The Victorian towns once booming but now offering house price discounts
Regional Victorian sea and tree change towns where house prices boomed in the lockdown years are now recording price falls as life finds a new normal and interest rate rises bite.
Regional areas are moving in a different direction to Melbourne, where house and unit prices have started a slow recovery, Domain’s latest House Price Report, released on Thursday, shows.
In the June quarter, the biggest falls in house prices were in areas where Melburnians had rushed during COVID lockdowns, led by the Northern Grampians local government area, which recorded an 11 per cent fall year-on-year to a median $325,000.
The Alpine and Colac Otway shires also had double-digit house price falls, both dropping 10.4 per cent, to medians of $750,000 and $540,000 respectively. Prices fell by at least 8 per cent in the Surf Coast and Hepburn shires.
Not all regional areas had price falls. Swan Hill’s house prices were up 15.2 per cent for the year, to $413,500, and nearby Yarriambiack was up 10 per cent to $220,000.
But that mark was still well below the rises of the leading areas when house prices were peaking at the end of 2021.
Domain chief of research and economics Dr Nicola Powell said the areas that had initially benefited from the exodus of Melburnians were now finding it more difficult to attract buyers.
“I would generally say all these areas, like the Surf Coast, Warrnambool, Bendigo and Ballarat, that were leading the market are now all hitting negative price growth,” Powell said.
“These regional areas are now far less affordable than they once were, so affordability has really narrowed the market for both locals and buyers outside the local area.”
That was the case in the Surf Coast, one of the most expensive LGAs in the state. The house price median is now $1.34 million – even though house prices dropped 8.1 per cent over the past year.
The Surf Coast property market has recorded price falls over the past year.Credit: The Age
Powell said 12 interest rate rises since May last year had also hit the regional market as people were able to borrow less and were facing far more expensive mortgages. Cost-of-living rises were also taking a toll.
KPMG regional economist Terry Rawnsley said popular coastal and tree change areas were losing steam as the push for lifestyle properties disappeared, while other areas had prices fall slightly or remain stable.
“People are not looking as much for lifestyle factors,” Rawnsley said. “That segment of the market has disappeared, and it has returned to locals for the properties of good value.”
The falls would put some buyers under pressure, he said, causing them to lose money on their purchases during the COVID boom.
“If you’ve seen some regional prices have come off 5 per cent or 10 per cent over the last year, and you’re still below the peak from a few years ago. Some people will be sitting on negative equity,” Rawnsley said.
“Those people who were buying sight unseen and paying a premium to get out of Sydney and Melbourne, they’ll be in a negative situation.”
He said many of these popular tree and sea change towns were now driven by local buyers, rather than cashed-up buyers from big cities.
Agents say the number of buyers has decreased since the boom, and though buyers are still in the market, it has become tougher for them to buy and sell.
Maryborough Ballarat Real Estate’s Kate Ashton said finance was trickier following the interest rate rises, changes to lending criteria for finance needed and saving for a deposit.
However, buyers were still coming to the areas between Ballarat and the Central Goldfields Shire from across Melbourne.
At the same time, locals sellers were keen to list, as those who had bought when interest rates were at record lows were now struggling to afford to hold on to their homes.
“A lot of locals are still struggling with affordability, especially since they’ve seen the ups and downs,” Ashton said. “But when you look at this area compared to Melbourne, it is still affordable.”
In Swan Hill, where house prices rose, LJ Hooker’s Jason Iannucci said there were still buyers, including those who had previously been outbid when prices were flying.
“We have a very low supply of property this year ... so that’s helping to keep prices up,” Iannucci said. “But there have been some houses coming to the market where people have bought them nine months ago or 12 months ago, and with all the interest rate rises it has become too expensive for the vendors.”
Those owners were getting into the market to avoid missing monthly mortgage payments, he said.