NewsBite

Crash-proof regional property prices as safe as houses

Regional house prices are finally turning down – but unique factors indicate they have a better outlook than the cities.

Prices in working-from-home favourite areas including Mornington in Victoria have recorded drops since March. Picture: Getty Images
Prices in working-from-home favourite areas including Mornington in Victoria have recorded drops since March. Picture: Getty Images

Regional property prices are ­finally starting to tumble – confirming a nationwide residential downturn – but there is mounting evidence they may still offer a better outlook than the bigger cities.

House prices in regional areas have risen at twice the pace of their big city cousins since 2020. But that does not mean they are due to retrace back to where they started.

“Normally we would say price patterns in regional Australia are predictable – this time it’s different. We have never had to include key factors such as the ability to work from home,” says Paul Ryan, a PropTrack economist.

Due to Covid-19 and the previously unexplored advantages of living in the regions while working for city-headquartered companies, prices in the regions have soared 47 per cent since the pandemic compared to a lift of 26 per cent for the larger cities.

The decline in regional prices over the three months to August 31 may look small, but – at -1.2 per cent – it is the biggest quarterly drop in more than a decade.

Among the dominoes to fall is Adelaide, which saw its first price fall in the current cycle – down 0.12 per cent against a nationwide decline 0.39 per cent.

Similarly, working-from-home favourites such as Wollongong in NSW, Mornington in Victoria and Queensland’s Sunshine Coast have all seen drops since March.

But country property prices are being sustained by a sharp lack of supply, rental vacancy rates lower than metropolitan centres and, most importantly, ­affordability.

Put simply, regional Australia is only falling at less than half the pace of the metropolitan centres. The drop from the peak among capitals is now 3.4 per cent. Among regionals it is 1.4 per cent. “Regional areas are still the most affordable and that gives many areas in regional Australia a new profile,” PropTrack’s Ryan says.

Average home prices in regional areas remain within reach for many families at close to $640,000. In contrast, the capitals have an average price of $763,000 while Sydney has an average of just under $1m at $991,000.

As figures from research house CoreLogic show that clearance rates in the larger cities fell again in recent weekends, many analysts are forecasting overall house price declines from peak to trough across Australia of between 15 per cent and 20 per cent.

PropTrack’s own forecast is close to 15 per cent.

It suggests we will see a 2-5 per cent fall this year followed by a 7-10 per cent fall in 2023. However, it does not break out specific forecasts for regional properties.

“We would suggest that regional Australian property prices will not see the 15 per cent falls the market expects for capital cities – regional areas are now falling persistently but they are being buffered by the affordability and lifestyle appeal,” Ryan says.

In the period since March 2020, all house prices nationwide rose by 32 per cent, but regional areas rose a stunning 47 per cent.

The biggest single lift came in Tasmania (excluding Hobart), which rose by 54 pre cent.

That was closely followed by NSW (excluding Sydney), which rose by 50 per cent. The poorest performance in the nation was the Northern Territory, where prices only rose 13 per cent, confirming that the ability to commute or work from home has been the key post-pandemic factor in prices.

Around the nation, Perth continues on its own resource-linked cycle – prices were effectively flat over the last quarter.

The district that may be heading for more sharp falls is Hobart. The city has already seen prices drop 1.7 per cent from their peak – which is a bigger downturn than in Brisbane, Perth or Adelaide – although prices in Hobart remain 10 per cent higher than a year ago.

“More significant price falls are expected in Hobart as higher interest rates constrain borrowing capacities,” reads the PropTrack report out on Thursday.

Originally published as Crash-proof regional property prices as safe as houses

Add your comment to this story

To join the conversation, please Don't have an account? Register

Join the conversation, you are commenting as Logout

Original URL: https://www.couriermail.com.au/business/crashproof-regional-property-prices-as-safe-as-houses/news-story/83a50b7bb2a8ff5af25c94dc18b05a8e