Property prices outpace capital city prices in regional resurgence

In the past quarter, regional property prices have outperformed capital city markets, led by Western Australia and Queensland.

In a trend rarely seen outside the Covid years of urban escapism, regional property prices are now outpacing capital city prices.

Western Australia and Queensland have seen double-digit annual growth in their migration magnets, driving the reversal of fortunes between cities and regions.

Regional Australia’s dwelling values increased by 1.2% in the three months to January 2024, while the capital cities’ increased by 1%.

In Australia’s 50 largest significant urban areas (SUAs), capital growth remains varied, but WA and Queensland are among the standout performers.

Albany and Bunbury, coastal towns in WA, recorded value growth of 7.7% and 6.2% respectively, ahead of Northern NSW’s Lismore (5.5%) and Townsville (4.7%).

Six SUAs experienced an annual increase of 10 percent or more, including Bunbury (15.8 percent), Bundaberg (12.0%), and Rockhampton (12.0%).

Five regions are selling properties faster, with median time-on-market below 20 days in five regions.

Queensland’s Bundaberg (15 days) had the shortest median time on market, followed by Toowoomba (17 days), WA’s Bunbury (18 days), Busselton (19 days), and Cairns (19 days).

Similarly, Batemans Bay, NSW (75 days) continued to record the longest median selling time, while Bowral-Mittagong, NSW (-6.7%) offered the largest discounts.

There were almost half of regional sales between $400,000 and $600,000 in the most recent month measured, November.

This year’s sales volumes are well down from last year’s peak for the same month.

The characteristics of regional hotspots are similar

There was a correspondingly strong performance in the property market in regional cities and towns that attracted population growth.

In Western Australia, Busselton was the top performing regional centre for the December 2023 quarter, according to the latest data from REIWA. According to REIWA President Joe White, prices in Busselton have increased by 4.2% to $715,000 from $686,000 in the September quarter. As people look to get off the rental roundabout and buy a home, the rental shortage is driving the lower end of the market.

„Population growth and the rush to the regions are the other factors. The state is seeing strong population growth overall and the fantastic South-West lifestyle continues to draw people to Busselton.

Busselton has seen a large influx of FIFO workers and their families since three mining companies left.

This year’s sales volumes are well down from last year’s peak for the same month.

Sales in the December quarter were 19.0 percent higher than the September quarter, and 5.3 percent higher than the same period in 2022, reflecting the high demand for homes.”

According to the data, the current regional property upturn is not part of a wider cycle of large ups and downs.

With a median house sale price of $523,086, Port Hedland recorded the highest annual growth among WA’s nine broadly defined regional markets. The median house sale price in Bunbury increased by 9.5 per cent over the year, making it the next best performer.

Over the next two years, Townsville may have one of the strongest growth rates in Australia, according to Knight Frank Senior Partner Townsville and Mackay, Craig Stack.

Over the next two years, we expect the median sale price for existing homes to rise very strongly due to the low supply of existing homes in Townsville.

As people move to the region to work on major projects beginning in 2024, Townsville’s median house price may become one of the strongest in Australia due to an imbalance between demand and supply.

In each of the past three years, median prices have increased by five to seven percent, but growth rates might reach 10 percent next year, especially if interest rates fall.

“We expect rental growth to be high in Townsville throughout 2024 due to the high demand for employees, with many companies likely to lease housing on behalf of employees so they can fill positions.”

According to Residential Tenancies Authority data for December 2023, the median price in Townsville is $430,000, while the median rent for a three-bedroom house is $450.

Does this regional property cycle differ from others?

The CBS Property Managing Director, George Kafantaris, said that the ever-dwindling housing supply and relative affordability are driving regional property markets and that often volatile price fluctuations may give way to steady capital gains.

According to the data, this time is different and price growth will continue to be strong well into 2025, unlike previous cycles of large ups and downs.

Compared to the main capital cities, which have stabilised, the current market is still relatively affordable.

Since the starting base price is lower, all dollar increases will result in a higher percentage increase than in areas with a higher starting price.

There’s no doubt that regional areas with multiple drawcards, such as employment, lifestyle, and improved infrastructure, will continue to attract strong net migration and pressure on property prices.”

“New housing supply simply cannot keep up with demand.”

According to CoreLogic Research Director Tim Lawless, the most successful regions are those with a diverse economic base, such as agriculture, tourism, ports and mining.

Property markets were not buoyant in all regions.

The largest quarterly drops were recorded in Launceston (-2.3%) and Devonport (-2.0%) in Tasmania. In 11 of Victoria, Tasmania and NSW regional markets, annual declines were recorded, with Batemans Bay (5.8 per cent) having the biggest annual decline.

In the past decade, values have increased by 91 percent in Tasmanian housing markets, Mr Lawless said.  

A combination of affordability constraints following the pandemic surge in values, negative interstate migration, and a normalisation of internal migration rates are likely to contribute to the softer conditions across regional Victoria and regional Tasmania.

Q&A on the article

What is the difference between regional and capital city property markets?

As a result of the Covid years of urban escapism, regional property prices are outpacing capital city prices. The reversal of fortunes between the cities and regions has largely been driven by double-digit annual growth in the migration magnets of Western Australia and Queensland.

What are the fastest-growing property markets in each region?

Coastal towns Albany and Bunbury in WA experienced the highest quarterly growth, with value growth of 7.7% and 6.2% respectively, ahead of Lismore (5.5%) in Northern NSW and Townville (4.7%) in Queensland.

What are the worst performing regional property markets?

The largest quarterly drops were recorded in Launceston (-2.3%) and Devonport (-2.0%) in Tasmania. In 11 of Victoria, Tasmania and NSW regional markets, annual declines were recorded, with Batemans Bay (5.8 per cent) having the biggest annual decline.