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The latest quarterly Regional Market Update from CoreLogic showed dwelling values across the combined regions rose 17 per cent over the 12-month period to July.
The figures stand in stark contrast with the 5.4 per cent growth seen across Australia’s capital cities.
But despite the widespread capital gains in regional values on an annual basis, regional markets are not spared from the recent downturn spreading across the country.
Regional dwelling values fell by 20 bps over the latest quarter to July, with 10 non-capital areas recording declines in house values during the period.
The figures are also significantly lower than the 6.4 per cent peak recorded in the quarter to December 2021.
CoreLogic economist Kaytlin Ezzy said several regional areas that previously saw some of the strongest growth over the COVID-19 period are now exhibiting weaker selling conditions, as consecutive rate increases, affordability constraints, weakening consumer sentiments, and high non-discretionary inflation hit demand.
“Typically, markets with a higher median value tend to lead the broader market when shifting through different cycles. After recording some of the strongest value growth throughout the COVID period, each of these areas now have a median house value in excess of $1 million,” Ms Ezzy stated.
NSW’s trophy regions bore the brunt of the recent quarterly declines, with the largest falls in house values recorded in Richmond-Tweed (-4.5 per cent), Illawarra (-3.5 per cent) and Southern Highlands and Shoalhaven (-3 per cent).
As interest rates move higher and affordability pressures mount, Ms Ezzy said it’s likely the decline in values witnessed in capital cities will become more widespread and impact regional areas.
“Value declines are already being seen across more expensive regional markets, while the pace of growth has eased considerably across the combined regions’ broad middle and lower quartile markets,” she said.
However, Ms Ezzy added that regional areas may be more insulated from declines compared to their capital city counterparts, partly due to these markets’ relative affordability and low advertised supply levels.
“Additionally, the strong growth that’s occurred over the past two years should help cushion regional homeowners from the most extreme effects of the cycle’s downturn,” she added.
Ms Ezzy also reminded that the figures come off a strong year of selling.
Earlier figures released by the property analysis outfit reported that over 2021, regional areas in Australia increased by 25.9 per cent.
“While sales activity across some of these regional markets is down compared to the previous year, it’s important to remember this is off the back of some extremely high sales volumes recorded the year prior,” Ms Ezzy said.
“All but one of the markets analysed recorded a rise in dwelling sales compared to the region’s previous five-year average.”
[Related: Housing market continues cool-down over July quarter: CoreLogic]
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