Home prices are falling in sea change areas as interest rate rises hit regional markets a short drive away from capital cities.
Idyllic towns near the beach have been popular with professionals able to work from home – but that is changing as the lending capacity of banks is constrained.
The Richmond-Tweed area of northern NSW, covering Byron Bay and Ballina, has been the worst-affected house market since the Reserve Bank began raising the cash rate from a record-low of 0.1 per cent in May.
In the three months to July, the median house price has plunged by 4.5 per cent to $1,034,826.
The Richmond-Tweed area of northern NSW , covering Byron Bay (pictured) and Ballina, has been the worst-affected house market since the Reserve Bank began raising the cash rate from a record-low of 0.1 per cent in May
It was one of 10 regional areas to suffer a quarterly fall in house values, CoreLogic data showed.
The Illawarra region, covering Wollongong and expensive South Coast towns like Kiama, saw its mid-point house price dive by 3.5 per cent over three months to $1,043,277.
The neighbouring Southern Highlands and Shoalhaven area, stretching from Bowral to Nowra, suffered a three per cent drop in the three months to July, taking the media house price back to $1,019,326.
Apartment values are also falling with seven regional markets going backwards in the three months to July.
The Richmond-Tweed area suffered a 3.8 per cent fall, taking the median unit price back to $702,863.
Inland areas are also going backwards with Ballarat in Victoria suffering a 3.2 per cent drop, causing mid-point apartment values to drop back to $393,977.
Geelong’s unit market slipped by 1.9 per cent during the quarter to $565,732.
All 25 regional markets, based on an Australian Bureau of Statistics mapping area, have enjoyed annual growth off the back of the Reserve Bank in November 2020 cutting the cash rate to a record-low of 0.1 per cent, sparking pandemic era demand.
But rate rises in May, June, July and August – the steepest rise since 1994 – and have taken the cash rate to a six-year high of 1.85 per cent.
CoreLogic economist Kaytlin Ezzy said rising interest rates and higher inflation was now affecting regional markets, which were last year some of the strongest in Australia.
In the three months to July, the median house price has plunged by 4.5 per cent to $1,034,826 (pictured is a young woman at Splendour in the Grass at Byron Bay)
The Illawarra region, covering Wollongong and expensive South Coast towns like Kiama (pictured), saw its mid-point house price dive by 3.5 per cent over three months to $1,043,277
‘Typically, markets with a higher median value tend to lead the broader market when shifting through different cycles,’ she said.
‘After recording some of the strongest value growth throughout the COVID period, each of these areas now have a median house value in excess of $1million.
‘As we move further into the downward phase of the cycle we would expect to see this decline in values to spread into more regional areas.’
All the banks are expecting another 0.5 percentage point rate rise in September that would take the cash rate to a seven-year high of 2.35 per cent.
ANZ is the most pessimistic of the big banks, expecting a 10-year high cash rate of 3.35 per cent by November.
But Ms Ezzy said regional markets would still be immune to the sharp downturns that are expected to hit Sydney and Melbourne particularly badly in 2022 and 2023.
‘As Australia’s housing market moves further into the downwards phase of the cycle, it’s possible the regional areas will be slightly more insulated than the capitals, thanks to these markets’ relative affordability and low advertised supply levels,’ she said.
‘Additionally, the strong growth that’s occurred over the past two years should help cushion regional homeowners from the most extreme effects of the cycles downturn.’
The neighbouring Southern Highlands and Shoalhaven area, stretching from Bowral to Nowra, suffered a three per cent drop in the three months to July, taking the media house price back to $1,019,326 (pictured is Mermaids inlet at Jervis Bay)
Inland areas are also going backwards with Ballarat (pictured) in Victoria suffering a 3.2 per cent drop, causing mid-point apartment values to drop back to $393,977