Which regional markets are witnessing rapid declines?

Richmond-Tweed’s house prices fell 11.7 per cent, NSW’s Southern Highlands and Shoalhaven and the Sunshine Coast dropped 7.1 per cent, the Gold Coast declined 6.4 per cent, while the Illawarra (6.1 per cent), and Newcastle and Lake Macquarie (6 per cent) felt prices rapidly fall.

Central Queensland (0.1 per cent) was the only regional locality where prices jumped during the quarter, while they held firm in south-east South Australia and Western Australia’s Bunbury.

CoreLogic economist Kaytlin Ezzy detailed how “consecutive interest rate rises, persistently high inflation, and waning consumer sentiment saw the pace of value declines accelerate across regional Australian property markets”.

Of the 87.8 per cent of regional housing markets to register a quarterly decline, four’s prices have either dipped below or remained steady. Values in Richmond-Tweed are down 7.8 per cent on a year ago, joined by Illawarra (1.9 per cent) and Ballarat (0.5 per cent), while Newcastle and Lake Macquarie’s prices are level with last year’s.

“It is unsurprising that 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,” Ms Ezzy said.

“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 poorest-performing housing markets. Southern Highlands and Shoalhaven lead the nation in declining sales volume (-27.5 per cent) and the highest vendor discounting rate (-4.9 per cent).

Moreover, the New England and North-West region registered the longest time on market at 43 days.

On the flip side, South Australia’s south-east was the strongest-performing region as values currently sit 21.7 per cent higher than the past year, followed by the Riverina (20.5 per cent) and New England and North-West (19.8 per cent).

Further to this, Townsville experienced the highest growth in sales volume, up 21.6 per cent. Homes in Toowoomba are selling in just under a fortnight (13 days), the quickest of any regional Australian location.

Vendor discounting was at its lowest rate, 2.7 per cent, in Victoria’s Latrobe Gippsland region and NSW’s Central West.

Shifting the focus to regional unit markets, 14 recorded a quarterly fall, double the portion in values over the three months to July. Again, Southern Highlands and Shoalhaven was one of the leaders with regard to value declines, down 7.7 per cent, the largest quarterly decline across the country.

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.

Additionally, Townsville boasts the highest days on market (42 days) and the highest vendor discounting (-4.4 per cent).

Conversely, Cairns and Toowoomba lay claim to the regions where units have experienced the highest rate of annual increase to October 2022, up 18.9 per cent and 17.4 per cent, respectively.

Ms Ezzy explained that “units have largely been more resilient than houses through the downswing to date”, despite not being “immune to the downturn”. Adding that “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 shrink”.

As for what the future holds for regional Australia, Ms Ezzy explained that “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”.

Although, Australia’s regional outlook remains negatively inclined as values are expected to drop further as interest rates rise.

She did note that “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”.

“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 home owners come up against affordability pressures in terms of mortgage serviceability,” she concluded.