Property values in Australia's regions are performing better than those in the capital cities, despite the normalisation of internal migration trends, affordability challenges, and reduced borrowing capacity due to higher interest rates.
The Regional Market Update from CoreLogic examines value and rent fluctuations across the 50 largest non-capital Significant Urban Areas (SUAs) in Australia. It reveals that dwelling values in regional Australia rose by 1.2% in the three months leading up to January 2024, compared to a 1.0% increase in the capital cities during the same timeframe. This surge was driven by high net internal migration flows and robust affordability.
Lawless commented, "Apart from the pandemic-driven growth between 2020 and 2022, the superior performance of regional markets compared to the capital cities is a relatively recent development. The recent trend where regional housing values have outpaced those in the capital cities is primarily due to a deceleration in growth rates in the capital cities."
“The strongest growth conditions have been skewed towards regional areas of WA and Queensland. These areas have a diverse economic base and are generally supported by a mixture of agriculture, tourism, ports and mining,” Mr Lawless said.
Regional Rental Market on the Rise
During the peak rental season in the regions, CoreLogic's regional rental index observed a 2.3% increase over the three months leading up to January, a notable improvement from the 0.4% rise in the September quarter of 2023.
In comparison, rents in the capital cities increased by 2.1% during the same period. Gladstone (11.6%) and Mackay (10.4%) in Queensland were the two other regional markets that experienced double-digit rental growth over the past year.
Outlook for Regional Housing Markets
According to Lawless, demographic trends, migration patterns, and local economic factors will play crucial roles in determining regional housing values in 2024. He noted that while the impact of COVID will linger, the extent to which remote working policies become permanent remains uncertain.
Lawless highlighted that regional cities offering easy access to capital cities, a desirable lifestyle, and affordable housing are likely to see increased demand compared to pre-COVID times. On the other hand, the performance of more remote regional markets will depend on local economic conditions, including infrastructure projects, climate, weather patterns, currency fluctuations, and governmental policies affecting industries such as farming or coastal areas.