The once-booming regional NSW towns now offering house price discounts
Popular towns along the coast have recorded the deepest house price declines in regional NSW, losing up to $377,000 in the past year.
Byron Bay council area led the way with house prices dropping 21 per cent to a median of $1,422,500 in the year to June, Domain’s latest House Price Report, released on Thursday, showed.
Byron Bay was one of the most popular property markets outside of Sydney during the pandemic boon.Credit:
That was followed by a string of neighbouring council areas, with the next steepest fall in house prices recorded in Lismore. The median fell 18.6 per cent to $570,000 in the past 12 months to June, capturing the period when floods devastated the region.
The next areas were Ballina and Bellingen, dropping 14.3 per cent and 13.6 per cent, respectively.
On the NSW South Coast, Kiama council dropped 13.1 per cent to a median of $1,377,500. It was a similar trend for its hinterland neighbour Wingecarribee council, which takes in Bowral in the Southern Highlands, falling 11.5 per cent to $1,150,000.
Domain chief of research and economics Dr Nicola Powell said regional areas that grew the most during the pandemic boom are pulling back, while affordable markets continue to rise as priced-out buyers chase cheaper properties.
“Those areas that saw those extreme rates of growth during the boom are seeing a deeper decline,” Powell said.
“On the flip side, those more affordable regional markets, that are inland, are seeing stronger rates of growth. It’s all those further flung regional areas.”
Experts say recent home owners, who bought at the peak of the market, and highly indebted investors, who are getting diminishing returns, have been the hardest hit by rising rates.
KPMG regional economist Terry Rawnsley said regional property markets are harder hit by interest rate rises than the city in some cases.
“Rates are having an effect and some of these coastal areas are population-driven economies,” Rawnsley said. “If rates are biting on cafe economies, those local economies are going to be feeling it more than diversified economies like the city, and they are more sensitive to discretionary spending in coastal areas.”
But out-of-town buyers in some of these popular regional areas would also be feeling the pinch after buying at the peak of the market at rock bottom rates.
“The holiday home you can afford at a 1 per cent interest rate, people can no longer afford at 4 per cent,” 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 driven by locals again, rather than cashed-up city buyers.
But even the regional property markets that recorded a drop in median prices in the past year are still up by staggering double digits over five years and Rawnsley said median prices were unlikely to return to pre-pandemic levels.
Ray White Byron Bay director of sales Damien Smith said most of the house price declines have been driven by the sub-$2 million market, which is most sensitive to inflation and rising mortgage rates.
“Anything under $1.5 million or $2 million, that segment has come back the furthest. It’s dropped up to 40 per cent in some areas. They are the people who are paying mortgages,” Smith said.
He said many home owners have seen the writing on the wall since rates started increasing and have pre-emptively sold before becoming a distressed seller.
“They went to market and sold and got a little bit more than what they would have got now. They’re not going to wait until they are about to fall off a cliff.”
But Smith said the area was mixed and prestige properties were performing better because they are less impacted by mortgage rates.
“We’ve had a lot of areas who were hurt by floods as well, a lot of those houses that are selling is a shell of a house,” he said.
Down the South Coast, investors were one segment of the market selling in Kiama after being hit with the triple whammy of rising rates, surging land tax bills and reduced holiday letting income streams.
“It’s more to do with the people who bought an investment that they didn’t need through COVID. They bought at the peak of the market and borrowed against their home. That’s where the mortgage stress comes in. You’ve got more costs from monthly repayments, land tax has doubled and reduced income streams,” said Steve Pryor, director of Raine & Horne Kiama. “The demand for holiday letting has decreased as people can go overseas.”
He also said Sydney’s property downturn was flowing into Kiama with buyers: “Our buyers are getting a bit less from theirs [in Sydney], so they’re expecting a similar discount [in Kiama].”