Regional centres’ change of pace opens doors to buyers – John McGrath

It’s not just Australia’s capital cities that are undergoing a property market rebalance. In a convergence of suburban areas and regional towns, we’re seeing the latter experiencing performance moderations very similar to capital cities.

The value gap between the regions and the capital cities is continuing to narrow and, just like our nation’s cities, the value momentum in our regions’ hottest towns is slowing down as weaker ones increase in popularity.

The narrowing value gap has been pretty noticeable since at least September last year and has picked up since January. According to Cotality, July was the first time in nine months that our regional markets’ quarterly growth rate (1.7%) didn’t outperform the capital cities (1.7%).

But at the same time, regional centres still have plenty to offer buyers in performance growth, like rental increases, especially when it comes to annual uplifts. For a start, Cotality’s latest Regional Market Update shows a 5.9% value uplift in our combined regions over 12 months, compared to a 3% increase in our capital cities.

It also shows that our 50 largest regional significant urban areas (SUAs) still outshine capital cities when it comes to performance growth. The value of the SUAs was 1.5% in the April quarter and 1% for the combined capital cities.

According to the report, buyers in regional Western Australia are still active with Geraldton’s home values rising by 26.9% over 12 months. Albany’s annual rental growth also experienced a 13% uplift.

In Rockhampton in Queensland, properties are selling after just 11 days and in a positive shift for Victoria’s newly-emerging market, Shepparton and Mooroopna experienced a 30.3% rise in yearly sales volumes.

This year’s interest rate cuts have also altered recent performance growth in our regional centres. Cotality argues that the capital cities’ 1.1% rise from the three months to January 31, compared to 0.5% in our biggest regional areas, makes it more responsive to this year’s February interest rate cut – our first in four years.

The trend of moving from more expensive capital cities to cheaper regional areas is still popular too.

The latest figures from the Regional Australia Institute’s Regional Movers Index show

average, quarterly city-to-country moves have stayed elevated at about 20.5% per cent higher than in the pre-COVID era. Our city-to-country moves also outnumber country-to-city moves by 25%.

Even with this popularity, regional New South Wales includes some of our poorest regional performers. Cotality’s Regional Market Update shows Bathurst property values only shifted by 0.3% in the last quarter while Lismore’s annual sales volume is down 18.7%. Homes in Bowral and Mittagong are taking 77 days to sell.

But overall, the demand for regional properties remains positive with this data presenting new opportunities for regional buyers, especially investors. But values and growth in regional centres are shifting and changing towards a new property cycle that is already increasingly apparent in our cities and suburbs.

I’d expect Cotality’s next Regional Market Update will highlight this shift even more than their most recent reports do. Rate cuts will likely mean further shifts in our regional values and performances.

We are also on the verge of another busy Spring period so it will be interesting to see what the next few months will bring to both regional and capital city property markets.