The regional towns where properties are getting cheaper, but harder, to buy

Home values have fallen in several regional towns this winter as higher for longer interest rates make it harder for home buyers to afford a tree change, a local purchase or an investment property.

More homes are for sale at the same time as affordability constraints have affected demand from buyers.

Ballarat home values have been falling.Credit: Eddie Jim

This pushed the rate of increase in the median home value across regional Australia down to 1.3 per cent over the three months to July, down from a recent high of 2.2 per cent in April, property researcher CoreLogic found.

It compares with an increase of 1.8 per cent across the capital cities to July as the slowdown has been more modest. The data measures the median value of all homes in an area.

CoreLogic Australia economist Kaytlin Ezzy said higher interest rates were putting pressure on household balance sheets.

“Affordability continues to be a fairly widespread concern for most buyers and high interest rates are likely seeing some buyers that would have entered the market delay that decision,” she said.

“Given we’re expecting to see interest rates remain that bit higher for longer, some people are likely waiting to see what happens.”

She said the lower levels of demand from buyers, as fewer people are making tree change moves now compared to during lockdown, had allowed the amount of unsold homes to accumulate.

At the same time, some property owners under pressure from higher mortgage repayments would take advantage of longer-term rises in value and sell to clear their debts, she said, adding to the volume of homes for sale.

This meant most regional areas in NSW and Victoria have above-average amounts of homes for sale, compared to during the COVID lockdowns when listings levels fell to about 50 per cent to 60 per cent below their previous averages, she said.

Ezzy expects some steam to leave regional housing markets until the Reserve Bank cuts the cash rate.

Among the 20 deepest falls in value over the past three months, most were in NSW and Victoria, with only one in South Australia. By contrast, pockets of regional Queensland and Western Australia pushed higher.

Values in Coffs Harbour fell most, down 3.8 per cent in three months, while elsewhere in NSW, Orange (-3.1 per cent) and Wagga Wagga (-2.6 per cent) also eased.

The second-largest fall was in Ballarat, down 3.4 per cent in three months, and other Victorian towns to drop included Wangaratta (-2.7 per cent), Colac (-2.4 per cent) and Castlemaine (-2.2 per cent).

Ezzy said a build-up in listings levels contributed to the falls in value. For example, Coffs Harbour listings are at about average levels while sales activity is about 8.5 per cent below usual for this time of year. Ballarat sales are about 5 per cent below average but listings volumes are almost double the average for this time of year.

“Those buyers don’t have to negotiate as much, they have more choice, more options and that’s taking steam out of the market,” she said.

She also noted Victoria’s policies for property investors – such as a higher land tax and more protections for tenants – have likely prompted some investors to look elsewhere.

Ballarat Real Estate general manager Allister Morrison, who also sells across other regional Victorian centres, had noticed a moderation in prices.

“[That’s] as a little bit of a function of some stock coming to market as well as buyers playing a bit of wait and see approach to the market, in relation to interest rates in particular,” he said.

Some investors affected by the higher cost of land tax or increased compliance requirements for landlords had decided to sell, he said.

But over the past few weeks he felt buyers had started to become more confident that the path of rates would be steady, and had started coming back to the market looking for affordable options.

“The out-of-town investor market is definitely coming back into play, people are recognising there’s some pretty good yields in regional Victoria because there’s been some rental growth,” he said.

“[They think] I can pick up a decent investment property in regional Victoria without having to outlay significant capital.”

Further north, McGrath Coffs Coast selling agent Shayne Long said not only was there less interest at the top end of the market, the more affordable end, where there were more sales, was hampered by higher interest rates.

“I’m finding I’m not having as much interest in higher-end properties … interest has really slowed,” Long said. “With higher interest rates, [buyers are] looking at more affordable homes that are not going to affect their debt [levels].”

“So instead of looking for a $1 million home they’re compensating and looking for an $800,000 home. People’s borrowing capacity has changed due to these rate rises.”

Long said it has taken some time for sellers to adjust their expectations too.