Sydney families contending with a cost-of-living crunch and pricier mortgages face a $270,000 bill to upsize from a three-bedroom to a four-bedroom house, as an undersupply of larger homes puts upward pressure on prices.

The median price of a four-bedroom house in Greater Sydney was $1.55 million in June, compared with $1.28 million for a three-bedroom house, according to Domain’s latest House Price Report.

Despite this year’s property downturn, the price of a typical four-bedroom house rose 3.9 per cent over the 12 months to June, while the typical three-bedroom house notched a 2.8 per cent gain.

Those seeking more compact accommodation got some relief: the median price for a two-bedroom house declined 1.6 per cent over the year to $1.2 million.

But for larger families, any hope that softer market conditions would deliver more affordable homes look dashed.

Dr Nicola Powell, Domain’s chief residential economist, said the Sydney property downturn had probably convinced some prospective larger home sellers to hold off, creating a shortage.

“The people selling four-bedroom homes are often downsizers and, for many of them, there is no urgency to sell. They’re saying: ‘I’m going to wait until market conditions improve,’ which is normal housing dynamics. As a seller, you don’t want to leave money on the table, so you hold out for things to get better.”

Even in a rising market, four-bedroom houses in Sydney were generally in short supply, Powell noted.

“This is a large family home, which means it’s sitting on a sizeable block, and sizeable blocks have that element of scarcity. The price premium on the land component alone is significant.”

Anthony Landahl, managing director at mortgage broker Equilibria Finance, said that, for many of his clients hoping to upsize, the numbers just weren’t adding up, even in a soft market.

“Mortgage serviceability is a big challenge right now, with interest rates where they are and potentially another rate rise looming. We’re often finding that families can’t quite afford to take that next step up the ladder.”

Landahl said some priced-out families were choosing to renovate or extend, “essentially upsizing their existing properties”.

With construction costs high, that approach presents its own challenges, Landahl said. “But it will often be cheaper than relocating to a larger house.”

Others were making compromises on location to secure a larger home, Landahl said.

“We’ve seen this in Sydney for quite some time, and it has continued this year. When upsizers see the affordability challenge, they will often expand their search to areas that may not have been their first preference.”

Nick Erdenebayar and Bona Byambadorj are one such couple. They live in a two-bedroom Zetland apartment with their three young children – Nandin, Erkhem and Gegeen. With a fourth on the way, they are looking for a four-bedroom house.

Erdenebayar, who runs a small construction company, was hoping the family would find a house on the lower north shore, close to well-regarded public and private schools.

But he said stiff competition and this year’s interest rate hikes had put many four-bedroom homes there out of their reach.

“We increased our budget, but it wasn’t enough, so now we’re looking at the upper north shore, too.”

The family have been actively searching for three months and have struggled to find properties matching their criteria, Erdenebayar said.

“There’s not much on the market, and even if we find a four-bedroom house in a good area, it might not have much of a backyard, which we need, so the kids can play outside.”

Erdenebayar said the family’s circumstances would force them to buy soon, possibly on the city’s northern fringes.

“It’s hard to make a decision when the market is so quiet but, because the baby’s coming, we will have to make a move.”

Jessica Cao, a real estate agent at Ray White Upper North Shore who predominantly sells larger homes, has been helping the family in their search. She said their experience was typical of families she had worked with this year.

“It’s a very challenging market for upsizers to navigate. In theory, it’s a great market to enter to buy. However, there’s not much to choose from. If I had to guess, I’d say we are down 20 per cent, volume-wise, in listings.”

Cao said many owners of large family homes in the area were “delaying their downsizing plans” while current market conditions persisted.

“In some areas, there just isn’t anything available. We sold a house at auction in Roseville last weekend, and it was the last decent house in that pocket for sale. Now, there’s nothing.”

Cao said current conditions were likely to persist for the rest of the year.

“I hope there will be a pick-up in volume, but I don’t see that. I just don’t have the vendors sitting in the pipeline, ready to list.”