Regional housing prices stall: Tim Lawless
The 10 most populous regional council areas around Australia have broadly been characterised by weak housing market activity and slowing rates of population growth, according to recent data. It is important to note that the vast majority of regions throughout the country have experienced similar conditions, however they are more pronounced in these large regional markets.
As the first table shows, the majority of the 10 most populous regional council areas have recorded a slowing of population growth over the most recent 12 months:
Click to enlarge
The exceptions have been Wollongong and Newcastle where population growth has increased. This is likely the result of housing affordability constraints providing an incentive for residents of Sydney to purchase in these more affordable regions that are relatively close to the city.
Although regions such as the Gold Coast, Sunshine Coast and Cairns remain the fastest growing of these council areas, the slowdown has been extremely pronounced over recent years. This is reflective of the slowdown in sea change and tree change migration flows as well as weak tourism and retail markets which have translated to low demand for labour in many of these coastal locations.
Click to enlarge
Focusing on the detached housing market, all ten of the regions have recorded a decline in median prices over the most recent 12 months. Townsville has been the weakest market with median house prices falling -14.3% followed by Sunshine Coast (-8.2%) and Gold Coast (-6.5%). On the other hand, price falls have been relatively minor in Greater Geelong (-0.7%), Wollongong (-1.0%) and Newcastle (-1.6%).
For the unit market, the trends are actually quite different. Five of the regions have recorded a fall in median price over the past 12 months while the other five have recorded growth. The biggest median price falls were recorded in Cairns (-14.8%), Townsville (-10.2%) and Sunshine Coast (-7.8%). Price growth for units was strongest in: Greater Geelong (7.3%), Newcastle (3.7%) and Toowoomba (2.0%).
Click to enlarge
Advertised rental rates have increased across each region for houses over the past 12 months. The most significant increases have been recorded in: Wollongong (10.0%), Lake Macquarie (6.1%) and Newcastle (5.9%). For units, in the instances in which rents have increased, the growth has generally been more robust than the growth in house rents. In four out of the ten regions, all of which were in Queensland, rental growth has been either flat or has declined.
Other lead indicators such as the average time on market and average vendor discount have increased over the past 12 months in all 10 regions and across both houses and units. These results are consistent with a general slowdown in market activity which is characterised by a fall in median house and unit prices across most regions.
With median prices having fallen in most regions and in some instances rents having increased, given these conditions, for the most part indicative gross rental yields have increased over the past 12 months. The only exception has been houses within Greater Geelong where indicative gross rental yields have remained stable over the past 12 months.
Over the coming year, we don't anticipate the falls in median prices will be as significant as they have been over the past year in areas such as the Gold and Sunshine Coasts and Cairns, however there may be some further weakness.
With the rate of growth in capital city property prices stalling, some of the relatively more affordable markets close to these major cities such as Newcastle, Wollongong, Greater Geelong and Toowoomba may actually outperform their capital city counterparts. In stating this, we do not believe that any market is going to enjoy significant price growth over the next year.
Tim Lawless is head of research at RP Data.
This article originally appeared on SmartCompany.