Imagine waking up to find your dream home in Melbourne just became $100,000 more affordable—but only in certain neighborhoods. Sounds too good to be true, right? Well, it’s happening, but there’s a twist. While Melbourne’s overall property market is booming, some of its most prestigious suburbs are seeing dramatic price drops. And this is the part most people miss: it’s not just about the numbers—it’s about what’s driving these shifts and what they mean for buyers, sellers, and the market as a whole.
In the upscale suburb of Toorak, the median house price plunged by a staggering $700,000 over the past year, dropping from $4.85 million to $4.15 million, according to Domain data. But here’s where it gets controversial: this isn’t an isolated incident. Other high-end markets like Hawthorn East, Malvern, and Armadale have also seen six-figure price declines, though their drops were more modest compared to Toorak’s 14.4% fall. So, what’s causing this? Is it a sign of a broader trend, or just a temporary blip?
Dr. Nicola Powell, Domain’s chief of research and economics, explains that these price drops are relative to the median house prices in these suburbs. In simpler terms, a $700,000 fall in Toorak is equivalent to the price of an entire home in some other areas. It’s a stark contrast to Melbourne’s overall market, where the median house price rose by 6.2% over the same period, reaching $1,083,000. But why are these elite suburbs bucking the trend?
Powell suggests that some high-end markets have undergone a correction, and the drop in median prices could reflect the types of homes selling. For instance, fewer sales at the ultra-luxury end and more activity at the entry-level price points within these suburbs could be pulling the median price downward. “These areas experience big swings,” she notes. “They see greater gains during upswings but also pullbacks during softer periods.”
Buyer’s agent David Morrell of Morrell & Koren argues that Toorak’s market is too diverse to compare directly with Melbourne’s broader median house values. “Toorak has A, B, and C grades,” he explains. “One side of the street can be worth 10% more than the other. When you lump it all together, you get the wrong message about the top end.”
But here’s a bold interpretation: could Victoria’s property taxes be to blame? Morrell thinks so. He points to the state’s increased taxes on investment properties and holiday homes, arguing that they’ve dampened demand for prestige properties. “Business in Victoria has been battered across the board, and it’s reflecting in real estate,” he adds. Tonya Davidson of Davidson Property Advocates agrees that Toorak has “different markets” and doesn’t believe house values there have dropped as much as the data suggests. “When you’re dealing with sales over $20 million, a $700,000 fluctuation is easily accounted for,” she says. “Residents of Toorak can sleep soundly tonight.”
The trend isn’t limited to inner suburbs. Coastal areas like Sorrento and Rye on the Mornington Peninsula have also seen prices fall—by $350,000 and $140,000, respectively. Powell attributes this to a pandemic-era overshoot, when city buyers flocked to these areas for a beach lifestyle. “Remote working and the pandemic inflated values well above fundamentals,” she explains. Now that work patterns have normalized, demand for secondary homes has cooled, and the Victorian government’s tax hikes on second homes have further impacted coastal property prices.
In Maribyrnong, the median house price dropped by over $150,000 following the 2022 floods. Kevin Nguyen of Nguyen Real Estate Footscray notes that sales in the area haven’t recovered, with the new median price at $877,500. Powell agrees that natural disasters like flooding can have a short-term impact on property markets, as buyers factor in the risk of future hazards.
The unit market tells a similar story, with inner-city areas like the CBD, West Melbourne, Carlton, and Southbank seeing price declines. Scott McElroy of Belle Property Carlton attributes this to a retreat in investor demand. “Many investors are exiting these buildings to avoid land tax, which is eating into their returns,” he says. Additionally, larger apartment blocks with over 55 units are less appealing to owner-occupiers, who prefer smaller, boutique apartments. “Even younger buyers are avoiding these buildings due to high costs, like $6,000 in body corporate fees,” McElroy adds. “These apartments are great for renting but tough to sell without investors, who are currently scarce.”
So, what does this all mean for you? Whether you’re a buyer, seller, or just an observer, these shifts raise important questions. Are we seeing a temporary correction in high-end markets, or a longer-term trend? How will government policies and external factors like natural disasters continue to shape the market? And most importantly, what does this mean for the future of Melbourne’s property landscape?
What’s your take? Do you think these price drops are a buying opportunity, or a sign of deeper issues in the market? Share your thoughts in the comments—let’s spark a conversation!
