Economic headwinds drive regional property values down

Property data and insights business PropTrack released its latest Home Price Index August 2022 report, which found national home prices continued to fall in August, by 0.39 per cent, or down 2.7 per cent from its peak.

The report found regional areas recorded their “largest quarterly price falls” in a decade, marking a 1.2 per cent drop over the quarter, with combined regional areas dropping 0.34 per cent in August.

Despite recent falls, prices are still significantly above their pre-pandemic levels, with regional areas up almost 50 per cent (47.4) since March 2020 to an average property price of $640,000.

Regional South Australia is the only market continuing to see significant growth in the month of August (up 0.27 per cent) hitting a new price peak, up 37.4 per cent, taking its average property value to $368,000.

Regional Tasmania has outperformed all other states, territories and capitals, when comparing property price increases since March 2020, up by 54.4 per cent — a new peak — to a median value of $500,000.

Regional NSW saw the next highest growth up 50.2 per cent to an average property value of $738,000, dropping 1.33 per cent from its peak. Followed by regional Queensland up 48.3 per cent, over the same period, to an average property value of $637,000, but falling 1.93 per cent from records.

Victoria’s regional property values also saw a large increase since March 2020, up by 43.4 per cent, despite its 1.95 per cent fall from its peak.

Western Australia increased 31.1 per cent overall, following a 0.26 per cent fall, taking its average property value in the regions to $439,000. The Top End increased 13.1 per cent, taking Northern Territory’s average property value to $449,000.

PropTrack’s senior economist Paul Ryan said regional areas will continue to be buffered by the affordability and lifestyle appeal that have led these markets to outperform over the past two years.

“In the short term, spring will see market activity pick up, despite price falls as buyers and sellers adjust to higher interest rates,” Mr Ryan said.

Looking at the capital city markets, the report found property prices lifted 26 per cent over the same time period, which was down 3.40 per cent from its peak, taking its property prices to $813,000.

Adelaide, which was the last capital city to record a price fall this year, is now the strongest performing capital over the last year (up 18.58 per cent) or 42.3 per cent since March 2020.

Hobart and Brisbane saw the biggest lifts overall, up around 46 per cent since the start of the pandemic, which brought the average property values in Hobart to $719,000 and Brisbane to $768,000.

Sydney and Melbourne continued to see the biggest falls with Sydney prices now below their level a year ago down -4.77 per cent from its peak to a 25 per cent increase, to a value of $991,000.

Melbourne saw a -4.29 per cent drop from its peak to an overall increase of 16.4 per cent since the start of the pandemic, taking its average property price to $838,000.

Indeed, with the Reserve Bank of Australia (RBA), set on bringing rising inflation down with more cash rate hikes forecasted, consumer buyers sentiment has slowed contributing to price falls across, which is expected to “persist” throughout spring, Mr Ryan said.

“We expect home prices to continue to fall across the country in 2022 and into 2023,” Mr Ryan said.

PropTrack analysis expects Australia’s property prices to decline by 15 per cent over the next 18 months.

Similar, but sharper, falls were recorded in CoreLogic’s data, which reported a national drop of -1.6 per cent over the month — the largest month-on-month decline since 1983.

CoreLogic’s research director Tim Lawless expects the downturn will continue to play out through the remainder of the year, and possibly into 2023.

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” he said.

“From current levels, interest rates are likely to increase by at least another 75 basis points and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values.”

[Related: Housing values tipped to sink 15 per cent by 2023]