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Regional prestige lifestyle areas the first to show market weakness

Posted by societyrealestate on 22/08/2022
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After COVID lockdowns fuelled record-breaking growth rates among many of Australia’s regional lifestyle areas, NSW and Queensland’s beach and country hot spots have been the first to register a quarterly fall in house values.

CoreLogic’s latest quarterly Regional Market Update examines growth conditions across Australia’s largest non-capital city regions, showing the largest 25 non-capital city regions all recorded an increase in house values for the year.

NSW’s Riverina region was the best performer among regional house markets, with an annual increase of 27.8%, followed by Wide Bay (Qld) and New England and North West (NSW), up 26.8% and 26.4% respectively. The lowest yearly growth rate was recorded across Ballarat in Victoria (7.4%), followed by Bunbury in Western Australia (9.5%).

Annual figures show regional dwelling values jumped 17.0%, outpacing the combined capitals, which saw dwelling values rise 5.4% over the same period. Despite the widespread capital gains in regional house values, 10 regions recorded values declines in the three months to July.

The growth in regional dwelling values has slowed from a peak of 6.4% in December last year to
-0.2% over the three months to July 2022.

CoreLogic Economist Kaytlin Ezzy saida number of the regional areas that previously saw some of the strongest growth over the COVID period are now showing weaker selling conditions as consecutive rate hikes, affordability constraints, falling consumer sentiments and high non-discretionary inflation put further downwards pressure on demand.

The largest quarterly falls in house values occurred in the Richmond-Tweed region, down -4.5%, followed by Illawarra (-3.5%) and Southern Highlands and Shoalhaven (-3.0%), all located in NSW. The popular South East Queensland regional lifestyle markets of the Sunshine and Gold coasts also saw house values decline over the past three months, down -2.5% and -1.2% respectively.

“Typically, markets with a higher median value tend to lead the broader market when shifting through different cycles. After recording some of the strongest value growth throughout the COVID period, each of these areas now have a median house value in excess of $1 million,” Ms Ezzy said.

“As we move further into the downward phase of the cycle we would expect to see this decline in values to spread into more regional areas.”

Unit markets

Across Australia’s regional unit markets, Queensland’s Gold Coast and NSW’s Capital Region recorded the highest annual increase in values, up 23.7% and 22.0% respectively over the 12 months to July 2022. At the other end of the scale, Townsville (Qld) was the only region to record a decline in unit values over the past year, down -4.7%.

While all but one region saw an annual increase in unit values, seven saw unit values fall over the three months to July. Richmond – Tweed, NSW (-3.8%) recorded the largest quarterly fall in unit values, followed by Victoria’s Ballarat and Geelong regions, where unit values were down -3.2% and -1.9% respectively.

Sales volumes

Strong interstate migration over the past year helped fuel an increase in sales activity across regional Queensland, lifting the national regional sales volumes 1.4% higher in the year to May, and almost 30% above the five-year average. As a result, Queensland had the top three regions with the largest increase in sales volumes in the 12 months to May, with dwelling sales across Townsville up 34.2%, followed by the Mackay – Isaac – Whitsunday region (29.6%) and Central Queensland (28.1%).

Falls in dwelling transaction volumes occurred in 15 of the 25 regions with the Southern Highlands and Shoalhaven region in NSW recording the largest fall (-19.7%), followed by Latrobe – Gippsland, VIC (-16.4%) and Richmond – Tweed, NSW (-14.8%).

“While sales activity across some of these regional markets is down compared to the previous year, it’s important to remember this is off the back of some extremely high sales volumes recorded the year prior. All but one of the markets analysed recorded a rise in dwelling sales compared to the regions previous five-year average,” Ms Ezzy said.

Time on market and vendor discounting

Houses sold fastest in Toowoomba (Qld) where the median time on market was 12 days in the year to July 2022, down from 23 days compared to the previous 12 months. Queensland’s Gold Coast and Tasmania’s Launceston and North East regions were second, each recording a median time on market of 17 days.

The slowest selling house region was once again the New England and North West region in NSW, where the median time on market was 43 days over the 12 months to July 2022, an improvement from the 72 days it took to sell a property in the year to July 2021.

While most markets are still recording faster selling times compared to this time last year, median days on market and vendor discounting figures have been creeping up in the past two quarters, Ms Ezzy said, suggesting buyers were starting to reign back some control.

“Vendors are now offering slightly larger discounts in order to secure a sale, while regional properties are now taking slightly longer to sell as selling conditions start to shift back in favour of buyers,” she said.

“While inventory levels remain low across the combined regional areas, the trend in newly listed properties is starting to normalise. As more properties come onto the market, vendors will potentially have to make more concessions when trying to secure a sale.”

Regional outlook

As interest rates move higher and affordability pressures mount, Ms Ezzy said it’s likely the decline in values witnessed in capital cities will become more widespread and impact regional areas.

“Value declines are already being seen across more expensive regional markets, while the pace of growth has eased considerably across the combined regions’ broad middle and lower quartile markets,” she said.

“However, as Australia’s housing market moves further into the downwards phase of the cycle, it’s possible the regional areas will be slightly more insulated than the capitals, thanks to these markets’ relative affordability and low advertised supply levels. Additionally, the strong growth that’s occurred over the past two years should help cushion regional homeowners from the most extreme effects of the cycles downturn.”

Source Corelogic

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