Regional markets continued to reel from high interest rates and shifting migration patterns, despite increases in regional housing values for the past five months, according to the latest CoreLogic report.
CoreLogic’s quarterly Regional Market Update, which examines Australia’s 25 largest non-capital city regions, revealed 18 areas experienced an annual fall in house values over the year to July.
Of the seven markets where house values increased, the southeast region of South Australia, which includes tourism hotspots Kangaroo Island, the Fleurieu Peninsula, and the Limestone Coast, reported the largest annual growth for the fourth consecutive report. Here, values jumped 9.1% in the year to July, a 1.63% slip from 10.8% three months ago.
Queensland led the regions in market capital growth, with Central Queensland (2.7%), neighbouring Mackay–Isaac–Whitsunday (1.2%), Toowoomba (0.7%), and Cairns (0.5%), with Bunbury, WA (3.7%), and New England and North West, NSW (1.6%) also making it to the top seven.
At the other end of the scale, NSW lifestyle markets Richmond-Tweed (-20.4%) and Southern Highlands and Shoalhaven (-15.0%) continued to experience the weakest conditions over the past year, although the annual pace of declines is slowing down.
The other regions that recorded double-digit decline in house values over the past year were Victoria’s Ballarat (-11.2%) and Geelong (-10.4%).
Eliza Owen (pictured above), CoreLogic Australia head of research, said despite recent increases in regional Australian dwelling values, they remained -5.6% below this time last year, and sales volumes were down -21.3%.
“While the market is starting to recover, value growth is largely being led by capital city markets, reflecting milder housing demand across regional Australia as demographic patterns normalise,” Owen said.
She said few regional markets had year-on-year growth in the past 12 months.
“The markets that saw an increase were largely more affordable and were more rural,” she said. “Presumably, lower value assets have been more resilient to increases in interest costs because they require lower indebtedness.
“Additionally, targeted migration programs also tend to focus on parts of regional Australia as a pathway to permanent residence, so some of the more rural, regional parts of the country may have seen sustained housing demand as international travel restrictions have lifted through 2022.”
Over the 12 months to May, all regions recorded house sales volume declines, with Townsville posting the smallest drop at -11.3%, followed by Central Queensland (-12.7%). Six regions had a decline of at least -30%, five of which were located in NSW.
The CoreLogic data showed the Southern Highlands and Shoalhaven region had the largest drop in sales (-33.6%), largest vendor discounting rate (-6.7%), and longest time on market (79 days), which according to Owen was nearly twice as long to sell as it took a year ago.
Five regional unit markets enjoyed positive annual growth in the 12 months to July 2023. This was led by NSW’s Riverina region for the second time running, with unit jumping 18.7% – that’s twice more than the growth experienced by the second and third strongest markets, Cairns (9.2%) and Hume, Victoria (9.1%).
In contrast, the largest decline in unit values over the past year was recorded in Launceston and North East (Tas) and Richmond-Tweed, where unit values both slipped -11.4%.
Over the same period, unit sales volumes declined in all regions, with Bunbury recording the smallest decline (-4.2%) and Southern Highlands and Shoalhaven the largest (-42.5%).
CoreLogic said Toowoomba posted both the shortest time on market at just 22 days and lowest vendor discounting rate of -2%. Units across NSW’s Mid North Coast had the longest time at the market at 62 days while vendors across the Launceston & North East region were offering the largest discounts at -6.2%.
Owen said the price point is “undoubtedly” the easiest way to characterise the markets most impacted by rate hikes.
“The higher the value of the market, the more likely it’s seen poorer performance in the past year,” she said. “But the good news for sellers is that these markets appear to have passed through the depths of the downswing.”
Houses in Richmond-Tweed, for instance, saw an annual decline of -20.4%, up from a year-on-year fall of -24.2% in the 12 months to April. In two of the past three months, house values in this market have increased.
“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,” Owen said.
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