Regional Property Market Outpaces Capitals as Slowdown Hits Cities

⚡️ Highlights:

1. Regional Australia’s property values are outperforming capital cities, with a quarterly increase of 1.2% compared to 1.0% in capital cities.

2. Strong growth in WA and Queensland coastal towns, with increases in Albany, Bunbury, Lismore, and Townsville.

3. Tasmania’s Launceston and Devonport recorded the largest quarterly falls in property values.

4. Regional rental market is on the rise, with a 2.3% increase over three months, led by Albany, Bunbury, and Busselton in WA.

5. Mining regions have the strongest yields, with Kalgoorlie – Boulder in WA leading at 9.5%, while Bowral – Mittagong in NSW has the lowest yield at 2.9%.

CoreLogic’s latest Regional Market Update reveals that Australia’s combined regional property markets have outperformed the combined capital cities, despite normalization in internal migration trends, affordability challenges, and reduced borrowing capacity amid higher interest rates. In the three months to January 2024, dwelling values in regional Australia recorded a quarterly increase of 1.2%, compared to a 1.0% increase in the capital cities.

Sustained Regional Growth Amidst Capital Slowdown

Tim Lawless, CoreLogic Research Director, notes that while the rate of growth across the combined regions has eased, it follows the sector’s ‘boom’ during the worst of the pandemic, driven by high net internal migration flows and strong affordability. “Outside of the pandemic growth between 2020 and 2022, the outperformance of regional markets relative to the capital cities is a fairly new phenomenon,” he said. The recent trend of regional housing values outpacing capital cities is attributed to a slowdown in capital city growth rates rather than an acceleration in regional growth.

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Standout Performers in WA and Queensland

Capital growth remains varied across Australia’s 50 largest Significant Urban Areas (SUAs), with many standout performers located in WA and Queensland. Coastal towns of Albany and Bunbury in WA recorded the highest quarterly rises, with value growth of 7.7% and 6.2% respectively, ahead of Northern NSW’s Lismore (5.5%), and Townville (4.7%) in Queensland’s North. Only six SUAs recorded an annual increase of 10% or more, including Bunbury (15.8%) and Central Queensland’s Bundaberg (12.0%) and Rockhampton (12.0%).

Rental Market on the Rise

As the regions entered peak rental season, CoreLogic’s regional rental index recorded a 2.3% increase over the three months to January, up from a recent low of 0.4% over the September quarter of 2023. Comparatively, capital city rents rose 2.1% over the same period. WA dominated the list for highest annual rental growth, with Bunbury (14.8%), Busselton (12.7%), Geraldton (12.1%), and Albany (11.2%) leading the way.

Outlook for Regional Housing Markets

Demographic trends, migration patterns, and localized economic drivers will be critical to regional housing values in 2024. “Regional cities in the ‘sweet spot’ — offering commuting options to a capital city, a lifestyle dividend, and affordable housing — will likely experience stronger demand than they did pre-COVID,” Lawless said. In contrast, the performance of more remote regional markets will hinge on local economic factors, with infrastructure projects impacting housing demand, and climate, weather, currency flows, and policies affecting farming or coastal areas.

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