Four bedroom homes are falling less than two bedroom homes

Some buyers may have been squeezed out of the two-bedroom home market and pushed into units due to lower borrowing capacity, Powell added, while others may find larger homes represent better value.

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Larger homes even saw price recoveries of 3.8 percent for four-bedroom homes and 4.3 percent for three-bedroom units last quarter. Powell, however, expected house price declines to continue, albeit at a slower pace, as reduced borrowing power and rising cost of living continued to weigh on households.

AMP Capital’s Chief Economist, Dr. Shane Oliver still predicts that Sydney house prices will fall 20 per cent from peak to trough, based on expectations that the federal funds rate will peak at 3.35 per cent.

Further price declines would be likely if the policy rate jumped above 4 percent, as some economists have predicted. But Oliver said that’s unlikely, especially as it would push mortgage rates down to nearly 8 percent — adding $15,000 a year to repayments on a $500,000 loan.

“People just don’t have $15,000 a year to put on the mortgage,” Oliver said. “It would create significant mortgage stress and we will see distressed sales when that happens.”

The fact that family homes are holding up better amid the downturn is welcome news for Haberfield seller Francesca Trochei, who is selling her family’s four-bedroom Federation home. The home was purchased by her late parents in the 1960s and has only changed hands twice since it was built.

She had some concerns about selling in a cooler market but hoped the home would prove popular with larger populated families.

“Two of me [son-in-law’s] Friends recently bought in Haberfield, there is the space, it has character and the lot sizes…they see tremendous potential.”

She understood why single family home prices would hold up better. “I think they always will because that’s the core of a family and a happy home,” she said. “I know someone will love the house as my family loved it.”

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Her agent, Michael Tringali of McGrath Leichhardt, said there had been good research into family homes in the area.

“There’s always a shortage of good Federation homes and large family homes in Haberfield because they’re so tightly held, and that shortage creates strong demand.”

Such homes attracted the interest of local and expatriate families seeking better value than suburbs like Annandale and Balmain, and proximity to private schools.

While prices have eased, some quality homes have received higher bids than last year, Tringali said.

Sales representative Michael Gallina of Belle Property Hunters Hill said limited supply and continued demand from families expanding and those seeking multi-generational homes have supported prices for four-bedroom homes in the Gladesville and Ryde area.

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“Most of our buyer demographics are exiting the inner-city or inner-west market [which they’ve been priced out of] and they’re looking for more space to work from home and raise their families,” he said.

He expects the number of homes for sale to increase in the coming months as the market picks up and more empty nesters try to downsize, but believes there is enough demand to support the rise.