The regional housing boom is beginning to slow in hotspots across New South Wales and Queensland after record-breaking rises during the pandemic.
Although overall the market is still outpacing capital cities.
While a "regional renaissance" saw strong population growth over the past two years, demand has slowed as interest rates have risen.
"I believe there have been some structural changes that benefited regional housing demand through the pandemic that are hard to unwind," CoreLogic's head of research, Eliza Owen, says.
"This may prove to be a once in a generation growth phase for regional dwelling markets, that even a sharp correction in interest rates cannot completely unwind."
Combined regional housing prices soared by an average 41.6 per cent after COVID-19 hit (compared March 2020), and they’ve since dropped 5.7 per cent since peaking in June.
In contrast, combined capital city home values are now 13 per cent above pre-pandemic levels.
But some regional markets are dealing with much higher house price growth than the national average.
According to CoreLogic, some markets saw house prices rise by 70 to 80 per cent during the pandemic. It’s changed the face of some local communities.
Crunching the numbers, CoreLogic figures reveal the biggest changes in regional values for houses and units since the pandemic hit.
Houses: strongest growth since COVID
*Housing data not provided for ACT.
"It's not too surprising to see more affordable markets topping capital growth lists at this stage, especially given the low end of the market tends to be a bit more lagged over the course of the housing cycle," Ms Owen says.
"So the full impact of rate rises tends to be a bit lagged for areas that have a low price point.
"Houses were very popular during the COVID period, so a lot of previously low-value areas may have seen a lot more value unlocked."
In March 2020, the top 20 house markets that would go on to have the greatest uplift in value started with an average median of around $306,000.
These areas now have an average median value of $527,000.
For the top 20 performing unit markets, the average median was closer to $392,000, and now has an average of $618,500.
*TAS, SA, and NT, unit market results did not satisfy the criteria for reporting
Lifestyle regions still the stand-outs
Domain's analysis of keyword searches in 2022 showed that lifestyle additions and location were high on wish lists, such as "pool", "waterfront", "beach" and "view".
"The global pandemic created one of the greatest lifestyle shifts Australians have experienced," Dr Nicola Powell, Domain Chief of Research and Economics says.
"It emphasised the importance of the home and its surrounding community, as well as the ability to work, live and play within a short distance of where we reside."
Ms Owen said the decline in regional home values accelerated in October and November, which may play out in a higher portion of regional loss-making sales in future quarters.
While some regions have seen relatively steep declines in value over recent months, Ms Owen says the regional lifestyle markets are "still the stand-outs".
"This stickiness of value stands out, despite recent price falls," she says.
"The highest growth markets since COVID have this common thread of farther afield regions that are close to wineries, or have a distillery, or are close to beaches," she says.
"The downswing period, combined with the normalisation of migration trends and return to office initiatives will be a real test for these markets over the next few years."
Most popular regional centres by numbers?
Perhaps unsurprisingly, the major Local Government Areas close to the east capitals rank as the most popular migration destinations for city-dwellers making a regional move, according to the Regional Movers Index.
The Gold Coast and Sunshine Coast were the most popular destinations by numbers, according to the quarterly report released last month.
Queensland's regional areas account for the largest share of total net inflows from capital cities (37 per cent) in regional Australia, eclipsing regional NSW (26 per cent) and regional Victoria (23 per cent).
CoreLogic figures show the sunshine coast has seen a peak-to-trough fall of 6.5 per cent in value, which is close to the magnitude of the national decline, but values are still a whopping 37 per cent above where they were at the onset of COVID-19.
“Using the example of Richmond-Tweed, values have fallen sharply from a peak in April, declining more substantially than Sydney," Ms Owen says.
"However values remain 24.3 per cent higher than what they were at the onset of COVID-19 in March 2020 as they do in places such as the Gold Coast, where values remain 41.9 per cent above March 2020 levels, despite a recent peak-to-trough decline of 7.4 per cent."
Australia's 'misaligned' housing market
Overall, national housing values fell 3.2 per cent over the year to November.
The fall was largely driven by capital city dwelling values dropping 5.2 per cent, while regional dwelling values rose 3.3 per cent over the same period.
Property prices in Australia may be up to 50 per cent higher than what the median household can afford, according to a new report from the International Monetary Fund.
In its report on housing affordability and stability, the IMF found Australia has one of the most severe "housing cost overburden" rates, which is the share of the population spending more than 40 per cent of its income on housing, higher than the OECD average.
