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Toorak’s median house price has dropped 17.1 per cent over 12 months but beneath the raw numbers is a complex market influenced by who is - and who is not - willing to sell.
Domain’s House Price Report for the March quarter shows the median house price in Melbourne’s most expensive postcode slipped to $4,075,000.
Fewer trophy home deals and more sales activity in cheaper price brackets have merged with an overall cooling market. Business confidence, taxation settings and geopolitical instability are more powerful than mortgage rates in an elite suburb such as Toorak, experts explain.
Psychology is also at play. Some buyers are in analysis mode, waiting for what they perceive as the bottom of the price cycle, while high-end home owners typically don’t list during economically uncertain periods because they don’t need to.
Domain’s chief of research and economics Dr Nicola Powell warned against interpreting the decline literally.
“The dip is significant, but that doesn’t mean that value has been wiped from every home in Toorak,” she said.
Powell stresses Toorak behaves differently to the wider market.
“This type of homeowner is not necessarily compelled to sell,” she said. “They wait out cycles, and they’re not going to sell unless they get the right price. There are fewer trophy homes for sale, and what we’re seeing transacting is more the entry level in Toorak.”
Fewer properties priced above $10 million have been offered for sale but investor-style houses have continued to trade, prestige buyers’ advocate Tim Picken of BuyerX said.
“It is a bit skewed, but there’s definitely a softening. The sentiment is definitely ‘no urgency’, and ‘let’s wait and see’.”
In Toorak, the best homes set records and command nine figures, while entry-level semis and smaller houses cost sub-$2 million, and comfortable houses on 400 square metres meet the median of about $4 million.
Standout houses with land value generally fetch $15 million to $20 million, and little is available in premier streets for under $10 million, Picken said.
Estates such as Cranlana on elite Clendon Road, listed with a guide of $96 million to $105 million through Marshall White Stonnington’s Marcus Chiminello, are in even rarer air.
Toorak’s median is sensitive to which segment is most active.
Generational properties such as Cranlana, for sale for the first time in a century, are always tightly held.
“They infrequently transact or change hands,” Chiminello said. “The current market conditions exacerbate that challenge.
“If someone doesn’t need to sell, they will ride out this time in their real estate journey until things look more prosperous.”
Chiminello said conditions are ideal for strategic buyers who intend to hold a blue-ribbon property over the long term.
“We’re in one of the greatest opportunity markets for buyers that we’ve seen for probably 30 years,” he says. “There is a relative, undeniable value that we present in comparison to other states.”
Softer markets are also suited to those upgrading, he said.
“The $2 million home to the $4 million home, the $4 million home to the $8 million home - this is a golden time to do that,” Chiminello said.
“If you ask any buyer going back to the early 2000s, ‘Would you have bought in the early 90s during the last recession?’, they all would have jumped at the chance if they had their time again. Another one of those windows has presented itself today.”
Picken agreed buyers should not mistake an easing market as a permanent reset.
“Buyers still have to pay a solid amount, although it’s not out of control with overseas interest and big money,” he said. “When it starts to bounce back, and it might not be next year, but in the next three to five years, it will bounce back hard.”
Whether justified or not, some buyers are reading inflation and weak consumer sentiment as a sign the market may have further to fall.
Picken said they are attempting to time their purchase.
“They are very happy to wait because they think it’s potentially got a bit more to give.”
Powell said this thinking was common but can backfire.
“We all want to purchase when we think the market is at its lowest, and sell when the market is at its highest, and that is behavioural economics at its best in Australia’s housing market,” she said.
“Premium-grade properties can get held back when the market is in a kind of freefall, so this mentality of wanting to buy at the bottom doesn’t necessarily mean you’re going to get the best of the best.”
Picken predicted the Toorak market will eventually benefit from capital gains tax exemption that remains attached to primary residences, while other federal budget changes play out.
“People may consolidate things and tip more money into the family home,” he said.
