Australia’s regional housing boom has softened, as several regional markets that had the strongest value growth through the upswing now among the fastest declining markets. 

CoreLogic found that house values in six of the most popular lifestyle markets recorded falls of -6% or more last quarter.  

These lifestyle markets included Richmond-Tweed, Southern Highlands and Shoalhaven, Sunshine Coast, Gold Coast, Illawarra and Newcastle and Lake Macquarie. 

CoreLogic showed that Australia’s 25 largest non-capital city regions recorded a quarterly decline in house values, with the exception of Central Queensland with 0.1%, and no change in SA’s South East region and WA’s Bunbury region.  

CoreLogic Economist Kaytlin Ezzy said value declines initially seen across the more expensive capital city and regional markets had become more geographically broad-based over the three months to October, with 87.8% of the regional house and unit markets analysed recording a quarterly decline in values.  

“Consecutive interest rate rises, persistently high inflation, and waning consumer sentiment saw the pace of value declines accelerate across regional Australian property markets,” Ezzy said. 

“It is unsurprising the Richmond-Tweed region recorded the strongest decline in house values. 

“Throughout the COVID period, values skyrocketed, rising more than 50% and taking the median house value to more than $1.1 million.  

“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% since April.” 

Looking ahead, Ezzy said around half of the markets analysed were still seeing houses and units transact faster than over the 12 months to October 2021.  

However, properties were now sitting on the market for around two to three days longer than they were over the year to July, demonstrating a continued softening in demand.  

“Sales activity has continued to soften over the quarter, with only a few regions, predominantly in northern Queensland, recording an increase in annual sales volumes,” Ezzy said.  

“While down compared to the previous year, it’s important to remember that last year was one of the busiest sales periods on record, and the majority (76%) of regional markets analysed are still recording higher annual sales volumes compared to their previous five-year averages.” 

On the supply side, the flow of regional listings had been relatively lacklustre this spring selling season, which has kept total listings levels fairly tight, despite a slowdown in sales activity.  

“While 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,” she said.  

Ezzy said the outlook for Australia’s regional markets remained skewed to the negative, with values expected to continue declining while interest rates are rising.  

“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,” Ezzy said.  

“However, as the cumulative rise in the cash rate approaches the serviceability buffer of 3% 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.”