The Regional Housing Market Could Be Losing Steam | Kanebridge News
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The Regional Housing Market Could Be Losing Steam

Small cracks in the market are emerging.

By Terry Christodoulou
Tue, Feb 15, 2022 2:03pmGrey Clock < 1 min

In the past three months alone, regional house prices have risen 6.3% — twice as fast as state capitals following lockdowns in Sydney, Melbourne and Canberra.

However, the latest rise in regional house prices is unlikely to be sustained with fears of higher interest rates and tighter lending weights on demand according to CoreLogic.

Overall selling conditions are currently still strong across regional Australia, some indicators are already shifting according to the CoreLogic data.

The time it takes to sell a home has dropped seven days to 30 from a year ago but the metric is drifting from a recent low of 23 days in three months to November 2021.

Further, quarterly growth rates in dwelling values has been on an ascendant trajectory since September 2021 across the combined regional market — however, growth eased through January at 1.8% over the month — lower than the 2.2% in the previous month.

While the greater growth rate across the greater regions during January declined, it was most concentrated in NSW. Here, the regional market – where the market is most expensive – eased 60 basis points from 2.3% to 1.7%.

During the 12 months to January, the median dwelling value across the combined regions jumped 26.1% — outpacing the combined capital city rate of 21.3% for the same period.



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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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