Australia’s premium regional markets, which benefited most from the mass exodus away from capital cities during the height of the COVID-19 pandemic, have taken the brunt of the country’s property downturn, with softer values, longer days on market, and bigger vendor discounts.
CoreLogic’s quarterly Regional Market Update, which examines the nation’s 25 largest non-capital city regions, found that the number of areas where house values increased in the year to April has dwindled to just seven.
The best-performing regional house market annually was still the South East region in South Australia, with value growth of 10.8% in the 12 months to April 2023. This was followed by the New England and North West (NSW) and Bunbury (WA) regions, which were up 4.9% and 4.8%, respectively.
The largest annual declines in house values, on the other hand, were experienced in NSW lifestyle markets, including the Richmond-Tweed (-24.2%), the Southern Highlands and Shoalhaven (-16.0%), and Illawarra (-13.7%).
Kaytlin Ezzy (pictured above), CoreLogic Australia economist, said it was unsurprising that several of the country’s most expensive regional lifestyle markets recorded some of the largest annual declines.
“Over the past year, premium lifestyle markets have been hardest hit by softer market conditions and rate increases,” Ezzy said. “These markets were among the largest beneficiaries of regional migration through the COVID-induced upswing and, as a result, became significantly more sensitive to the rising cost of debt and the normalisation in regional migration trends.”
Richmond-Tweed, on the NSW far north coast, saw house values surge 51% during the pandemic before the region’s relatively higher price tag, rising cost of debt, and lingering impacts of the 2022 flood, saw values drop by -24.2% over the year to April. The region also posted the biggest decline in annual sales activity, down -39.9%, and highest vendor discounting rate, down -7.9%.
During the quarter, houses in Toowoomba in Darling Downs, Queensland sold the fastest, with a median time on market of 21 days. In contrast, the Southern Highlands and Shoalhaven region, south of Sydney, posted the longest days on market, with houses taking a median of 79 days to sell.
Unit markets
Across Australia’s regional unit markets, the Riverina region in NSW posted the largest annual rise in values, lifting 19.8% over the 12 months to April 2023. This was followed by Cairns (QLD) and Toowoomba (QLD), which were up 15.2% and 13%, respectively. Richmond-Tweed, NSW and Geelong, Vic recorded the largest yearly decline in unit values, down -13.9% and (-10.6%), respectively.
Mackay-Isaac-Whitsunday was the only region that saw an increase in unit sales volumes over the year to February, up 3.7%. The seven other regions saw the volume of sales plunge by -30% or more. Southern Highlands and Shoalhaven, NSW (-51.0%), Wide Bay, QLD (-37.5%), and Illawarra, NSW (-37.3%) reported the largest year-on-year drop in sales volumes.
Units across Cairns (QLD) continued to sell quicker than any other region, with houses taking a median 20 days to sell over the three months to April, down from 32 days over the January quarter. Hume (Vic) had the second lowest days on market (27 days), followed closely by the Gold Coast, QLD and Newcastle & Lake Macquarie, NSW, at 28 days each.
Units in Ballarat were selling the slowest across the regions, with a median time on market of 64 days, followed by Richmond-Tweed (NSW) at 60 days.
The largest vendor discounts to secure a sale was in Geelong (Victoria), while the lowest was across the Latrobe Gippsland region (-2.0%).
Regional outlook
Ezzy said affordable rural markets continued to be resilient, having recorded only mild declines through the recent downswing, with a few regions still recording values at peak.
“Despite two interest rate rises over the first few months of the year, these markets offer relative affordability, have low listing levels, increased regional migration inflows, and strong economic activity off the back of mining, agriculture, and tourism. This has all helped support mild value growth,” she said.
“Values are influenced by more than just interest rates, such as stock levels, migration, local economic factors and an improvement in consumer sentiment, which are helping to stabilise values across some regional markets.”
Desirable commuter markets, such as the Gold Coast in South East Queensland, and the Illawarra and Newcastle in NSW, saw some positive improvements in their quarterly house figures.
Ezzy said a number of factors including low stock levels, a perceived end to the rate tightening cycle, and an improved consumer sentiment, were helping keep a floor under values in some of these markets.
“Similar to Sydney and Melbourne, these more expensive regional commuter markets typically lead the cycle. Although mild, the positive growth seen over the three months to April may suggest we have moved through the trough in value declines and signals the start of a recovery phase across the regional markets,” she said.
“It’s likely strong regional migration is also helping bolster demand in these regions. The Gold Coast recorded some of the strongest internal migration rates across the country through 2022, while Illawarra and Newcastle saw some outflow of residents back to the capitals over that time. Data from the first three months of this year is likely to show a reversal of this trend, with the strong return of overseas migrants to Sydney likely to ‘spill over’ into these regions.”
What do you think about the latest findings from CoreLogic? We’d love to hear from you in the comments below.
