Home prices are falling in the desirable suburbs of Toorak, South Yarra and Hawthorn as interest rates rise

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“It has the effect of putting people in a backseat role of watching and waiting.”

Bongiorno said he hasn’t yet seen many sales by owners who couldn’t afford to service their loans – instead, deaths, divorces or the need to expand resulted in properties changing hands.

“We don’t see any signs that people need to sell because of interest rates,” he said. “Most sales are made out of necessity.”

Even after prices have fallen, they remain out of reach for many Melburnians. Toorak’s median was $4.738 million, South Yarra’s was $1.87 million, and Hawthorn’s was $2.252 million.

Up-and-coming suburbs like Fitzroy North, Brunswick and Northcote would become more accessible to young professionals during the downturn, Mardiasmo said.

In those suburbs, however, price declines were more limited, ranging from about 6 percent to 1 percent.

“It’s more important in these middle-class suburbs,” she said.

“A dip in mid-range or lower-priced suburbs makes people think, ‘Hey, maybe I can jump in there now and broaden my search.'”

Northcote renter Allie Harris was one such buyer, having adjusted her expectations after property prices fell in the suburbs around her home.

“It feels like it’s getting a little bit more affordable to get into the areas that we would have liked to get into but gave up,” she said.

That didn’t mean the search had been easy though – Harris and his partner Owen Davey said they’d taken an interest in some recently listed homes while looking around in areas like Fitzroy North, Northcote, Brunswick and Brunswick East.

“We searched for about four months,” she said. “It was a challenge, there wasn’t really a huge amount on the market. Part of that is because of the Christmas season.”

Harris and Davey were looking for a fixer-upper – the couple loved taking on renovation projects and, thanks to Harris’ interior design business, felt comfortable being able to source tradesmen and materials to finish the job.

Jellis Craig Northcote agent Nigel Harry said Harris would benefit from a trend away from homes in need of renovation caused by shortages of crafts and materials.

“We did a full 180,” he said. “Turnkey homes are what people are looking for and are willing to pay for.

“I think there are really good buying opportunities out there for people who are willing to get their hands dirty and do a renovation.”

Elsewhere, affordable suburbs, like those on the outskirts of the city, are likely to avoid big price drops, Powell said.

Prices rose in various suburbs including Gisborne on the outskirts of the city, Alphington and the new suburb of Deanside. Their medians increased by 25 percent, 24.1 percent, and 19.6 percent, respectively.

“We could see a pullback in all price segments, but I think these more affordable properties will hold up better,” she said. “Due to affordability and lower buyer capacity, they will compete better compared to mid- to high-end suburbs.”