The country’s least volatile market overall is Melbourne, but the trend of greater volatility among expensive homes is most apparent in the city. Price growth for expensive houses and units is much more volatile compared to cheaper houses and units, according to a recent study by real estate advertising portal Domain.

The city's diversified economy and stable population growth have likely resulted in relatively stable prices for typical Melbourne homes.

The research found that volatility among Melbourne’s expensive houses has been 70% to 80% higher than for less expensive houses. In addition, these high-end properties’ values dropped in more quarters than cheaper properties.

Sydney, the other largest market in the country, also recorded more volatile price growth in expensive houses and units than low-priced ones.

"The pattern of higher price volatility among more expensive Sydney and Melbourne houses has been observable during the current market cycle. Top-end Sydney and Melbourne house prices grew by over 20% a year in 2015, compared to 10 to 15% for cheaper houses. And after prices peaked in 2017, expensive houses have seen the biggest price falls," said Domain.

Domain revealed the reasons why price growth is more inconsistent for expensive Sydney and Melbourne properties.

First, it appears that higher-end housing in Sydney and Melbourne is more prone to market sentiment. This leads to bigger price cycles, with values for expensive homes rising when the market is prosperous. When the marker slows, more expensive homes see bigger drops.

Second, the greater volatility for high-end properties might have something to do with owners generally holding a higher proportion of expensive homes.

“Owners are less likely than investors to sell in a downturn, as owners can continue to live in a home even if prices decline or they may find it difficult to sell and move due to a loss of equity. In contrast, investors have more flexibility and may sell if they see the market falling,” said Domain.

This may trigger higher price volatility among expensive properties in Sydney and Melbourne since there are fewer high-end properties on the market when prices are declining.

Sydney’s price volatility for a typical house is higher than in Melbourne. This may be because there is more investor activity in Sydney. Price variability for a typical unit, meanwhile, is a bit higher than Victoria’s capital.