“You might find these more affordable suburbs don’t go through a decline, they go through subdued growth,” Powell said.
“That will help divert demand to the unit market or divert demand to the more affordable end of the market for houses, and units are likely to hold up better than the mid to upper end.”
She said more suburbs would post annual falls in prices in the coming quarters but premium, inner areas were leading the downturn for now because these areas posted the biggest increases during the pandemic boom. House prices recorded annual falls in Sylvania Waters (down 21.3 per cent), Cremorne (down 12.6 per cent) Haberfield (down 10 per cent), and a handful of others.
Powell said it was unlikely prices would return to pre-pandemic levels as downturns historically fall short of the upswing that precedes them.
AMP Capital chief economist Dr Shane Oliver expected that recent data showing a rise in inflation, to 7.3 per cent in Australia, would have a negative impact on the property market.
Some economists were now predicting the cash rate would peak at 3.6 per cent, rather than 3.35 per cent, cutting buyers’ borrowing power further.
“Buyers and first-home buyers who might be going to get a cheaper price on a house, that will be offset by higher mortgage rates,” he said.
Mortgage rates looked likely to jump from 3.5 per cent to more than 6 per cent next year – almost doubling monthly repayments. House prices, however, would not be halving, he said.
Oliver said house prices holding up better than unit prices could be due to a hangover from COVID-19, where many buyers looked for a larger property to work from home.
Blaz Dejanovic, principal of Blaze Real Estate who sells property in the south-west, said migrants and buyers searching for bigger homes at more affordable prices were driving demand in the area.
“There is a high demand for the area based on the migrants who have moved to Australia,” Dejanovic said. “There are people who definitely want to own their own homes. They’re looking at different avenues.
“COVID has had an effect on that too. They want to work from home, and so they say ‘I can live where I want’,” he said.
He said buyers were attracted to newly created suburbs like Oran Park, up 37 per cent to $1,075,500, and Edmondson Park, up 29.4 per cent to $1.2 million, for their new housing stock and infrastructure such as train stations.
More established postcodes like Edensor Park, up 33.3 per cent to $1.2 million, were proving attractive for their larger block sizes, Dejanovic said.
Closer to the city, selling agent Catherine Murphy of The Agency North, who sells mostly in Epping where the median house price is up 8.6 per cent to $2.22 million, said the suburb was still in positive territory for now due to sought-after school catchments and good transport links, but it would not be immune to falls.
“I don’t feel Epping has immunity to what’s going on around us. I feel like we will see what every suburb in Sydney will see in terms of a further step back in pricing, but I don’t think it’ll be very impactful.”