Lawless said there were different theories as to why the top of the market was more reactive, but the conjecture was that households in more expensive markets were more highly leveraged, leaving them more sensitive to changes in interest rates or lending policies.
Reduced borrowing power could also be pushing more buyers towards middle and lower price points, making these segments more resilient.
While declines have been more obvious for pricier properties, he expected more resilient markets would follow suit. However, they would likely have a smaller peak-to-trough decline than the upper end, which traditionally has steeper gains and falls.
“There’s definitely more volatility [in the upper quartile] … but it tends to smooth itself out over time,” Lawless said, adding the upper quartile was ahead over the past decade.
ANZ this week tipped prices across the capital cities to fall 18 per cent from peak to trough, with the largest declines forecast for Sydney (20 per cent), Melbourne (17 per cent) and Canberra (16 per cent). Prices in Adelaide, which are still on the rise, were also expected to fall 17 per cent next year.
The steep increase in mortgage rates had accelerated price declines, said ANZ senior economist Felicity Emmett. Reduced borrowing capacity was the biggest factor driving prices lower, she noted, not a rise in forced sales.
She previously expected prices to fall until 2024, but now thinks the market will reach its low next year, and then recover about 5 per cent in 2024, when mortgage rates are expected to fall.
Emmett said the upper end of the market typically led the cycle, and had larger price swings. This was not necessarily due to greater sensitivity to the rising cash rate, she noted, as prices at the higher end of the market started falling at the beginning of the year, well ahead of the first cash rate hike in May, though fixed-mortgage rates were already on the rise at the time.
“An element of sentiment and affordability [constraints] drove earlier declines in prices, and I think it does take a little while for the full impact [of a rising cash rate] to be felt. It’s especially the case in the current cycle where we have so many people on fixed rates [mortgages]she said.
Sydney real estate agency BresicWhitney reported a higher turnover of more affordable properties in June and July, chief operating officer Will Gosse said. Much of the prestige market was on hold over winter, as cashed-up buyers holidayed overseas or delayed decision-making until later in the year.
Buyers and sellers at the upper end could be more sensitive to interest rate movements in the short term, Gosse said, and may be more swayed by the macroeconomic environment. Those making aspirational property moves may also have the luxury to be more selective in their decision-making and timing of the market.
However, he noted high-quality homes with a unique edge would always attract an audience.
Melbourne buyer’s agent Cate Bakos, of Cate Bakos Property, has seen prices pull back more at the top end, particularly in holiday hotspots and lifestyle locations.
Demand for discretionary purchases like holiday homes had dropped as borrowing power reduced and mortgage costs increased, Bakos said.
Meanwhile, the lower end of the market was being better supported by investor activity. Reduced borrowing power had also pushed home buyers to lower priced properties, she said.