'The market is in for a slowdown': Regional property prices are up, but for how much longer?

Regional property prices have continued to outperform their city counterparts in March, according to the latest data. However how long this can continue is now up for debate.

Nationally regional property prices rose by 1.1 per cent in March, taking the median price to $758,788 according to property data firm Cotality.

It outperformed the national capital city price rise of just 0.6 per cent during the same period, with the median capital city home price now at $1.025 million.

The latest numbers come after two months of interest rate rises and uncertainty as Australians face cost-of- living pressures and a war in the Middle East.

Where prices are rising the most

While regional property prices are at an all time high, the strongest growth in prices is coming in those states where their capital city prices are also on the rise.

That means prices in regional Western Australia have seen the highest growth in March, in tandem with its capital Perth, with values up 2.2 per cent in March to be 6.2 per cent higher over the quarter. .

"The strongest regional markets are very similar to the strongest capital cities," said Cotality's research director Tim Lawless.

Regional South Australia and Queensland also saw stronger gains than other states, in line with their capitals.

Regional NSW and Victoria, however, were a different story.

"It's fair to say that when you look at regional NSW and regional Victoria, there's clearly a little bit of fade happening in the growth rate," Mr Lawless said.

Over the past year, however, prices in regional NSW and Victoria, along with Tasmania have seen significant rises.

IN NSW Armidale led that charge with an annual price change of 19.8 per cent, the Latrobe Valley in Victoria saw a 15.3 per cent rise in the same period and a 14.6 per cent rise in Launceston.

A strong trend is that those regional areas with the highest price growth were further from capital cities and had strong standalone employment.

"They're very different from the lifestyle markets that were really leading the price during COVID-19," Mr Lawless said.

"They have a generally more affordable price point and economic resilience and it's that blend of jobs and lower prices that help support those markets."

That trend of regional centres further from capital cities and coastal hotspots being places of growth was also reflected in the latest Regional Movers Index.

Regional Australia Institute CEO Liz Ritchie said regional movers were looking further afield, leading to greater diversity in the top destinations for movers.

"We are seeing a trend of capital-city dwellers still choosing popular locations, but regional-to-regional movers looking elsewhere," said Ms Ritchie.

'Further slowdown'

With selling prices easing, fewer homeowners are willing to put their home on the market.

"There are some early signs of an easing in purchasing demand, with Cotality's estimate of quarterly home sales tracking 1.9 per cent lower than a year ago and 5.6 per cent down on the five-year average," said Mr Lawless.

He said that given the likelihood of a further rise in cost-of-living pressures and interest rates, alongside a drop in confidence as conflict in the Middle East extends, it's likely that fewer homes will be coming onto the market.

That state of uncertainty both globally and domestically is also tipped to have further effects on the property market.

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"It's fair to say the headwinds are building and I think the market is in for a slowdown," Mr Lawless said.

"We've already seen some momentum come out of the markets in cities like Sydney and Melbourne are drifting lower in value.

"You'd have to expect with more rate hikes ahead of us and challenges with household balance sheets as they contend with cost of living pressures, particularly fuel, transport and energy costs - then that's going to be weighing on confidence as well.

"My view is that we will probably see a further reduction in housing demand on the back of all those factors."