Regional property prices are falling, but how far will the downturn go?

The nation’s regional property markets have started to follow the capitals south, but despite a stellar decade of performance, the downturn is likely to be relatively short-lived, say experts.

Over the past ten years regional, non-capital city, home prices have doubled, soaring a massive 99.4 per cent, according to analyst Cotality.

That’s compared to capital cities, where the combined median price growth over the decade has been 57.7 per cent.

Much of the regional boom was driven by urban flight during the pandemic, says Housing Industry Association (HIA) Senior Economist Tom Devitt.

Population flows have long since “normalised”, and despite regional values having started to follow the capitals into the red, underlying fundamentals means there’s unlikely to be blood on the streets.

“They faced even more shortages of shovel-ready land compared to the capitals, so there’s still an enormous amount of pent-up demand in the regions,” Mr Devitt told Australian Property Investor Magazine.

“Even in this day, with this current short-term shock, the fundamentals are still very much there.

The median regional dwelling price (the combined median of all non-capital city homes) fell 1.1 per cent over the three months to 1 September, according to Cotality.

The median capital city home price fell 3.7 per cent over the same period.

Taking a step back gives a clearer picture.

Over the past year, the combined capital city median was up 1.1 per cent, mainly driven by Brisbane and Perth, before they turned the corner.

Over the same period, the combined regional median was up 7.7 per cent.

The recent cooling of regional markets, and the pain seen in parts of Sydney and Melbourne, has many questioning how far the non-capital downturn will run.

Mr Devitt said supply shortages meant the regional downturn was likely to be relatively short-lived.

“We think dwelling price declines will stabilise by the end of the year and early next year,” he told API Magazine.

“Tight labour markets and supply shortages will send prices and sales volumes back up again.”

On the ground, there is no doubt many regional markets have come off the boil.

Joya Nona of Joya Nona Buyers Agency in Central Queensland, who covers Hervey Bay, Maryborough, Bundaberg and Gladstone, said the change was undeniable.

“There’s definitely a slowdown in the market, there’s no doubt about that,” she said.

But things had come off a very high peak.

“Before the market changed earlier this year you had to be really quick because of the competition,” Ms Nona said.

“Now I’ve got lots of selling agents contacting me and that wasn’t the case during the peak.

“It’s certainly been an interesting change in the market.”

For now, many buyers are sitting on their hands.

“There’s a lot of hesitation because people don’t know if it is going to plateau or continue to drop, so there’s not as much rush.”

But affordability, and the prospect of positively-geared properties — in light of the recent tax changes — would continue to underpin the market.

“It’s still active in certain areas, like in terms of investment there’s still a lot of opportunities presenting themselves in Central Queensland,” Ms Nona said.

“The price points in Central Queensland still allow for positive gearing and are more affordable.”

Those chasing lifestyle and cheaper homes remained active.

“There’s a lot of people moving out of the busy cities and downsizers heading up this way,” Ms Nona said.

“We’ve seen from Hervey Bay right up to Gladstone, the consensus is a lot of people from Brisbane and the Sunshine Coast are shifting up because they are out priced from the market where it’s become way too expensive.

“There’s quite good job security in Central Queensland,” she said.

Shift towards buyers’ market

It’s a similar story south of the border.

Kareema Kerr, of North Coast Buyers Agent, who services Coffs Harbour, Port Macquarie, Kempsey and the Nambucca Valley, said the market had changed dramatically.

“The Port (Macquarie) and Coffs (Harbour) markets were really hot at the beginning of the year,” Ms Kerr told API Magazine.

“I had some overseas clients and when I would see a property come up that would suit them, I’d call the agent but they’d say they’d already got an offer.

“And that was because it was before it got to the market — it was super-hot,” she said.

In another case, Ms Kerr said she had been working for clients seeking a house in the “$1.1 million to $1.2m mark” around Port Macquarie market at the beginning of the year.

“They were coming on the market and selling one or two days later,” she said. 

“At the beginning of the year the sellers could say whatever they wanted and the buyers had to come along for the ride.”

Now, while not quite a buyers’ market, the dial was certainly shifting in that direction, Ms Kerr said.

While prices may have eased slightly, it was nothing like the falls seen in the southern capitals, “particularly in the eastern suburbs of Sydney,” she said.

“It’s more reasonable, it’s more like a levelling out.”