The housing downturn is now national, but it is not hitting every price bracket the same way. According to Cotality’s September chart pack, upper-quartile values in Sydney and Melbourne sit 10.7% and 10.5% below their respective peaks. The sharpest losses, the firm’s senior researcher says, are still clustered among the more expensive homes.
That is worth pausing on. Most coverage frames the market as a city-by-city story. The price-tier split cuts across cities, and it says more about what is actually driving the fall.
Borrowing capacity bites hardest at the top
The official cash rate reached a 15-year high in September, and another increase may follow the next month. Higher rates shrink what a lender will let a household borrow, and that squeeze scales with loan size. A buyer stretching to a $1.7 million purchase loses far more in dollar terms than someone borrowing for a $700,000 home when the serviceability buffer tightens.
In plain English: the bigger the loan, the more a rate rise costs in borrowing power, so the upper tiers feel it first.
Wealthy buyers can afford to wait
Brokers say wealthier buyers have become cautious as borrowing costs climb. A Perth broker described a house asking $1.7 million that sold for $1.535 million, a discount of $165,000 on the asking price. Affluent purchasers, often adding to an existing portfolio, have the option to sit out the market. Sellers at that level then face a thinner pool of buyers willing to pay full price.
The catch is that this behaviour is voluntary. People with equity and cash flow can pause. When enough of them do, prices at the top soften even without forced selling.
The lower end is tighter, but not uniformly firm
Entry-level buyers do not have the same luxury. They need a home, and they are competing for a limited supply of them. A broker quoted in the report says that shortage keeps competition alive below the million-dollar mark.
But brokers do not agree that the cheaper tier is safe. A Bunbury broker argues that changes to the negative gearing concession pushed investors out of the market. In his area, lower-priced units once advertised at $750,000 now sell for around $670,000 to $680,000. That is a fall of roughly 9% to 11% from the old asking price, which is not far from the top-tier declines. Note this is one broker’s local observation, not a national figure.
So the split is real, but the mechanics differ. At the top, it is borrowing power and buyer patience. At the bottom, it is investor tax settings removing a layer of demand. For more on that second force, see our look at the investor pullback and what it means for renters.
What this means for trade-up demand
A weaker upper tier has a knock-on effect. Households planning to sell a mid-priced home and buy a dearer one need both sides of that deal to work. If the home they want to buy is falling, waiting can look attractive. If the home they must sell is also softening, equity shrinks and the move stops making sense.
That can slow turnover in the middle of the market, which in turn reduces the supply of homes that first-time buyers would otherwise be able to purchase. It is one reason the lower end can stay tight even while prices there edge lower. Our guide to house prices, downturns and auctions explains how thin transaction volumes can distort the headline numbers.
Is the worst still ahead?
A New South Wales broker believes it is, pointing to slumping builder inquiries and sellers holding listings back. Neither is a price measure, but both are early indicators. Fewer builder inquiries suggest weaker confidence in future values. Withheld listings can mask the true level of distress, because sellers who can wait are not yet transacting.
What would shift this view? A pause in rate rises would ease the pressure on borrowing capacity, which matters most at the upper end. Conversely, further increases would likely widen the gap between those who can wait and those who cannot.
One practical step
If you are weighing a purchase or sale in the upper tiers, test your numbers against a lower borrowing capacity than your current approval suggests, and check recent sold prices against asking prices in your target suburb. The gap between the two is the clearest sign of how much negotiating room exists. Subscribe to the newsletter for weekly updates on how these tiers are moving.
General info, not financial advice.
