Regional property markets start losing steam
Regional Australia property markets appear to be losing some of their heat because of chronically low listings, sustained buyer demand, high internal migration rates and a move towards hybrid working arrangements.
CoreLogic’s latest Regional Market Update shows the growth rate across Australia’s 25 largest non-capital city regions has slowed from a peak of 6.6 per cent in April 2021 to 4.7 per cent in the three months to April 2022.
That said, regional Australian property markets are still outperforming capital cities.
Dwelling values across the combined regions jumped 23.9 per cent in the year to April 2022, outpacing the combined capital city dwelling growth rate of 14.6 per cent for the same period.
CoreLogic’s research director Tim Lawless says there are many reasons why the rapid rate of growth for regional areas has continued while conditions in capital city markets, particularly Sydney and Melbourne, have softened in recent months.
“Although demographic data is significantly lagged, anecdotally we are still seeing strong demand for regional housing supported by high internal migration rates,” says Lawless.
“The high level of demand is supported by estimates of home sales, which were tracking 20.1 per cent above the previous five-year average over the three months ending April 2022.
“It seems many employers across the relevant industries have implemented permanent hybrid working arrangements for staff which is likely to be supporting the stronger demand trend across regional Australia.”
The quarterly Regional Market Update shows Hunter Valley, excluding Newcastle, was the best performing non-capital house market, with an annual growth rate of 34.3 per cent, leapfrogging Southern Highlands and Shoalhaven (33.3 per cent).
But Lawless says the figure was more about a slowing rate of growth in the Southern Highlands and Shoalhaven region rather than an acceleration in the growth rate across the Hunter Valley.
“We are likely seeing worsening affordability pressures limiting the rate of growth across the Southern Highlands and Shoalhaven, where the quarterly rate of growth has reduced from 9.7 per cent late last year to 5.6 per cent over the most recent three-month period,” he says.
“Across the Hunter Valley region the median value of a house is still well below $1 million implying less dampening pressures from worsening affordability.”
Houses in Toowoomba (Queensland) sold fastest in the 12 months to April 2022, where the median time on the market was 13 days, followed by Queensland’s Sunshine Coast and Gold Coast, where both regions recorded a median time on the market of 16 days.
The slowest-selling region for houses is the New England and North West region in New South Wales, where the median time on the market was recorded at 46 days over the same period.
As interest rates move higher and affordability pressure mount, Lawless says the outlook for non-capital regional markets is for a softening in growth rates to more sustainable levels.
“Arguably some regional markets will be somewhat insulated from a material downturn in housing values due to an ongoing imbalance between supply and demand,” he says.
“We continue to see advertised stock levels remaining extraordinarily low across regional Australia and settled sales activity looks to be holding firmer relative to the capitals. A lot will depend on regional migration patterns and we expect the demographic trends to continue favouring regional housing markets, especially those regions with some lifestyle appeal within a few hours’ drive of the major capitals.”