Australia’s real-estate boom is running out of steam

AUSTRALIA’S pandemic-induced property boom in coastal and regional markets is finally running out of steam, with values declining sharply as sellers offer discounts to entice buyers.

CoreLogic’s Regional Market Update, which examines the nation’s 25 largest non-capital city regions, shows only 13 areas recorded an increase in house values over the year to January 2023, down from 21 over the year to October 2022.

The nation’s most popular lifestyle markets have been hardest hit by softer conditions and the Reserve Bank of Australia’s (RBA) interest rate increases, said Eliza Owen, CoreLogic head of research.

Many coastal and regional areas — known as sea-change and tree-change destinations in Australia — saw big jumps in value during the pandemic, with demand driven by people’s desire to leave big cities and fuelled by ultra-loose monetary policy that sent borrowing costs to historic lows.

But since May, the RBA has pursued an aggressive tightening cycle that’s seen it raise interest rates 3.25 percentage points to cool inflation. The housing market has slumped, with CoreLogic data earlier this month showing the national index is now down 8.9 per cent from its April 2022 peak, the largest and fastest fall in values since at least 1980.

The upmarket coastal and hinterland Richmond-Tweed region, about 800 kilometres north of Sydney, recorded the weakest performance across all metrics, with house market value falling 18.6 per cent in the year to January, sales volumes down 36.1 per cent in the year to November and houses sitting on the market for 71 days. Vendors also dropped prices by about 8.3 per cent.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

“This was the region where values skyrocketed, with houses increasing more than 50 per cent during Covid, taking the median house value to more than A$1.1 million (S$1 million),” Owen said. “Since then much has changed with borders reopening, outbound travel returning, workers returning to the office not to mention the overlay of nine rate rises. It’s been a swift and significant shift.”

Still, house prices in the region are up 23.7 per cent on pre-Covid levels.

Houses in the Illawarra region, 90 kilometres south of Sydney, recorded the second biggest yearly fall of 12.6 per cent after values surged 44 per cent through the recent upswing.

Owen said that while some regional markets were experiencing sharp price falls, regional market performance overall remained more resilient than capital city markets. BLOOMBERG