- Compared with 21 growth regions in Jan 2022, only 13 regional areas recorded an increase in Jan 2023.
- CoreLogic’s Regional Market Update found that vendor discounts and days on market are rising sharply.
- The upmarket coastal and hinterland Richmond-Tweed region in NSW recorded the weakest performance.
After a record increase in values during the pandemic, high-end regional property is now starting to see a sharp reduction in demand.
CoreLogic’s Regional Market Update found that values have started to decline while vendor discounts and days on market are rising sharply.
Across the country, 13 of 25 regional areas recorded an increase in house values over the year to January 2023, down from 21 in the prior year.
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.
The NSW regions of New England and North West and Riverina were not far behind, with values increasing 11.5 per cent and 10.1 per cent respectively.
CoreLogic Head of Research Eliza Owen said the country’s most popular lifestyle markets had been hardest hit by softer market conditions and rate increases.
Tweed and surrounds losing steam
The upmarket coastal and hinterland Richmond-Tweed region in NSW recorded the weakest performance across all metrics registering the lowest annual growth rate, largest drop in sales volumes, longest days on market and highest vendor discounts.
Ms Owen said, “It is unsurprising the Richmond-Tweed region recorded the strongest decline in house values and a sharp increase in other important metrics.
“This was the region where values skyrocketed, with houses increasing more than 50 per cent during COVID, taking the median house value to more than $1.1 million.
“Since then much has changed with borders reopening, outbound travel returning, workers returning to the office not to mention the overlay of nine rate rises. It’s been a swift and significant shift,” she said.
Ms Owen explained that the surge in demand for areas such as New England and North West was also likely to have been due to a spill over from nearby markets such as Richmond-Tweed, where the strong migratory sea-change trend and low interest rates priced out many lower income households.
Richmond-Tweed’s house market value fell 18.6 per cent in the year to January, with sales volumes down 36.1 per cent (in the year to November) and houses sitting on the market for 71 days, while vendor discounting hit -8.3 per cent for the same period.
Despite the drastic shift in market conditions, houses in the region are still up 23.7 per cent on pre-COVID levels.
Growth in former low-performing areas
Ms Owen said those regional areas where double-digit annual growth rates were still occurring were predominantly areas that had underperformed for many years.
She said, “The COVID-boom unlocked enormous value across more affordable regional tree-change markets such as South Australia’s South East region.
Houses in the Illawarra region, 90km south of Sydney, recorded the second lowest yearly change of -12.6 per cent after values surged 44.0 per cent through the recent upswing.
Houses sold fastest in Bunbury (WA) where the median time on market over the three months to January was 24 days.
Queensland’s Toowoomba region recorded the second fastest sales time, with a median time on market of 28 days.
Mixed unit markets in small cities
Across Australia’s regional unit markets, Queensland’s Cairns and Toowoomba recorded the highest annual increase in values over the 12 months to January 2023, up 17.3 per cent and 14.1 per cent respectively.
At the other end of the scale, Richmond-Tweed (NSW) and Geelong (Vic) recorded the largest decline in unit values over the past year, down -10.0 per cent and -9.4 per cent respectively.
Sales volumes lifted in only two of the 25 regional unit markets, up 19.2 per cent in Mackay – Isaac – Whitsunday and 10.6 per cent in Townsville in the year to November 2022.
Sales volumes fell in 23 regions, led by the Southern Highlands and Shoalhaven (-45.5 per cent), Newcastle and Lake Macquarie (-37.3 per cent) and Illawarra (-37.0 per cent) regions, all located in New South Wales.
Units in Cairns took a median of 32 days to sell in the three months to January 2023, followed by Ballarat (35 days).
Richmond-Tweed and Capital Region (NSW) were the slowest-selling unit regions, with a median time on market of 66 days and 60 days respectively. Vendors across the Richmond-Tweed are offering the largest discounts in order to secure a sale (-5.6 per cent) while discounts of -2.4 per cent in the Hume region (Vic) are the lowest amongst the unit markets analysed.
More falls ahead
Following the RBA’s warning that further rate hikes would be necessary to curb inflation, Ms Owen said there was a good chance housing values will continue to trend lower, and regional areas would not be immune from softer conditions.
Ms Owen said, “This is a trend we can expect to see playing out at least until interest rates top out.
“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.
“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” she said.
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.
Since the rate hiking cycle commenced in May, monthly value changes have averaged -0.8 per cent across regional Australia through to January, compared to -1.1 per cent in the capitals. This also follows a larger price boom in the regions of 41.6 per cent compared to the combined capitals increase of 25.5 per cent.
