Premium home prices lead downturn as sellers retreat from auctions

Australia's priciest homes are leading the housing downturn, with values in Sydney and Melbourne's top-end markets now more than 10% below their peaks, according to new data from Cotality.

At the same time, separate research from Domain suggests sellers are becoming more cautious about taking properties to auction, with more than half of auction-launched listings in major capital cities now switching to private treaty sales before auction day.

While they track different trends, both reports suggest the housing market is becoming less seller-friendly, as rising stock levels and weaker competition give buyers more room to negotiate.

Cotality data shows upper-quartile house values in Sydney are now 10.7% below their cyclical peak, while Melbourne's most expensive houses have fallen 10.5%.

The declines are among the largest recorded across Australia's major housing markets and contrast with the relative resilience of lower-priced homes and units.

Cotality head of research Gerard Burg said premium housing had been at the forefront of the downturn since values first began to soften.

"Early in the cycle, falling home values were largely confined to higher-priced properties in Sydney, Melbourne and Canberra," Mr Burg said.

"While the market correction has become more widespread, the largest declines continue to be concentrated among higher-value homes."

The divide is particularly clear in Sydney and Melbourne. In Melbourne, upper-quartile house values have fallen 6.6% more than lower-quartile houses since the market peaked. In Sydney, the gap is 5.3%.

By contrast, the difference between expensive and affordable housing segments is less than 1% in Brisbane, Adelaide and Perth.

More sellers ditching auctions

Separate analysis from Domain suggests softer conditions are also affecting how homes are being sold.

The property platform tracked listings from launch through to sale and found a sharp rise in the number of properties switching from auction campaigns to private treaty sales across Sydney, Melbourne, Brisbane, Adelaide and Canberra.

More than half of auction-listed properties now convert to private treaty during the sales campaign.

In Sydney, conversion rates rose from 24.9% in February to 56.3% in July. Melbourne increased from 29.3% to 58.1%, while Brisbane climbed from 36.6% to 67.6%.

Domain chief residential economist Dr Nicola Powell said sellers were adapting to a more balanced market.

"Conversion rates are now at their highest level since the 2022-23 housing downturn, indicating that sellers are becoming more responsive to changing market conditions," Dr Powell said.

"More than half of auction-launched listings across Sydney, Melbourne, Adelaide, Brisbane and Canberra are now converting to private treaty."

Auctions typically perform best when strong buyer competition creates pressure among bidders.

As market conditions have cooled, sellers and agents appear increasingly willing to pursue negotiated sales instead.

Signs of a softer market

Cotality figures suggest housing conditions have become more challenging for sellers across the board.

National dwelling values fell 3.1% over the three months to August, while annual growth slowed to 2.7%.

Total listings climbed 18.1% over the year to more than 139,000 properties, taking advertised stock above the five-year average.

Properties are also taking longer to sell. The median time on market increased to 39 days, up from 28 days a year earlier.

Vendors are becoming more flexible on price as well, with median discounting across the capitals widening to 4.2%, the highest level since January 2023.

Auction performance has weakened alongside those trends. Cotality's four-week average auction clearance rate sat at 49.5% at the end of August and has remained below 50% since early June.

Taken together, the figures suggest a market that is moving away from the frenzied conditions that defined much of the post-pandemic boom.

Affordable housing proving more resilient

Despite the broader slowdown, lower-priced properties continue to hold up better than premium housing in many markets.

Mr. Burg said affordability remained an important support for demand, particularly in the unit market.

"Units have generally proven more resilient throughout the downturn, supported by their relative affordability and lower entry price points," he said.

While higher-value units have generally recorded larger declines than cheaper stock, the gap is smaller than that seen in detached housing.

The result is increasingly a tale of two markets: premium homes that are undergoing a sharper correction after years of strong gains, and more affordable properties that continue to benefit from buyers being priced out of higher-value segments.