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Australia’s “COVID-induced whirlwind love affair” with the country’s hottest regional cities may have run its course, according to the latest CoreLogic data.
CoreLogic’s Regional Market Update, which examines Australia’s 25 largest non-capital city regions, has only found 13 areas that recorded an increase in house values over the year to January 2023, down from 21 over the year to October 2022.
For example, the upmarket coastal and hinterland Richmond-Tweed region in NSW recorded the weakest performance across all metrics, registering the lowest annual growth rate (down 18.6 per cent), as well as the largest drop in sales volumes (-36.1 per cent in the year to November), longest days on market (71 days) and highest vendor discounts (down 8.3 per cent).
Despite the drastic shift in market conditions, houses in the region are still up 23.7 per cent on pre-COVID-19 levels.
CoreLogic’s head of research, Eliza Owen, said the drop in values was “unsurprising” given the region saw house values increase more than 50 per cent during the pandemic, taking the median house value to more than $1.1 million.
Houses in the Illawarra region, 90 kilometres south of Sydney, recorded the second lowest yearly change of -12.6 per cent after values surged 44 per cent through the recent upswing, to a median value of $930,538.
Regional areas where double-digit annual growth rates were still occurring were predominantly areas that had emerged from a long period of subdued capital growth performance, Ms Owen noted.
For example, the South East region in South Australia, which includes areas such as Kangaroo Island, the Fleurieu Peninsula and the Limestone Coast, was the best-performing regional house market, with annual value growth of 15.7 per cent.
In addition, the surge in demand for areas such as New England and North West NSW was also likely to have been due to a spillover from nearby markets such as Richmond-Tweed, where the strong migratory sea-change trend and low interest rates priced out many lower-income households, she explained.
New England and North West saw house prices increase 11.5 per cent for the year to January 2023, taking the median value to $411,352.
Similarly, the Riverina region saw prices increase by 10.1 per cent, a median value of $442,694.
It was a similar picture in Queensland, with the more popular coastal regions that saw huge price increases during the pandemic experiencing bigger downturns in property prices while other markets remained strong.
For example, Cairns house prices lifted 2.3 per cent to a median value of $507,630, Central Queensland lifted 8.5 per cent ($386,324 median price value), and Toowoomba increased 7.8 per cent to a median house value of $557,034.
Whereas, the Gold Coast dropped 4.7 per cent to a median price of $970,709, alongside the Sunshine Coast, which fell 9.9 per cent to a median value of $965,004.
Victoria’s Ballarat fell 9.7 per cent to a median value of $606,645, alongside Geelong (down 6.8 per cent, taking its median value to $777,642) as well as Gippsland, which fell 3.9 per cent to a median value of $592,682.
Despite the resilience of regional Australia, with the cash rate at 3.35 per cent and rising, Ms Owen added there was a “good chance” housing values would continue to trend lower and regional areas would “not be immune from softer conditions”.
“With this in mind, sellers will need to be realistic about their pricing expectations, make sure they have a quality marketing campaign behind the property and be ready to expect some negotiation from buyers,” Ms Owen said.
“Considering some of these regional values will have only moved through a peak in the cycle more recently, it’s likely there will be a lag between buyers and sellers, and it may take some time for vendors to adjust their expectations.”
However, Ms Owen noted that while some regional markets were experiencing sharp price falls, regional market performance overall remained more resilient than capital city-dwelling markets.
Regional resilience
Speaking about the stability of regional Australia, Domain’s chief of research and economics, Dr Nicola Powell, said the ability to work from home has allowed metro workers to continue to seek regional housing, changing the demographics and outlook of house prices in these areas.
“While the price looks different to a local, someone from the city will be drawn to the area because the median price is considerably lower,” Ms Powell said.
She noted that the regional housing boom is starting to lose steam after interest rate rises, but it’s still a great time for home owners looking to sell.
“Most regional markets have hit their peak and will experience a slowdown in the annual change. But many of these regions are unlikely to head back to pre-COVID-19 prices, given that the areas are still more affordable than houses in the capitals.”
[Related: Largest annual home value declines: CoreLogic]
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