Sydney’s property downturn is creating a growing divide between suburbs that may be priced above what buyers are willing to pay and areas that could offer better value in the current market.
New research from property analytics firm SuburbData has identified suburbs where property prices have significantly outperformed similar nearby areas, with some locations now priced up to $250,000 higher than comparable suburbs.
At the same time, several Sydney suburbs have been identified as potentially undervalued, with prices sitting below what local market conditions and comparable areas may suggest.
Sydney’s property downturn continues
The research comes as Sydney’s housing market experiences a significant decline.
Recent PropTrack figures showed that house values fell in 91 per cent of Sydney suburbs over the July quarter. Around 400 suburbs recorded median price declines of more than $50,000, while approximately 200 suburbs saw values fall by more than $100,000.
As the market weakens, the gap between suburbs that previously experienced strong price growth and nearby areas with similar amenities is becoming more noticeable.
According to SuburbData analyst Jeremy Sheppard, a suburb being classified as “overvalued” does not necessarily mean that prices are simply expensive. Instead, the classification reflects how much buyers are willing to pay compared with similar nearby markets.
“Suburbs don’t outperform forever,” Mr Sheppard said.
When buyers begin to find cheaper alternatives with similar housing, amenities and lifestyle benefits, demand can shift. This can place pressure on suburbs where prices have significantly outpaced neighbouring areas.
Sydney’s most overvalued suburbs
Many of the suburbs identified as overvalued are located in Sydney’s eastern suburbs, the Lower North Shore and the Northern Beaches.
Notable suburbs include:
- Collaroy
- Avalon Beach
- Palm Beach
- North Manly
- South Coogee
- St Johns Park
- Wakeley
- Old Guildford
- Ashcroft
The research showed that some of these suburbs were priced significantly higher than similar nearby areas.
For example, suburbs such as Orchard Hills, Double Bay, East Lindfield, Bellevue Hill, Palm Beach, Dover Heights, Vaucluse and Collaroy were identified as being priced up to $250,000 above comparable nearby areas.
Other suburbs, including St Johns Park, Wakeley, Gordon and Monterey, also recorded significant price differences compared with similar surrounding locations.
Why are these suburbs considered overvalued?
SuburbData suggests that many of these locations experienced years of strong price growth. However, buyer demand has since weakened while housing supply has increased.
This creates a potential risk for buyers who purchase at a premium in a falling market.
If buyers are no longer willing to pay the same premium for a particular suburb, property values may decline or homes may take longer to sell.
There is also the risk of negative equity if a property’s value falls below the amount owed on the mortgage.
Sydney’s most undervalued suburbs
On the other side of the market, several suburbs have been identified as potentially undervalued.
These areas have prices that are lower than what comparable market conditions and underlying property metrics may suggest.
Many of Sydney’s potentially undervalued suburbs are located across:
- The Blacktown region
- The Sutherland Shire
- Parts of Sydney’s Inner West
Suburbs identified in the research include:
- Oyster Bay
- Caringbah
- Caringbah South
- Heathcote
- The Ponds
- Acacia Gardens
- Woodcroft
- Marayong
- Schofields
- Newtown
- Drummoyne
The data showed that some suburbs were priced significantly below similar nearby areas. Neutral Bay, Newtown, Caringbah and Oyster Bay were among the suburbs highlighted with some of the largest price differences.
For example, Oyster Bay was identified as being approximately $231,000 below similar nearby areas, while Caringbah was around $281,000 lower. Newtown was approximately $293,000 below comparable nearby areas.
Could undervalued suburbs offer opportunities?
While the term “undervalued” may attract buyer attention, it does not guarantee that prices will rise.
However, areas that offer similar amenities, transport connections and lifestyle benefits at a lower price point may become more attractive to buyers, particularly when affordability is a major concern.
Inner West real estate director Adrian Tsavalas said current market conditions could provide opportunities for buyers who had previously been priced out of suburbs such as Newtown.
With prices falling from previous highs, some buyers may now have an opportunity to consider suburbs that were previously outside their budget.
However, market conditions can change quickly. A suburb that appears affordable today may become more competitive if buyer demand returns.
What does this mean for Sydney buyers?
The research highlights the importance of looking beyond suburb popularity and recent price growth.
A well-known or highly desirable suburb is not automatically a good buy, just as a lower-priced suburb is not automatically undervalued.
Buyers should consider:
- How prices compare with similar nearby suburbs
- Recent sales trends
- Local supply and demand
- Transport and amenity improvements
- Rental demand
- Future development
- The property’s long-term affordability
As the Sydney market continues to adjust, buyers may need to look more closely at the relationship between price and value.
The biggest opportunities may not always be found in the suburbs that experienced the strongest growth during the boom. Instead, they could emerge in areas where prices have fallen too far compared with similar nearby markets.
For Sydney buyers, the key question is no longer simply whether a suburb is expensive or affordable—it is whether the price represents good value compared with the alternatives available nearby.
