The Covid boom that saw tens of thousands of people moving to regional Australia has officially come to end, with many regional hotspots now leading the downturn.
CoreLogic’s Regional Market Update found that house values in six of the most popular Covid markets recorded falls of 6 per cent or more last quarter, including Richmond-Tweed (down 11.7 per cent), Southern Highlands and Shoalhaven (down 7.1 per cent), Sunshine Coast (down 7.1 per cent), Gold Coast (down 6.4 per cent), Illawarra (down 6.1 per cent) and Newcastle and Lake Macquarie (down 6 per cent).
All of the large regional markets recorded value declines over the quarter with the exception of Central Queensland, which was up 0.1 per cent and South Australia’s South East and Bunbury in Western Australia, which both recorded no change.
House values in Richmond-Tweed (down 7.8 per cent), Illawarra (down 1.9 per cent), and Ballarat (down 0.5 per cent) are also below the levels recorded this time last year, while values across Newcastle and Lake Macquarie are flat year-on-year.
CoreLogic Economist Kaytlin Ezzy said many of the markets that saw the largest gains, particularly across NSW and QLD, would likely continue to decline.
“Consecutive interest rate rises, persistently high inflation, and waning consumer sentiment saw the pace of value declines accelerate across regional Australian property markets,” Ms Ezzy said.
“It is unsurprising the Richmond-Tweed region recorded the strongest decline in house values.
“Throughout the Covid period, values skyrocketed, rising more than 50 per cent and taking the median house value to more than $1.1 million.
“However, the impact of this year’s floods, coupled with seven consecutive rate rises, has seen house values fall in the region by nearly 16 per cent since April.”
Regional NSW dominated the worst-performing house markets across a range of different metrics.
Southern Highlands and Shoalhaven recorded the largest decline in sales volumes (down 27.5 per cent) and the highest vendor discounting rate (falling 4.9 per cent), while the New England and North West region clocked up the longest time on market at 43 days.
The best-performing regional house market was South Australia’s South East, where values are 21.7 per cent higher over the past year, followed by the Riverina (20.5 per cent), and New England and North West (19.8 per cent).
In terms of the unit market, Southern Highlands and Shoalhaven (down 7.7 per cent) recorded the largest quarterly fall in unit values, followed by Sunshine Coast (down 6 per cent), NSW’s Hume region (down 5.5 per cent) and Richmond-Tweed (down 5.2 per cent).
Townsville and Richmond-Tweed were the only regions to record a decline in unit values over the past year, down 2.6 per cent and 0.2 per cent respectively.
Ms Ezzy said units had held up better than houses during the market correction.
“While unit values have not been immune to the downturn, units have largely been more resilient than houses through the downswing to date,” she said.
“If this trend of house values falling at a faster pace than unit values persists, we could see some demand shift towards the detached segment as the value premium for houses shrinks.”
Ms Ezzy said around half of the regional markets analysed were still seeing houses and units transact faster, however, properties are now sitting on the market for around two to three days longer than they were 12 months ago, demonstrating a continued softening in demand.
“Sales activity has continued to soften over the quarter, with only a few regions, predominantly in northern Queensland, recording an increase in annual sales volumes,” she said.
“While down compared to the previous year, it’s important to remember that last year was one of the busiest sales periods on record, and the majority (76 per cent) of regional markets analysed are still recording higher annual sales volumes compared to their previous five-year averages.”
On the supply side, the flow of regional listings has been relatively lacklustre this spring selling season, which has kept total listings levels fairly tight, despite a slowdown in sales activity, Ms Ezzy said.
“While the negotiating power across Australian regional markets is slowly transitioning to the buyer, it is likely tight supply is insulating the downturn to some extent,” she said.
Ms Ezzy said the outlook for Australia’s regional markets remains skewed to the negative, with values expected to continue declining while interest rates are rising.
“The lack of a typical spring listings surge is positive, in that we are yet to see material signs of a rise in distressed listings,” she said.
“However, as the cumulative rise in the cash rate approaches the serviceability buffer of 3 per cent, which most borrowers were assessed under, we could see an increasing number of regional homeowners come up against affordability pressures in terms of mortgage serviceability.”
