Australian regional markets soften as the shine wears off popular lifestyle locales
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Australian regional markets soften as the shine wears off popular lifestyle locales

The hottest market on the coast in recent years has also been the hardest hit

By KANEBRIDGE NEWS
Wed, Feb 15, 2023 9:51amGrey Clock 2 min

Australia’s pandemic-induced love affair with regional real estate has well and truly cooled, data from CoreLogic reveals.

Head of research at CoreLogic, Eliza Owen, said rate increases and softer markets had impacted the country’s most popular regional areas, with the Richmond-Tweed area in far north NSW the worst affected.

“It is unsurprising the Richmond-Tweed region recorded the strongest decline in house values and a sharp increase in other important metrics,” Ms Owen said. “This was the region where values skyrocketed, with houses increasing more than 50 percent during COVID, taking the median house value to more than $1.1 million. 

“Since then much has changed with borders reopening, outbound travel returning, workers returning to the office not to mention the overlay of nine rate rises. It’s been a swift and significant shift.”

The Regional Market Update, which reports on house values in Australia’s 25 largest non-capital city regions, showed house market values in the area fell -18.6 percent over the 12 months to January, with houses sitting on the market for 71 days. Vendor discounting in Richmond-Tweed was also the highest of the regions at -8.3 percent. However, it is worth noting that house values in the region are still 23.7 percent above their pre COVID levels. 

The Richmond-Tweed was also the worst performer for unit values, with lowest yearly growth down -10.0 percent and vendor discounts at -5.6 percent for the three months to January.

The Richmond-Tweed area was among four regions in Australia to record more than a 30 percent fall in sales with over the 12 months to November. The others were the Southern Highlands and Shoalhaven, NSW (-35.9 percent), Mid North Coast, NSW (-30.7 percent) and Latrobe-Gippsland, Vic (-30.3%).

The news was better for that other popular COVID destination, Queensland, particularly in the far north where unit growth continued to be strong. Cairns recorded the highest yearly growth at 17.3 percent while Mackay-Isaac-Whitsunday units had the shortest days on market, 32 days over the three months to January. The next fastest selling location for units was the historic Victorian centre of Ballarat, with 35 days on market.

In the WA town of Bunbury, houses took just 24 days to sell, the fastest regional results in the country, followed by Toowoomba on 28 days.

While some regional areas had experienced significant falls, Ms Owen said regional market performance overall continued to be more resilient than capital city dwelling markets.

   



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How much income is required to service a mortgage? It depends on where you live

New research suggests spending 40 percent of household income on loan repayments is the new normal

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Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.

Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.

“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.

CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.

Sydney

Sydney’s median house price is $1,414,229 and the median unit price is $839,344.

Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.

Melbourne

Melbourne’s median house price is $935,049 and the median apartment price is $612,906.

Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.

Brisbane

Brisbane’s median house price is $909,988 and the median unit price is $587,793.

Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.

Adelaide

Adelaide’s median house price is $785,971 and the median apartment price is $504,799.

Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.

Perth

Perth’s median house price is $735,276 and the median unit price is $495,360.

Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.

Hobart

Hobart’s median house price is $692,951 and the median apartment price is $522,258.

Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.

Darwin

Darwin’s median house price is $573,498 and the median unit price is $367,716.

Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.

Canberra

Canberra’s median house price is $964,136 and the median apartment price is $585,057.

Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.

 

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