Key points

• House values in 44 suburbs have dropped below a $1 million median, as have unit values in five suburbs.
• Most of the drops were in Melbourne’s middle and outer rings. 
• Interest rate rises have hit buyers’ hip pockets, reducing how much they can borrow and spend on property.

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Almost 50 suburbs across Melbourne’s middle and outer ring have fallen out of the ‘million-dollar club’ amid the sharp property downturn.

Ten interest rate rises since May last year and the rising cost of living have hit home buyers’ hip pockets, leaving them unable to borrow as much as they once could. It’s hit property prices in suburbs that once had a median of $1 million.

Across greater Melbourne, house values in 44 suburbs have fallen below $1 million since their peak, while unit values in five pricey inner-city suburbs dropped out of the seven-figure club, CoreLogic data shows.

House values in Tootgarook on the Mornington Peninsula, where many buyers moved during lockdowns, plummeted the most, down 20.3 per cent since its peak in March last year. Its median fell from north of $1.15 million to about $918,000.

Hurstbridge in the outer northeast dropped 19.6 per cent, from almost $1,044,000 to $839,000.

Falls of at least 18 per cent were recorded in Chelsea Heights and Heatherton in the city’s south, and Bittern on the Mornington Peninsula.

Unit medians tumbled most in Kew East, down 21.6 per cent from the peak in March 2020, from more than $1,056,000 to about $828,000. Median unit values dropped 19 per cent in exclusive Toorak and 14.8 per cent in Canterbury.

CoreLogic executive research director Tim Lawless said suburbs that enjoyed a boost during the COVID-19 house price boom, taking them just over the $1 million line, were now losing those gains and falling out of the club.

“As interest rates rise, buyer sentiment has also fallen, so buyers aren’t confident to make the big offers they once had,” Lawless said.

“Less demand is also weighing on the level of activity in the market and that’s affecting values.”

Buyers’ budgets have been cut by 10 interest rate rises since May last year.Credit:Chris Hopkins

He said the portion of all suburbs with a $1 million house value in Melbourne dropped from 56.7 per cent in February last year, to 45.2 per cent this year.

Across Melbourne, the pandemic property gains have been almost entirely lost during the downturn.

Melbourne dwelling values have fallen 9.6 per cent since the peak in February last year, CoreLogic data shows.

Northwest of the city, Keilor fell out of the million-dollar club, after house values dropped 16.6 per cent to a median of about $927,000.

Corey and Kelly Wilkes with their children Harvey, Kurtis, Alexie and Tilly in front of the home they bought in Keilor village. Credit:Jason South

Corey Wilkes and his wife Kelly bought a house in a sought-after pocket of the suburb – Keilor village – recently and are now planning to rebuild.

The Wilkes, including children Harvey, Kurtis, Alexie and Tilly, recently finalised plans with their builder and will move once their build is completed.

“It’s just timing for us,” Wilkes said. “Whether we’ve paid a bit over or a bit under doesn’t matter to us because we plan on staying for a long time.

“We’ve lived in Taylors Lakes for the past 20 years, and we’re really excited to move to the village.”

Wilkes said prices in the village area of the suburb were still selling well, such as a block of land close to where they bought that traded for $1.325 million late last year.

Brad Teal Woodards Keilor’s Craig Teal said there were distinct pockets of the suburb and some had been selling for more than $1 million despite the downturn. But there was a lack of listings.

“There’s no doubt interest rate rises have put a lot of pressure on people, and the properties that are coming up for sale are things like ex-rentals or because of divorces or separations – things like that,” he said.

In Chelsea Heights, OBrien Real Estate Chelsea’s Tanja Neven-Jones said the hit to buyers’ borrowing power had hit the local market.

“The interest rate rises do affect us because the demographic is upgraders,” Neven-Jones said.

“We have had 10 rises in a row and that means people who could borrow $1 million can only borrow $750,000 to $780,000.”

It was a similar story in Toorak, where unit prices had taken a hit.

Belle Property South Yarra auctioneer Joe Eason said a lack of quality stock meant the properties that came up for sale were trading for less.

“People who have good stock are keeping them as an investment because the rental market is doing so well,” Eason said.

“Buyers really want something with car parking, that’s north facing, and they’re being more picky because they have the time now.”

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