‘Affordability advantage’: Regions outpace capital cities for growth
Properties in regional Australia have continued to outpace capital cities as demand moves to the affordable housing market, CoreLogic’s February Housing Chart Pack showed.
Almost three-quarters of regional suburbs nationwide recorded dwelling price growth in the past quarter while nearly half (48.6 per cent) of capital city suburbs saw values decline, recent data from CoreLogic indicated.
The latest data showed that national home values fell -0.3 per cent, capital city dwelling values fell -0.7 per cent over the rolling quarter, while regional markets recorded 1 per cent growth.
Sydney and Melbourne were particularly affected, with three in four Sydney suburbs and nine in 10 Melbourne suburbs experiencing quarterly declines.
CoreLogic economist, Kaytlin Ezzy, attributed the regional market’s resilience to affordability advantages, rising internal migration, and increased listing levels in capital cities.
“After underperforming the capitals through much of 2023, the regions have regained much of the affordability advantage, with the capital city premium widening by around $50,000 over the past two years to around $240,000 in January,” Ezzy said.
Ezzy highlighted that the shift in demand towards more affordable housing has driven growth in regional areas, particularly as remote and hybrid work arrangements remain prevalent.
“We’re almost five years on from the onset of COVID and it appears that remote and hybrid working arrangements are here to stay,” she said.
“With more people able to prioritise lifestyle over job location, the flow of internal migrants to regional markets has settled higher than the levels seen pre-COVID, helping to support housing demand.”
CoreLogic data indicated that while regional markets are easing, capital city declines are becoming more broad-based.
The recent data showed a steady rise in the number of capital city suburbs recording value drops, increasing from 31.3 per cent in September to 48.6 per cent in January.
Sydney and Melbourne have been hit the hardest with declines, yet signs of value softening are emerging in Brisbane, Adelaide and Perth.
Ezzy noted that these trends reflect recent shifts in market dynamics.
“Worsening affordability, easing new overseas migration and a steady accumulation of for-sales listings have helped swing capital city selling conditions back in favour of buyers,” Ezzy stated.
“Quarterly declines are also starting to creep into Brisbane, Adelaide and Perth, as momentum leaves the stronger performing mid-sized capitals.”
Despite these mixed results, Ezzy reported that the national market remained relatively stable in January, with a 0.2 per cent decline in capital city values offset by a 0.4 per cent increase in regional values.
This trend is expected to persist, as the CoreLogic daily index remains stable around the 0.0 per cent mark.
Looking at the broader market, CoreLogic’s estimates showed the combined value of residential real estate in Australia remained steady at $1.1 trillion in January.
Additionally, CoreLogic noted that the affordable end of the market dominated growth over the past year.
It revealed that nationally, lower quartile values increased by 9.4 per cent over the year, compared to a modest 1.5 per cent rise in the more expensive upper quartile.
However, CoreLogic reported that sales volumes have slowed, with 526,410 transactions recorded in the 12 months to January, down from the recent high of 534,782 in October 2024.
The data noted that the slowdown is evident in the rolling six-month moving average, which has dipped below historical averages, indicating a decline in sales alongside weaker value growth.
It also showed that vendor discounting has expanded, with sellers across capitals offering a median discount of -3.5 per cent over the three months to January.
In regional areas, the discounting rate increased from -3.6 per cent in May to -3.8 per cent in January.
According to CoreLogic, new listings have risen significantly from early January lows, with 34,926 new listings observed in the four weeks to 2 February.
While still below the five-year average, new listings have doubled from the seasonal low recorded by CoreLogic in early January.
CoreLogic’s rental data reveals that rental growth remains elevated, although it slowed to 4.4 per cent annually in January.
As rental growth eases, it is expected to fall below pre-COVID averages in the first half of 2025.