House prices in most parts of regional NSW are higher than a year ago, and experts warn ongoing demand from city buyers has permanently lifted prices.
Many regional council areas recorded double-digit growth in the year to December despite Sydney’s sharp property downturn, the latest Domain House Price Report reveals.
Armidale Regional Council was in the top 10 areas outside of Sydney for house price growth.
Far-flung areas led the way as Glen Innes Severn Shire – a seven-hour drive from Sydney – jumped 30.8 per cent from a year earlier to a median of $340,000.
That was followed by neighbouring Armidale Regional Council, which jumped 29.6 per cent to $520,000 and the Upper Hunter which jumped 22 per cent to $455,000.
But the regional housing boom is starting to lose steam after interest rates rose and the CBD reopened.
Some of the sea- and tree- change areas that were most popular earlier in the pandemic are leading the downturn. Byron Bay fell 9.7 per cent to $1.49 million, while Bellingen and Kiama fell more than 5 per cent each.
Moree Plains – a Queensland border regional council, ravaged by the floods – topped the list, falling 14.2 per cent to $225,000.
Domain’s chief of research and economics Dr Nicola Powell said house prices in most regional council areas were supported by a degree of ongoing demand from Sydneysiders.
“We’re really seeing a slowdown in momentum, but prices are really holding firm. That affordability will look different to a local, but there is still that draw from a Sydneysider because it’s [medians] half the price,” Powell said.
The ability to work from home has allowed Sydneysiders to continue to seek regional housing, changing the demographic and outlook of house prices in these areas, she said.
Byron Bay Shire was one of the few regional councils that led the downturn outside of Sydney.Credit:Destination NSW
Most regional markets have hit their peak and will see a substantial slowdown in the annual change, Powell said, but it would stop short of falling below pre-COVID levels.
“It’s very unlikely we’ll see these markets revert back to where they were. We’ve seen a shift and that shift is here to stay.”
She said popular councils like Byron, Bellingen and Kiama were leading the downturn just as they did during the upswing.
“These markets peaked first, and saw stronger rates of growth. Byron was the heart beat of regional growth.”
KPMG regional economist Terry Rawnsley said most regional areas continued to record annual house price growth because there was ongoing demand.
“More population growth is coming through. The economy is still more stimulated. The underlying fundamentals are still driving the housing market,” Rawnsley said.
With many of these areas still relatively more affordable than their city counterparts, it was unlikely for house prices to fall back to pre-COVID levels now despite the broad housing downturn, Rawnsley said.
“What the pandemic has done is a big re-pricing of housing in regional areas. Housing has become more expensive across the board,” he said.
Most of those regions are unlikely to head backwards to pre-COVID prices because of ongoing demand and tight rental vacancy rates, he said.
“The increase in population, the change of demographic, it’s going to hold up more of their post-COVID levels rather than swinging back to their pre-COVID levels.”
Rawnsley said regional housing markets ultimately move slower, for reasons such as longer settlements, and would see a delayed impact from interest rates in coming quarters.
House prices in Kiama have started to reverse.
But for some regional councils, like Byron Bay, the heat has come out of the market, Rawnsley said, as buyers were priced out and looked elsewhere.
“They had that really strong 2021 as people shifted out of the cities. Last year some of that heat came out of the market,” he said.
Ray White Byron Bay director of sales Damien Smith said the combination of a steep run up in prices coupled with floods and eight months of rate rises contributed to median house prices falling in the 12 months to December.
“That’s absolutely going to contribute to Byron LGA [house prices] coming off. House prices have come back by 20 to 25 per cent in parts of the shire. Mullumbimby has been hit hard,” Smith said.
He said half of Byron’s buyers still come from Sydney, but they have more negotiating power: “You’ll see sellers will take a little bit less to get onto the next place.”
Elsewhere, Professionals Armidale’s Kyle Garrahy said while the local property market has settled down since the height of the pandemic, there are still more buyers than there are properties.
“We were selling houses 30 per cent quicker than we were listing them. That goes for every agency in town. We were selling more than we were adding to the market,” Garrahy said.
Tight vacancy rates below pre-COVID levels have drawn out investors too, adding to demand, he said.