Premium regional properties hit by market downturn

Oksana Patron

17 May 2023

Premium regional markets, which benefited from escape from capital cities during the pandemic, are now seeing softer values, longer days on market and bigger vendor discounts, according to CoreLogic’s Regional Market Update.

The South East region in South Australia (Kangaroo Island, the Fleurieu Peninsula and the Limestone Cost) were identified as the best performing regional house market on annual basis, with value growth of 10.8% as of April 2023, according to the report that looks at Australia’s 25 largest non-capital city regions.

The New England and North West (NSW) and Bunbury (WA) regions were the next best performers, up 4.9% and 4.8% respectively.

But NSW lifestyle markets, including the Richmond-Tweed (-24.2%), the Southern Highlands and Shoalhaven (-16.0%) and Illawarra (-13.7%) regions recorded the largest annual declines in house values.

CoreLogic Australia Economist Kaytlin Ezzy said that over the past year, premium lifestyle markets have been hardest hit by softer market conditions and rate increases.

These markets were also the largest beneficiaries of regional migration through the COVID-induced and they were significantly more sensitive to the rising cost of debt and the normalisation in regional migration trends.

For example, house values in Richmond-Tweed (NSW far north coast) surged 51% during the pandemic, according to CoreLogic’s report, before the region’s relatively higher price tag, rising cost of debt and lingering impacts of the 2022 flood, saw values fall -24.2% over the year to April.

As far as regional unit markets were concerned, the Riverina region in NSW, recorded the largest annual increase in values, up 19.8% over the 12 months to April 2023, followed by Cairns (QLD) and Toowoomba (QLD), up 15.2% and 13.0% respectively.

At the same time, units in Richmond-Tweed, NSW (-13.9%) and Geelong, Vic (-10.6%) recorded the largest yearly decline in values.

Commenting on the regional outlook, Ezzy said that affordable rural markets would continue to show some resilience as they recorded only mild declines through the recent downswing, with a few regions still recording values at peak.

“Despite two interest rate rises over the first few months of the year, these markets offer relative affordability, have low listing levels, increased regional migration inflows and strong economic activity off the back of mining, agriculture and tourism. This has all helped support mild value growth,” she said.

At the same time, Ezzy pointed to some positive improvements in the quarterly house figures within the desirable commuter markets, such as the Gold Coast in South East Queensland, and the Illawarra and Newcastle in NSW.

“Similar to Sydney and Melbourne, these more expensive regional commuter markets typically lead the cycle. Although mild, the positive growth seen over the three months to April may suggest we have moved through the trough in value declines and signals the start of a recovery phase across the regional markets,” Ezzy added.

She stressed that a likely strong regional migration would also help bolster demand in these regions.

The Gold Coast recorded some of the strongest internal migration rates across the country through 2022, while Illawarra and Newcastle saw some outflow of residents back to the capitals over that time.

According to Ezzy, data from the first three months of this year is likely to show a reversal of this trend, with the strong return of overseas migrants to Sydney likely to ‘spill over’ into these regions.