Weakening personal finances and a return of buyers from regional locations to the cities are cutting demand for homes in popular lifestyle locations such as Byron Bay and the Mornington Peninsula, and putting them at risk of erasing their pandemic gains, new CoreLogic data shows.

Declines of more than 31 per cent in the hinterland of northern NSW’s Richmond and of 10 per cent in parts of Victoria’s Mornington Peninsula show the changes hitting holiday rental markets as surging living costs and higher interest rates cut discretionary household spending,