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Australian Regional Home Demand Depletes

Data suggests the want for a pandemic-fuelled change of scenery is diminishing.

By Terry Christodoulou
Wed, Sep 8, 2021 12:04pmGrey Clock < 1 min

In the midst of the first wave of COVID across Australia’s capital cities, reports of rising regional property demand emerged, with a number of city-dwellers looking to the regions for a socially distanced slice of life.

However, the latest report by CoreLogic shows that prices in the regions are growing at a slower pace since the start of 2021 – especially when compared to the capital cities.

From January to August house pieces in regional NSW grew by 15.5% – compared to Sydney’s 22.5% rise according to CoreLogic’s Data.

Queensland saw similar results with house prices rising 15.6% regionally, and 16.8% in Brisbane.

In South Australia, regional houses grew 9.8% compared to Adelaide’s 14.4% gain.

Victoria bucked the trend, with Melbourne recording a slightly lower growth rate of 14.9% compared to the 15.9% growth in regional Victoria.

Since the end of January, house values across the combined capitals have risen by 16.8% higher while regional house values were up by 14.7%.

Where regional growth has slowed the most include Warrnambool, Victoria – where house price gains had slowed by 6% to 3.7% in the three months to August – and Shepparton, Victoria – which slowed 5.5% to 2.4% during the same period.

NSW saw its central coast region drop by 4.3% to 7.1% – still a robust growth rate.

Before easing trends emerged, regional house values had recorded consistently higher rates of capital gain than the capitals since April 2020.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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