Fall in regional home values is catching up with capital cities

The regional housing market has been resilient in the face of rising costs and interest rates. That is until now. Latest data shows signs regional property values are going the way of those in the capital cities...down.

Residz Team 3 min read

Cover image for Fall in regional home values is catching up with capital cities

The pandemic-fuelled rush to regional areas saw home prices shoot up 40% in the two years to January 2022. Residz data analysis showed buyers still preferred clicking on regional listings over city listings well into 2022 and many of those were Millennials and Gen Xers looking for bigger properties at a lower cost. But latest data from CoreLogic shows regional home values were down -1.5% in August. Falls of this magnitude have been felt mostly by capital city markets until now, so what could be behind it?

The higher they go, the harder they fall

Just like the higher priced suburbs in the capital cities, it’s the regional towns and cities within commuting distance to large CBDs that have fallen the most. In other words, the higher they went in the boom, the further they fell once the market began cooling.

“The largest falls in regional home values are emanating from the commutable lifestyle hubs where housing values had surged prior to the recent rate hikes,” says CoreLogic’s Tim Lawless.  “Over the past three months, values are down -8.0% across the Richmond-Tweed, -4.8% across the Southern Highlands-Shoalhaven market and -4.5% across Queensland’s Sunshine Coast.”

The combined regional dwelling values were down -1.5% in August compared with a -1.6% fall in values across the combined capitals.  Between March 2020 and January 2022 regional dwelling values surged more than 40% compared with a 25.5% rise for the combined capitals.

The secret seven still posting gains

CoreLogic says that across the 41 SA4 sub-regions analysed, only seven areas recorded a rise in housing values in August.

These included the northern suburbs of Adelaide (0.9%), Perth’s North East and Mandurah (0.6% / 0.5%) and the Coffs Harbour-Grafton region (0.6%).

Values still above pre-Covid

CoreLogic says despite the recent weakness, housing values across most regions remain well above pre-COVID levels.  Home values in all capital cities and rest-of-state regions, bar Melbourne, remain 15% or above the levels recorded in March 2020, implying most homeowners have a significant equity buffer before their home is likely to be worth less than what they paid.

“A 15% peak to trough decline would roughly take CoreLogic’s combined capitals index back to March 2021 levels,” Mr Lawless said.  “Additionally, many homeowners would have had at least a 10% deposit and paid down a portion of their principal, the risk of widespread negative equity remains low.”

As the weather warms the market cools

With more spring listings coming online and interest rates still rising, it’s no surprise Mr Lawless expects the downturn will continue to play out through the remainder of the year, and possibly into 2023.

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” he said.

Homeownership headwinds and hope

So, with house prices dropping, will first home buyers finally get a property? CoreLogic does see a glimmer of a silver lining for home buyers in the lower housing prices.

“The wash up is that lower housing prices and higher incomes should make home ownership more achievable for non-home owners, but headwinds remain in being able to save for a deposit and demonstrate the ability to service a loan amid such a high cost of living,” Mr Lawless said.

Residz can help buyers and sellers reduce the stress:

  • If you’re considering purchasing or renting a house, make sure you download our free property report for that address. We have 12 million addresses in our database, with every report offering information on internet speeds, crime trends, bushfire and flood risks, investability scores and a whole lot more.
  • Would you like to sell your home and connect with home buyers willing to pay your dream price? Residz has the solution, for zero dollars. Put a DreamPrice on your home to test interest. Read about DreamPrice(™) here.

Photo by Allef Vinicius on Unsplash