Value growth in regional property markets has slowed down because of factors such as affordability constraints, normalising listing levels, and the current interest rate impacting growth, according to a report by CoreLogic.
In its Regional Market Update, CoreLogic found that regional markets only saw an increase in dwelling values of 1.3% over the three months in July. In contrast, capital cities saw a rise of 1.8%.
According to Kaytlin Ezzy (pictured), economist at CoreLogic Australia, the pace of the growth has eased from the peaks recently recorded as the normalising of internal migration patterns cooled down the demand for regional housing.
“The quarterly growth rate in regional dwelling values has slowed from a recent high of 2.2% in April to just 1.3% in July. The capital cities have also seen a moderation in growth, albeit milder, from 2.0% to 1.8% over the same period,” said Ezzy.
However, Ezzy said that the trends in growth across the country’s largest 50 non-capital city Significant Urban Areas (SUAs) were becoming more diverse. About 40% of such regions saw a decline in values over the quarter. Meanwhile, 11 regions saw a rise in values by more than 3%.
“As the higher cost of listing and high interest rates environment continues to put pressure on households' balance sheets, it's likely we’ll continue to see values and rents moderate in the coming months,” said Ezzy.
Queensland had overtaken Western Australia for the top spot in the quarter as Gladstone saw values rise by 9.2% over the three months to July. Meanwhile, decline in values were seen in 14 regional New South Wales markets and six regional Victoria markets.
While it had accelerated through the first quarter of the year, the rental growth across combined regions has been losing its momentum again. The report stated that the regional rental index had recorded a 1.3% increase over the three months to July, which was a decrease from the 2.8% recorded during the March quarter. Meanwhile, capital city rents rose by 1.1% in July, which was a decrease from the 2.9% recorded in April.
“Although the majority of markets are still recording positive rental growth, the pace of quarterly growth has eased in most regions, with many renters coming up against affordability constraints and some looking for ways to share the additional rental burden by forming larger households,” said Ezzy.
"While growth in both values and rents are losing momentum, affordability continues to be a significant issue across the regions. Dwelling values have risen by 52.5% since the onset of the pandemic, and rents are up 39.1%, compared to a 33.4% and 35.4% rise in the capitals.”
