Earlier this year, regional property markets were outperforming their capital city counterparts, fueled by strong demand and a migration boom. However, the tide has turned, with regional markets now showing signs of slowing down, while capital cities are regaining momentum.
According to the latest data from CoreLogic, the combined regions saw a median price increase of just 1.3% in the July quarter, compared to a stronger 1.8% rise in the combined capitals. This marks a notable shift from the April quarter, when regional markets enjoyed a 2.2% price increase, outpacing the 2.0% growth seen in capital cities.
Several factors are contributing to this change. Affordability constraints, normalizing listing levels, and elevated interest rates have all played a role in tempering the pace of growth across both regional and urban markets. However, a significant driver of the slowdown in regional areas has been the reduction in internal migration.
During the pandemic, many Australians flocked to regional areas in search of more space and a better quality of life, driving up demand and prices. But as the country returns to a more normal state, internal migration to the regions has slowed, reducing the upward pressure on property prices.
The impact of this shift is evident in the fact that 20 of the 50 largest regional markets experienced price declines during the July quarter. Notably, all these declines occurred in New South Wales and Victoria, two states that had previously seen significant migration-driven growth.
In contrast, Queensland continues to lead the regional market in terms of price growth, followed closely by Western Australia. These states are benefiting from a combination of factors, including continued population growth, relatively affordable property prices, and strong economic conditions.
As the property market evolves, both buyers and investors will need to stay attuned to these shifting dynamics. While regional areas may no longer offer the same level of growth as they did during the height of the pandemic, certain regions still present opportunities for those who are strategic in their property choices.
