Interest rates begin to weigh on regional property prices

CoreLogic’s latest quarterly Regional Market Update, focusing on Australia’s 25 largest non-capital city regions, revealed that 18 areas experienced a decline in house values in the year leading up to July 2023.

House prices remain 5.6 per cent below the previous year’s levels, with sales volumes down by 21.3 per cent.

The data coincides with the company’s Home Value Index, which showed the pace of growth slowed in July to 0.7 per cent, down from 1.2 per cent for the two months prior.

CoreLogic Australia head of research Eliza Owen explained: “While the market is starting to recover, value growth is largely being led by capital city markets.”

This reflects milder housing demand across regional Australia as demographic patterns normalise, she added.

“Year-on-year growth was hard to find across regional Australia in the past 12 months,” Ms Owen said.

The markets that saw an increase were largely more affordable and rural, suggesting that lower-value assets have been more resilient to interest rate hikes due to lower indebtedness.

“The higher the value of the market, the more likely it’s seen poorer performance in the past year. But the good news for sellers is that these markets appear to have passed through the depths of the downswing,” she said.

In addition, she highlighted the role of targeted migration programs in sustaining housing demand in rural parts of the country as international travel restrictions were lifted in 2022.

Of the seven markets where values rose, houses in the South East region of South Australia, encompassing Kangaroo Island, the Fleurieu Peninsula, and the Limestone Coast, achieved the largest annual growth of 9.1 per cent in house values for the fourth consecutive report.

Similarly, Queensland experienced significant regional market capital growth, with Central Queensland (2.7 per cent), Mackay Isaac Whitsunday (1.2 per cent), Toowoomba (0.7 per cent), and Cairns (0.5 per cent) showing gains.

In contrast, the weakest conditions over the past year persisted in NSW lifestyle markets: Richmond-Tweed reporting a 20.4 per cent fall, alongside Southern Highlands and Shoalhaven (down 15.0 per cent), although the annual pace of declines is easing.

For example, while Richmond-Tweed saw a decline of -20.4 per cent, this is up from a year-on-year fall of -24.2 per cent in the 12 months to April. In two of the past three months, houses in this market have actually increased.

In addition, Victoria’s Ballarat and Geelong saw double-digit drops in the 12 months to July 2023, down 11.2 per cent and 10.4 per cent, respectively.

“While there’s still a few headwinds on the horizon for housing market performance more broadly, popular high-end markets could start to stabilise as mortgage rates move closer to a peak, and capital city markets become more expensive,” Ms Owen said.

Meanwhile, the sales volume trend was uniform across all regions, with every area experiencing a decline in house sales volumes over the 12 months leading to May.

[Related: House values growth is easing CoreLogic]

Kate Aubrey is the senior content producer of Momentum Media's mortgages titles: The Adviser and Mortgage Business.

Prior to joining Momentum Media, Kate covered regional and breaking news for ABC Radio for more than three years.

She has a Master of Arts in Journalism from the University of Melbourne and a Bachelor of International Business and Business Management from Griffith University.

Email Kate at: This email address is being protected from spambots. You need JavaScript enabled to view it.