Once-booming Victorian tree-change towns where house prices are on discount

House prices in several Victorian tree-change and sea-change towns have dropped over the past year due to home buyers’ increased borrowing costs and gradual return to CBD offices.

The median house price across regional Victoria has fallen 1.4 per cent to $572,000 by the September quarter, compared to the same time last year, according to Domain’s latest House Price Report, released on Tuesday.

Surf Coast house prices have fallen.Credit: Mark Chew/Visit Victoria

The local government area that recorded the steepest decline was the Yarriambiack Shire, in northwestern Victoria, down 22.9 per cent in 12 months, to a median of $185,000.

It was followed by the LGA of Corangamite, down 11.9 per cent to $415,000. House prices in Mansfield (down 10.9 per cent), Strathbogie (down 9 per cent), Bass Coast (down 8 per cent), Hepburn (down 6 per cent) and the Surf Coast (down 4.6 per cent) also fell.

Domain’s chief of research and economics, Dr Nicola Powell, said regional Victorian house prices have dropped for three consecutive quarters, which hasn’t happened since 2008. She said during the lockdown years, there was a surge in demand for tree-change and sea-change properties as people sought lifestyle changes and were working remotely. However, as the market stabilises now, there is now a clear slowdown in migration out of cities.

“We saw strong rates of demand for [houses] around the commutable belt of greater Melbourne. This peaked during the pandemic,” she said. “Many businesses are mandating a return to office work, which is significantly impacting buyer behaviour. People are reassessing their commuting distances.”

Powell also said September had the highest volume of listings for that month since 2017, causing conditions to shift in favour of buyers looking to enter the regional housing market. But many potential buyers are adopting a wait-and-see approach, due to forecasts the Reserve Bank will cut interest rates in the next year.

“A few reductions in the cash rate will do wonders for everyone’s borrowing capacity and affordability in terms of home loan repayments. So I do think that there will be a pool of buyers that are just on the sidelines for the time being, just waiting to see.”

“Once we start to see a few rate cuts coming through, that will likely spur buyers back to market… [But] we’re likely to see prices fall, for the coming quarters,” she said.

Michael DeVincentis, director at BigginScott in Daylesford, said he is experiencing an oversupply of listings in the Hepburn region. He said many sellers are expecting to sell at pandemic prices, but this is deterring buyers.

“It’s no good having a high price if no one’s going to pay it… That’s starting to adjust as buyers aren’t willing to meet those expectations,” he said.

DeVincentis says most of his current clients come from metropolitan Melbourne, attracting cashed-up second or third home buyers looking for holiday homes. He says investor activity has diminished due to higher land taxes and interest rate rises.

“Some people locally have had their mortgage repayments go up by 50 per cent making it difficult to cope because the rents haven’t gone up that much. [People are] finding that their holiday accommodation is not getting booked as much as well,” he said.

KPMG regional economist Terry Rawnsley said the decline in regional prices are reflective of a “cooling-off period post-COVID.”

There are plenty of homes for sale in the Hepburn region.Credit: Joe Armao

“You have a big influx of people, remote workers, coming into these places during that COVID period. But after a period of time, some people might want to return to Melbourne and there’s no new big city buyers coming in to sort of keep the prices up,” Rawnsley said.

Rawnsley said many who purchased “weekender” homes in coastal areas when interest rates were low are now re-evaluating their investments.

“With interest rates increasing over the last few years, people might have been having to sell properties into the market. So there’s probably a bit more of a lack of demand for higher-end properties in those locations.”

Director of Great Ocean Road Real Estate James Worssam says rising land taxes and the cost of living are affecting potential buyers. “Eighty per cent of the houses we sell are holiday homes, and land tax is proving to be a big factor, especially for self-funded retirees whose land taxes have suddenly gone up.”

Worssam remains optimistic about the future of regional house prices, particularly on the Surf Coast. “I’ve been selling down here, and the market never stays the same,” he said. “It goes up, it goes down.”

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