House prices in Sydney and Melbourne are declining most sharply in the cities' most affluent suburbs, signaling that the drag from successive interest rate rises is now being compounded by significant policy headwinds.
The downturn, which initially impacted the top end of the market, is showing signs of broadening as the federal government's recent tax shake-up removes key concessions for property investors.
Analysts indicate that the combination of elevated financing costs and reduced investment incentives is stifling demand in blue-chip areas.
While the initial impact of rate hikes was felt across the board, the removal of tax benefits has disproportionately affected the investor-heavy segments of the market, leading to a more pronounced price correction in these high-value suburbs.
This development underscores the growing uncertainty facing the Australian residential property sector.
The Albanese government's housing affordability measures, introduced to cool the market, are now contributing to a risk of severe contraction.