As mortgage rates increase in regional markets just outside the major cities, home values are decreasing there.
The popularity of idyllic seaside communities among professionals who can work from home has changed as a result of banks’ limited lending ability.
The Richmond-Tweed region of northern New South Wales, which includes Byron Bay and Ballina, has been most negatively impacted by the Reserve Bank’s decision to raise the cash rate from a record-low of 0.1% in May.
The median price of a home fell by 4.5% in the three months leading up to July, to $1,034,826, on average.
According to CoreLogic statistics, it was one of ten regional locations where home prices fell quarterly.
The mid-point property price in the Illawarra area, which includes Wollongong and pricey South Coast towns like Kiama, fell by 3.5% over the course of three months to $1,043,277.
The typical home price fell to $1,019,326 in the Southern Highlands and Shoalhaven neighbourhood, which stretches from Bowral to Nowra, over the three months leading up to July.
Seven regional areas had a decline in apartment prices in the three months leading up to July.
The median unit price in the Richmond-Tweed region dropped by 3.8%, returning to $702,863.
The value of a mid-point apartment in Ballarat, Victoria, fell by 3.2%, bringing it back to $393,977. Inland locations are also declining.
The unit market in Geelong fell by 1.9% during the quarter to $565,732.
Based on a mapping area created by the Australian Bureau of Statistics, all 25 regional markets have seen yearly growth after the Reserve Bank lowered the cash rate to a record-low of 0.1% in November 2020, igniting pandemic-era demand.
The cash rate has already reached a six-year high of 1.85 percent because to rate increases in May, June, July, and August, which were the highest increases since 1994.
According to CoreLogic analyst Kaytlin Ezzy, regional markets, which were among Australia’s best last year, are now being impacted by increasing interest rates and greater inflation.
When transitioning through several cycles, “normally, markets with a greater median value tend to lead the larger market,” she noted.
Each of these localities currently has a median home worth over $1 million after seeing some of the COVID period’s most robust value rise.
We would anticipate that this fall in values would expand into more regional regions as we moved farther into the cycle’s downward phase.
The cash rate is predicted to increase by another 0.5 percentage points in September, reaching a record-high 2.35 percent.
Of all the major banks, ANZ is the most gloomy, anticipating a 10-year high cash rate of 3.35 percent by November.
Regional markets, however, would still be protected from the severe downturns that are anticipated to strike Sydney and Melbourne especially hard in 2022 and 2023, according to Ms. Ezzy.
‘It’s probable the rural regions may be somewhat better insulated than the capitals as Australia’s housing market proceeds deeper into the negative phase of the cycle, given to these markets’ relative affordability and low advertised supply levels,’ she added.
Additionally, the sustained expansion of the previous two years should protect local homeowners from the worst consequences of the current slump.