Discounted Victorian towns once thriving now,
House prices in various Victorian tree-change and sea-change towns have dropped significantly over the past year.
This decline results from increased borrowing costs for home buyers. Additionally, there is a gradual return to CBD offices.
According to Domain’s latest House Price Report, the median house price across regional Victoria has fallen considerably.
Specifically, it decreased by 1.4 percent to $572,000 by the September quarter compared to the same period last year.
The local government area experiencing the steepest decline was the Yarriambiack Shire, located in northwestern Victoria.
This area saw a remarkable drop of 22.9 percent over 12 months, resulting in a median price of $185,000.
Following Yarriambiack, the LGA of Corangamite also reported a significant decrease in house prices over the past year.
House prices in Corangamite fell by 11.9 percent, bringing the median price down to $415,000 during this period.
Additionally, Mansfield recorded a decline of 10.9 percent, while Strathbogie experienced a 9 percent drop in house prices.
Moreover, Bass Coast saw an 8 percent decrease, and Hepburn’s prices fell by 6 percent over the same timeframe.
The Surf Coast also faced a decline of 4.6 percent, which contributes to the overall downward trend in the region.
Domain’s chief of research and economics, Dr. Nicola Powell, pointed out that regional Victorian house prices have consistently dropped recently.
This trend marks three consecutive quarters of decline, which is a situation not observed since the year 2008.
During the lockdown years, there was a notable surge in demand for tree-change and sea-change properties across the region.
This surge occurred as individuals sought lifestyle changes and adapted to remote work arrangements during the pandemic’s peak demand.
However, as the market stabilizes now, there is a clear slowdown in migration out of urban areas, Dr. Powell noted.
Dr. Powell emphasized, “We saw strong rates of demand for houses around the commutable belt of greater Melbourne during this period.”
She noted that this demand peaked during the pandemic and has since changed due to shifting work policies.
As many businesses now mandate a return to office work, buyer behavior is significantly impacted across the housing market.
Consequently, people are reassessing their commuting distances and evaluating their housing options with greater care in the current market.
Victorian regional towns with the largest decline in house prices over the past year
| LGA Name | Sep-24 | Sep-23 | Annual change |
|---|---|---|---|
| Yarriambiack | $185,000 | $240,000 | −22.9% |
| Corangamite | $415,000 | $471,250 | −11.9% |
| Mansfield | $637,378 | $715,000 | −10.9% |
| Strathbogie | $555,000 | $610,000 | −9% |
| Bass Coast | $690,000 | $750,000 | −8% |
| Ararat | $350,000 | $380,000 | −7.9% |
| Moyne | $625,000 | $670,000 | −6.7% |
| Colac Otway | $502,500 | $535,000 | −6.1% |
| Hepburn | $700,000 | $744,500 | −6% |
| Moorabool | $640,000 | $680,000 | −5.9% |
| Ballarat | $513,000 | $545,000 | −5.9% |
| Surf Coast | $1,240,000 | $1,300,000 | −4.6% |
| East Gippsland | $500,000 | $520,000 | −3.8% |
| South Gippsland | $582,500 | $605,000 | −3.7% |
| Wellington | $445,000 | $460,000 | −3.3% |
| Baw Baw | $610,000 | $630,000 | −3.2% |
| Central Goldfields | $400,000 | $410,000 | −2.4% |
| Northern Grampians | $310,000 | $317,000 | −2.2% |
| Wangaratta | $525,000 | $535,000 | −1.9% |
| Greater Geelong | $695,000 | $707,750 | −1.8% |
Powell also mentioned that September had the highest volume of listings for that month since 2017, significantly impacting market conditions.
This increase in listings is shifting conditions in favor of buyers who are looking to enter the regional housing market.
However, many potential buyers are taking a wait-and-see approach due to forecasts predicting that the Reserve Bank will cut interest rates.
Powell stated, “A few reductions in the cash rate will greatly enhance everyone’s borrowing capacity and home loan repayment affordability.”
She added, “I believe there will be a pool of buyers waiting on the sidelines for the time being.”
“Once we start seeing a few rate cuts, this will likely encourage buyers to return to the market,” she explained.
“However, we are likely to see prices decline in the coming quarters, which may further impact buyer decisions,” she noted.
Michael DeVincentis, director at BigginScott in Daylesford, reported experiencing an oversupply of listings in the Hepburn region currently.
He observed that many sellers are expecting to sell their properties at pandemic prices, which is deterring potential buyers.
This mismatch between seller expectations and buyer willingness to pay is creating challenges in the current real estate market.
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“It’s ineffective to have a high price if no one is willing to pay it,” he stated.
“That situation is starting to change as buyers are no longer willing to meet those high expectations,” he added.
DeVincentis mentions that most of his current clients originate from metropolitan Melbourne. They are typically cashed-up second or third home buyers.
These clients are seeking holiday homes in the regional area, which has become increasingly popular recently.
However, investor activity has decreased significantly due to rising land taxes and increasing interest rates in the market.
“Some local residents have experienced their mortgage repayments increasing by 50 percent, making it challenging for them to cope,” he noted.
This increase is problematic because rents have not risen significantly, which adds to their financial strain.
Furthermore, people are discovering that their holiday accommodations are not being booked as frequently as they had hoped.
KPMG regional economist Terry Rawnsley stated that the decline in regional prices reflects a “cooling-off period post-COVID.”
This observation indicates broader market trends affecting regional areas as they adjust after the pandemic’s impact.
“You had a significant influx of remote workers moving into these areas during the COVID period,” Rawnsley stated.
“However, after some time, certain individuals might wish to return to Melbourne, resulting in fewer new city buyers,” he explained.
Rawnsley also mentioned that many who purchased “weekender” homes in coastal areas during low-interest rates are now reassessing their investments.
“With interest rates increasing over the past few years, people may be forced to sell their properties into the market,” he noted.
This situation likely contributes to a lack of demand for higher-end properties in those coastal locations, according to Rawnsley.
James Worssam, director of Great Ocean Road Real Estate, stated that rising land taxes and the cost of living affect potential buyers.
He noted, “Eighty percent of the houses we sell are holiday homes, and land tax is a significant factor.”
This issue is particularly impacting self-funded retirees, whose land taxes have suddenly increased, making affordability a concern for them.
Despite these challenges, Worssam remains optimistic about the future of regional house prices, especially on the Surf Coast.
“I’ve been selling properties here, and the market never remains constant; it fluctuates over time,” he remarked.
“It goes up, and then it goes down, reflecting the dynamic nature of the real estate market,” he concluded.
