Affordable and commutable regional centres such as Newcastle are poised to see strong demand from home buyers priced out of the capital cities.
Affordable regional housing markets within commuting distance to CBDs, such as Newcastle and Wollongong, could see stronger price growth in coming months as rising capital city home values price out a growing number of buyers, experts say.
However, the outlook for the more premium regional areas, such as Byron Bay, remain uncertain amid weak consumer sentiment, despite their house prices stabilising in the past three months.
“Regional markets that are still relatively affordable and are located within good proximity to capital cities are seeing a resurgence, as they are becoming an attractive option for home buyers who cannot afford to buy in the capital cities,” NAB head of valuations and property advisory Mark Browning said.
“Even with less regional migration and higher interest rates, the appeal of good climate and desirable lifestyle will still attract people seeking sea and tree-change experiences, affecting property prices in these areas.”
Sunshine Coast suburbs Mooloolah Valley and Glenview topped the biggest gainers over the past three months to July, with prices rising 9.4 per cent each, while Greenock and Penola in SA racked up more than 9 per cent increase according to CoreLogic.
House prices in Newcastle rose 3.6 per cent, but sharply higher than the 0.2 per cent gained in the previous three months. Similarly, Wollongong increased 3.8 per cent, which is more than double the 1.7 per cent notched up in the previous three months.
Lake Macquarie increased by 3 per cent, Shellharbour rose by 2.7 per cent and Toowoomba by 2.6 per cent.
CoreLogic head of research Eliza Owen said demand for commutable regional markets could rise further as affordability worsened in the capital cities.
“One thing that might buoy the more popular regional centres is the fact that expensive markets like Sydney are on the rise again. This could prompt more first home buyers and young families in particular to look to nearby regional centres such as Newcastle or Wollongong for housing,” she said.
“I think for the year ahead, just based on the idea that we are settling back into pre-COVID rent trends, we could see strong growth in the major regional centres like Wollongong, Newcastle, and Geelong.
“The more affordable commutable areas have a stronger case for purchasers at the moment, which is a reflection of people getting priced out of capital cities once again.”
Newcastle’s median house price is sitting at $893,826, which is $440,159 cheaper than in Sydney and comparable to the $817,059 price tag of an average two-bedroom unit, according to CoreLogic.
In Wollongong, the median house price is currently at $981,136, which is $352,849 cheaper than in Sydney.
By contrast, recovery in the high-priced regional markets such as Byron Bay, with its $1.44 million median house price, remains uncertain amid weak consumer sentiment and higher interest rates, according to Ms Owen.
“On a macro level, the upswing looks uncertain, which reflects some uncertainty households still have around where interest rates are going. I think this will persist until households are a little more confident that interest rates have peaked,” she said.
In the past three months, Byron Bay’s house prices rose by 0.3 per cent, after falling 1.5 per cent over the three months to April. Compared to a year ago, house prices have plummeted by 25.5 per cent.
Some smaller Victorian towns, popular with tree-changers but within commuting distance of Melbourne, also went backwards, such as Castlemaine, Kyneton and Heathcote.
Across the combined regional markets, house prices increased by 1.2 per cent in the three months to July, lower than the 3.5 per cent recorded across the combined capital cities during the same period.
“Like with the capital cities, we’ve also seen a bit of momentum come out of the market in July, as monthly growth slowed from 0.5 per cent to 0.2 per cent,” Ms Owen said.
“Until we have a clearer understanding of where monetary policy and employment is going, the upswing might look a bit soft at the aggregate level, and reflect some of the reservedness of households and their current borrowing constraints.”
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