Despite surpassing capital cities in Australia, the regional property markets are showing signs of slowing due to chronically low listing and sustained buyer demand.
According to CoreLogic's most recent Regional Market Update, growth in Australia's 25 major non-capital city regions fell from 6.6 per cent in April 2021 to 4.7 per cent in the three months leading up to April 2022.
The dwelling values across combined regions increased by 23.9 per cent in the year to April 2022, exceeding the combined capital city dwelling growth rate of 14.6 per cent during the same period.
There are several reasons why the rapid growth in regional areas have maintained while conditions in capital city markets, particularly Sydney and Melbourne, have deteriorated in recent months.
Despite the fact that demographic data is significantly lagging, we continue to see strong demand for regional housing, which is fueled by high internal migration rates.
Many employers across relevant industries have implemented permanent hybrid working practices for their employees, which is supporting the strong demand for homes in the regional areas of Australia.
While the comparison does not always hold true for the most popular regional locations, regional housing prices are more affordable compared to their capital city counterparts. For example, the median dwelling values in Newcastle and Lake Macquarie region remain $250,000 lower relative to Greater Sydney.
Similarly, the median value in the Illawarra region is $143,000 lower compared to Sydney’s; the dwelling value in Geelong is $5,350 cheaper compared to Melbourne (which may not seem much) but the housing values in Ballarat are $203,000 lower relative to Melbourne’s median.
Hunter Valley, excluding Newcastle, was the best-performing non-capital house market with an annual growth rate of 34.3 per cent — higher than the Southern Highlands and Shoalhaven i.e. 33.3 per cent.
We're probably seeing worsening affordability pressures limiting growth in the Southern Highlands and Shoalhaven, where the quarterly growth rate has dropped from 9.7% late last year to 5.6 per cent in the last three months.
The median housing value in the Hunter Valley is below $1 million reflecting less pressure from the worsening affordability.
The figures reflect the slower rate of growth in the Southern Highlands and Shoalhaven region rather than an increase in the Hunter Valley's growth rate.
Considering the house sales for 12 months from Feb 2021 to April 2022, here are some statistics to reflect upon...
Central Queensland, New England and North West (NSW)
42.9 per cent increase
41.2 per cent increase
Mackay Isaac Whitsunday
40.8 per cent increase
36.1 per cent increase
35.6 per cent increase
Victoria’s Latrobe – Gippsland region
2.4 per cent increase in house sales from January 2021 to February 2022
1. Toowoomba (Qld) - The median time on the market was of 13 days
2. Queensland’s Sunshine Coast and Gold Coast - The median time on the market was of 16 days
North West region and New England, New South Wales
The median time on the market was recorded at 46 days
Hunter Valley excluding Newcastle in New South Wales
A median discount rate of -1.8%
Mackay – Isaac – Whitsunday region in Queensland
A median discount rate of -4.2% in order to secure a sale
The Launceston and North East region of Tasmania had the strongest performing regional unit market in Australia over the 12 months to April 2022 with a 30.9 per cent gain in values.
The Sunshine Coast (29.3%) and Gold Coast (28.4%) in Queensland came in second and third, respectively. The Mackay – Isaac – Whitsunday (0.9 per cent) and Townsville (2.2 per cent) districts of Queensland, on the other hand, experienced a negligible increase over the same period.
Despite the fact that the median days on the market and vendor discounts are still low, both indicators have weakened in recent months.
The number of homes for sale in Regional Australia is more than 40% below the five-year average and 20.5 per cent lower than a year ago. Simultaneously, the sales activity has increased by about 20% above the five-year average across Regional Australia.
There’s a clear disconnect between demonstrated demand and available supply which makes it a vendor's market and gives them favourable conditions over buyers. In a low supply housing market, the buyers tend to feel a bit rushed in decision making and get little opportunity to negotiate on the advertised price.
When the interest rates and affordability pressures rise, the growth rates in non-capital regional markets drop to more sustainable levels. As a result of a persistent supply and demand imbalance, some regional markets may be protected from a significant drop in house values.
Advertised stock levels across regional Australia continue to be extremely low, and settled sales activity appears to be holding firmer compared to the capital cities. Much will be determined by regional migration patterns and we anticipate that the demographic trends will continue to favour regional housing markets, particularly those with some lifestyle appeal within a few hours' drive of large capitals.
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