Metro markets regain momentum as regional growth steadies
Australia’s major cities have surpassed regional areas in property value growth for the first time in nine months, according to the latest Cotality Regional Market Update.
Data for the three months to July showed the Cotality capital city Home Value Index increased by 1.8%, marginally outpacing the 1.7% rise in regional dwelling values.
Kaytlin Ezzy, economist at Cotality, stated that the shift reflects the greater sensitivity of capital city markets to interest rate movements, rather than a slowdown in regional growth.
“Throughout both the rate tightening and cutting cycles, capital city growth rates have been more responsive to interest rate changes, with the pace of growth showing a noticeable jump following both the February and May cuts,” Ezzy said. “Since bottoming out at -0.7% in January, the capital’s quarterly trend has continued to gain momentum.”
Regional markets have shown a steadier response to rate cuts, with quarterly growth holding around 1.7% since April. However, performance varied across the largest 50 regional significant urban areas (SUAs): nearly 60% experienced a slowdown in growth between April and July, while the remaining 40% saw gains accelerate.
Lismore in New South Wales led regional markets, with values rising 4.5% over the quarter to reach a new high in July. This marks a full recovery from the nearly 18% drop following the 2022 floods and interest rate increases. The rest of the top five included only one resource market, Bunbury in Western Australia, a notable change from recent years.
“Western Australia and Queensland’s mining markets have dominated value growth rankings over much of the past two years,” Ezzy (pictured right) said. “However, momentum has eased as the relative affordability advantage that these regions once offered dissipates.”
Although no longer leading quarterly growth, Albany (23.1%) and Geraldton (20.8%) in Western Australia, along with Mackay (18.2%) and Townsville (16.7%) in Queensland, posted the strongest annual increases. Albany also recorded the shortest average selling times at 12 days and some of the lowest vendor discounting rates at -1.7%.
At the lower end, only three regions saw values fall over the year. Bowral – Mittagong in the central highlands experienced the largest decline at -2.1%.
“The picturesque tree-change market saw significant growth throughout the early pandemic upswing,” Ezzy said. “However, that growth saw the region become the most expensive market among the largest 50 regional SUAs and, behind Byron Bay and Sydney, the third most unaffordable market nationally.
“This unaffordable price tag, coupled with normalised listing levels and below average sales, has put downward pressure on values.”
Properties in Bowral – Mittagong also spent around 79 days on the market, with vendors offering a median discount of 5.3% to secure a sale.
Sales activity in regional Victoria has picked up over the year to May, with annual sales rising in 36 of the top 50 SUAs. Victoria accounted for the top seven increases, with Shepparton – Mooroopna, Ballarat, and Bendigo recording jumps of 32.7%, 29.8%, and 26.4%, respectively.
“Sales volumes across Melbourne and Regional Victoria have been somewhat muted in recent years due to less favourable taxation, demographic and supply changes,” Ezzy said. “Although rising from a low base, the uptick in annual sales activity reflects a turnaround in sentiment, with affordability advantages and capital gains prospects, reigniting buyer interest.”
Lismore, by contrast, saw the largest annual drop in sales activity, with transactions down almost 35% from last year’s post-flood recovery surge. “While down almost 35% from last year’s post-flood recovery surge, Lismore’s transaction counts over the 12 months to May are down just -5.3% from the previous five-year average,” Ezzy said.
Rental growth in regional areas continues to outpace the capitals. Over the three months to July, regional rents rose 1.1%, and 5.6% over the year, compared to 0.9% and 3.0% in capital cities. Albany (WA) again stood out, with rents up 4.2% in the quarter and 15.3% over the year, adding $82 per week to the median rent. Other notable increases were seen in Goulburn (NSW), Victor Harbour–Goolwa (SA), Mount Gambier (SA), and Devonport (TAS), with quarterly rises between 2.6% and 3.3%.
Despite some markets recording mild quarterly declines, all 50 regional SUAs saw annual rent increases. Ezzy pointed out tight vacancy rates remain a key factor.
“Despite worsening affordability, elevated regional migration and below-average rental supply are placing strong upwards pressure on rents,” she said. “As of July, just two markets, the Mildura - Buronga region on the NSW/QLD border, and the Nowra – Bomaderry market in NSW’s Shoalhaven region, have seen vacancy rates rise above their pre-covid decade average.”
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