New data shows Australia’s regional housing markets are continuing to demonstrate resilience, despite a high-interest rate environment.
CoreLogic says regional property values rose 1.0% over the three months to the end of January 2025.
This compares favourably to the 0.7% decline in capital city values seen during the same period.
However, CoreLogic's latest Regional Market Update says growth patterns are shifting, with signs of a slowdown emerging in some areas.
The research underlines the difficulty of “picking winners” when investing in Australia’s often volatile regional property markets.
The details
Each quarter, CoreLogic analyses Australia’s largest 50 non-capital cities “Significant Urban Areas” or SUAs, examining performance across dwelling values and rents.
Over the most recent quarter, Western Australia and Queensland recorded the strongest value gains, with Geraldton (6.3%), Albany (5.9%), Mackay (5.7%), Townsville (5.1%), and Gladstone (4.3%) leading the charge.
However, CoreLogic’s report warns that “momentum in most of these markets is shifting.”
For example, it points out that Gladstone’s quarterly growth rate has more than halved from the 9.9% rise recorded in July 2024.
“Similarly, Geraldton’s three-month growth rate has slowed by 2.6 percentage points from its August peak.
“Compared to the three months to October, 28 markets have seen a slowdown in the quarterly pace of growth, with 10 out of 11 Queensland markets and three in four Western Australia markets recording an easing in growth.”
CoreLogic Australia economist and Regional Market Update report author Kaytlin Ezzy says its likely growth in these markets will continue to moderate as affordability concerns dampen demand.
“Queensland and Western Australia markets have driven regional growth for more than a year; however, they are now clearly losing steam,” she says.
“The historically affordable mining markets of Gladstone, Townsville, Mackay and Geraldton, and the coastal markets of Busselton and Bunbury, have all seen significant growth over the past year, adding between $100,000 and $140,000 their respective medians.
“While these markets continue to demonstrate strength, the slowdown in quarterly growth suggests that peak growth conditions in these areas may have passed.”
She says that while some markets are cooling, others are heading the other way.
In New South Wales, Bathurst recorded the sharpest turnaround, moving from a 1.8% decline in October 2024 to a 4.2% increase in January.
Taree in New South Wales and Warragul-Drouin and Ballarat in Victoria are also showing signs of stabilisation or a modest uptick in growth.
“Regional markets in Victoria and the southern parts of New South Wales were among the worst performers in 2024,” Ms Ezzy says.
“However, they have arguably gained somewhat of an affordability advantage over that time.
“We could be seeing the first green shoots in these markets if growth conditions continue to improve.”
Regional rental market slowing
CoreLogic’s Regional Market Update also reports that rental markets experienced renewed momentum in January, with rents rising 1.6% over the quarter, compared to a 0.3% increase in capital cities.
However, the report notes “the uptick in the quarterly rental trend is largely seasonal, with the broader annual trend in rental growth continuing to moderate.”
Busselton in Western Australia recorded the strongest quarterly rental growth at 4.6%, while Geraldton (also in WA) remained the standout performer on an annual basis, with rents climbing 13.8%, adding $64 per week to median rental values.
Ms Ezzy says vacancy rates remain relatively tight, coming in at 1.9%, down slightly from 2.0% a year ago.
Most analysts regard a 3% vacancy rate as being indicative of a “balanced” rental market, where potential tenants have a decent range of properties to choose from, but landlords can still command fair rents.
The western Victorian centre of Warrnambool had the tightest rental market, with a vacancy rate of just 0.3%, while Dubbo and Bowral-Mittagong in New South Wales saw the highest levels of available rental stock at 3.9% and 3.3%, respectively.
Implications
While many regional towns offer low entry property price points for investors and, on paper, appear to offer astonishing rental yields, their small populations and lack of economic diversity can spell trouble.
A good example is the South Australian town of Whyalla, where the future of a large steelworks complex is now uncertain, with the South Australian government bringing in insolvency experts and casting around for a new buyer.
As I noted earlier, CoreLogic’s latest Regional Market Update report warns that dwelling value momentum is shifting away from some mining-dependent Central Queensland cities, including Mackay and Gladstone.
However, suburbs in both these cities recently appeared in property advisor Hotspotting’s “National Top 10 Positive Cash Flow Hotspots” list.
Resource-dependent Port Augusta (only 75 kilometres from troubled Whyalla) in South Australia also rated a mention in the Hotspotting list.
The fact remains that around 70% of Australians live in or near a capital city with 40% alone living in just two cities - Sydney and Melbourne.
As I wrote recently in this story for Australian Property Update
“Despite their recent value dips, over the longer term, Australia’s capital cities look set to continue to be stable drivers of economic growth, jobs and therefore housing demand, making them a safer property investment bet than the relative volatility of the regions.”