Regional housing markets outshine cities amid economic uncertainty

Australia’s regional property markets have demonstrated remarkable resilience by outperforming their urban counterparts, despite various economic headwinds. According to the latest Regional Market Update from CoreLogic, the combined regions of Australia have seen dwelling values rise by 1.2% in the quarter leading up to January 2024. This is slightly higher than the 1.0% increase observed in the combined capital cities during the same period. The analysis covers value and rent changes across the country’s 50 largest non-capital Significant Urban Areas (SUAs).

Tim Lawless, CoreLogic’s Research Director, highlighted that although growth has moderated after the pandemic-driven boom, this period marks a relatively new trend of regional markets outperforming the capital cities. “Outside of the pandemic growth between 2020 and 2022, the outperformance of regional markets relative to the capital cities is a fairly new phenomenon,” he explained.

The slowdown in capital city growth rates, rather than an acceleration in regional growth, has been identified as the primary driver behind this trend. Furthermore, capital growth remains uneven across Australia’s 50 largest SUAs, with regions in Western Australia (WA) and Queensland standing out. Notably, WA’s coastal towns of Albany and Bunbury, alongside Northern NSW’s Lismore, and Townville in Queensland’s North, have recorded the highest quarterly rises in property values.

Regional areas in WA and Queensland, benefiting from a mix of agriculture, tourism, ports, and mining, have shown strong growth conditions. “The strongest growth conditions have been skewed towards regional areas of WA and Queensland…they’re the only states with a positive rate of interstate migration that helps support housing demand and they’re relatively affordable markets,” stated Mr. Lawless.

Tasmania’s Launceston and Devonport have experienced the largest quarterly falls, with several regions across Victoria, Tasmania, and NSW recording annual declines. According to Mr. Lawless, these declines could be attributed to a combination of factors including affordability constraints, negative interstate migration, and a normalisation in internal migration rates following a surge in values post-pandemic.

The regional rental market has also witnessed gains, with CoreLogic’s regional rental index showing a 2.3% increase over the three months to January, a significant rebound from the 0.4% increase observed in the previous September quarter. In contrast, capital city rents recorded a 2.1% increase over the same period. High annual rental growth was predominant in WA, with Bunbury, Busselton, Geraldton, and Albany leading the charge.

This robust performance in regional markets is underpinned by demographic trends, migration patterns, and localised economic drivers, with remote working policies partially contributing to ongoing demand. As Mr. Lawless poignantly summarized, “Regional cities in the ‘sweet spot’ — offering commuting options to a capital city, a lifestyle dividend, and affordable housing — will likely experience stronger demand than they did pre-COVID.”