.9 per cent, while Melbourne’s was 37.6 per cent.
Economist, and former adviser to the Gillard government, Stephen Koukoulas said on Tuesday the house price downturn had “all the hallmarks of being one of the most severe for many decades”.
“Early days still, but a 5 to 7 per cent fall might not be enough,” he said.
“If it does hit -10 per cent or more, the economic fallout will be ugly.”
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