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Regional areas outpace capital cities for growth

Despite affordability constraints and rising interest rates, regional property prices have outpaced the capital cities over the past quarter.

CoreLogic’s Regional Market Update found that dwelling values in regional Australia recorded a quarterly increase of 1.2 per cent in the three months to January 2024, compared to the capital cities’ 1 per cent rise over the same period.

CoreLogic Research Director Tim Lawless said the growth in the regions followed the sector’s ‘boom’ during the worst of Covid lockdowns, when people were leaving the cities en masse.

“Outside of the pandemic growth between 2020 and 2022, the outperformance of regional markets relative to the capital cities is a fairly new phenomenon,” Mr Lawless said.

“The more recent trend, where growth in regional housing values has outpaced the capital cities, is attributable to a slowdown in capital city growth rates rather than an acceleration in regional growth.”

Capital growth remains varied across Australia, with many of the standout performers located in WA and Queensland.

WA’s coastal towns of Albany and Bunbury recorded the highest quarterly rises, with value growth of 7.7 per cent and 6.2 per cent respectively, ahead of Northern NSW’s Lismore (5.5 per cent), and Townsville (4.7 per cent) in Queensland’s North.

Only six regional locations recorded an annual increase of 10 per cent or more, including WA’s Bunbury (15.8 per cent), and Central Queensland’s Bundaberg (12 per cent) and Rockhampton (12 per cent).

“The strongest growth conditions have been skewed towards regional areas of WA and Queensland,” Mr Lawless said.

“These areas have a diverse economic base and are generally supported by a mixture of agriculture, tourism, ports and mining.

“They’re the only states with a positive rate of interstate migration that helps support housing demand and they’re relatively affordable markets.”

Meanwhile, Tasmania’s Launceston (down 2.3 per cent) and Devonport (down 2 per cent) recorded the largest quarterly falls. 

Annual declines were recorded in 11 regional markets across Victoria, Tasmania and NSW where the coastal market of Batemans Bay (5.8 per cent) had the largest annual decline.

“The weakness across Tasmanian housing markets is broad-based but follows a solid run of growth with values up 91 per cent over the past decade,” Mr Lawless said.  

“A combination of affordability constraints following the pandemic surge in values, negative interstate migration and a normalisation in internal migration rates are other factors that are likely contributors to the softer conditions across Regional Victoria and Regional Tasmania.”

Rents across regional Australia remain on the rise and have also outpaced the capital cities.

CoreLogic’s regional rental index recorded a 2.3 per cent increase over the three months to January, up from a recent low of 0.4 per cent over the September quarter of 2023. 

Comparatively, capital city rents rose 2.1 per cent over the three months to January. 

Rents increased 3 per cent or more in 13 regional areas, including Albany (WA), which recorded the highest quarterly increase in rents up 6.3 per cent, followed by Bunbury and Busselton (WA) at 4.6 per cent a piece. 

This translates to an approximate increase in the median weekly rental value of between $25 to $30.

WA dominated the list for highest annual rental growth, with the top four regions being Bunbury (14.8 per cent), Busselton (12.7 per cent), Geraldton (12.1 per cent) and Albany (11.2 per cent).

Queensland’s Gladstone (11.6 per cent) and Mackay (10.4 per cent) were the other two regional markets with double-digit rental growth in the past year.

NSW’s Bateman’s Bay was Australia’s weakest rental market, recording the highest quarterly fall in rents (down 1.8 per cent) and an annual decline of 10.2 per cent in the 12 months to January.

Looking forward, demographic trends, migration patterns and localised economic drivers will be critical to regional housing values in 2024, Mr Lawless said.

He said while there is likely to be a legacy of Covid, with remote working at least partially embedded in workplace policies, it’s unclear how work from home policies will evolve over time.

“Regional cities in the ‘sweet spot’ — offering commuting options to a capital city, a lifestyle dividend, and affordable housing — will likely experience stronger demand than they did pre-COVID,” he said.

“In contrast, the performance of more remote regional markets will hinge on local economic factors, with infrastructure projects impacting housing demand, and climate, weather, currency flows, and policies affecting farming or coastal areas.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.