Regional housing sales remain strong despite interest rate rises

Along with the capital cities, some regional markets have come off the boil although some regions remain in record country.

Property experts say housing affordability will continue to decline as mortgage repayments become more expensive with the further rise in interest rates announced on Tuesday, August 2.

The Reserve Bank has lifted interest rates for the fourth month in a row, increasing the cash rate by 0.5 percentage points.

Those property experts predict price falls will broaden throughout the regions and then accelerate further into 2023.

Some are forecasting prices to fall by between minus two per cent and minus five per cent by the end of this year and by a further minus seven per cent to -10 per cent by the end of next year.

But remember these falls are coming from a very high base and agents still complain of their low inventory of regional houses for sale.

For instance, in South Australia the regional property market has continued its upward trajectory by again extending its record breaking median price streak.

Real Estate Institute of South Australia interim CEO Cain Cooke said the results of the Valuer-General's price data for the 2022 June quarter were extraordinary given the ongoing COVID tribulations and interest rate rises.

Regional South Australia posted a 4.22 per cent median house price increase from the previous quarter and a hefty 20.98 per cent rise from the same quarter last year.

The regional median price now sits at a record of $338,750 in that state.

According to CoreLogic, the combined regionals index has recorded its first monthly decline (-0.8 per cent) since August 2020.

Dwelling values were down across regional New South Wales (-1.1 per cent), regional Victoria (-0.7 per cent), regional Queensland (-0.7 per cent) and regional Tasmania (-0.6 per cent), while regional SA (1.1 per cent) and regional WA (0.1 per cent) is bucking the trend.

CoreLogic says overall, regional markets are still outperforming their capital city counterparts.

Dwelling values across CoreLogic's combined regionals index were up 41.1 per cent from the pandemic trough to the June peak.

National dwelling values surged 28.6 per cent through the pandemic growth phase, values are now minus two per cent below April's peak led by Sydney and Melbourne.

Brisbane also edged into negative growth territory for the first time since August 2020 while Canberra and Hobart were also down over the month.

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Perth, Adelaide and Darwin remained in positive growth through July.

The value of new loan commitments for housing fell 4.4 per cent in June 2022 (seasonally adjusted) but remained at a historically elevated level of $31 billion, according to data from the Australian Bureau of Statistics.

But even with the June falls, the value of new owner-occupier loan commitments remained 50 per cent higher than the pre-pandemic level in February 2020.

CoreLogic research director Tim Lawless said housing market conditions are likely to worsen as interest rates surge higher through the remainder of the year.

"The rate of growth in housing values was slowing well before interest rates started to rise, however, it's abundantly clear markets have weakened quite sharply since the first rate rise on May 5," he said.

Mr Lawless said the stronger growth in regional markets reflected a significant demographic shift towards commutable regional markets "which is likely to have some permanency as more workers take advantage of formalised hybrid employment arrangements".

Most of the major regional centres adjacent to Sydney, Melbourne and Brisbane (including Geelong, Ballarat, Illawarra, Newcastle and Lake Macquarie, the Southern Highlands and Shoalhaven, the Gold Coast and Sunshine Coast) recorded a decline in home values over the three months to July, marking the end of nearly two years of significant capital gains.

Rents also continued to trend higher through July, rising 0.9 per cent nationally over the month to be 2.8 per cent higher over the rolling quarter and 9.8 per cent higher over the past year.

"When interest rates start to stabilise, or potentially reduce next year, this could be the cue for housing values to find a floor," Mr Lawless said.

"Similar to the trajectory of the upswing, this downswing phase could be a short but sharp one, depending on how high and fast interest rate settings go."

And back to those startling numbers from South Australia, towns which have seen the largest growth over the past year were Renmark, Mount Gambier and Naracoorte.

Top selling towns in terms of recorded sales over the June quarter were Mount Gambier, Murray Bridge and Victor Harbor.