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The regional trend could be coming to an end as new figures reveal that monthly capital city price growth has outpaced regional price growth for only the second time in 12 months.
Over the past month, dwelling prices in capital city markets have increased 0.4 per cent compared with 0.3 per cent in regional areas, REA’s latest Insights Home Price Index revealed.
While regional markets dominated buyer interest in 2020, strongly outperforming capital city markets, so far in 2021 capital cities are leading the charge.
Cameron Kusher, REA Group director of economic research, expects the regions to be tested in the months ahead.
“Price growth in capital cities has been stronger than in regional markets over the past two months, so it will be interesting to see if this trend continues as vaccines roll out in Australia and we head towards a new COVID-normal,” said Mr Kusher.
“Undoubtedly, the lure of regional Australia with its lower property prices and desirable lifestyle remains strong, but we may see those who intended to make a tree- or sea-change reconsider their regional move as cities reopen.”
But despite the recent turnaround, over the past year regional markets recorded growth (9.6 per cent) that was double that of capital cities (4.8 per cent).
Of the Greater Capital City Statistical Areas (GCCSA) regional Victoria (11.3 per cent), regional Tasmania (11.2 per cent) and Darwin (10.5 per cent) have recorded the greatest price increases over the past year.
As for the type of property buyers are flocking to, house price growth (0.4 per cent) continued to outpace unit growth (0.1 per cent) in February. Looking at the last 12 months, houses price growth (6.9 per cent) more than tripled that of unit price growth (2.1 per cent).
But Mr Kusher, however, questioned what impact the scaling back of government and banking support will have on property.
“Property prices have clearly responded positively to state and federal government housing stimulus along with the lowest borrowing costs on record. The main potential bump in the road to recovery will be what happens as government and banking support is wound down over the coming months,” said Mr Kusher.
According to him, while the share of mortgages on deferral remains low, the removal of JobKeeper and JobSeeker may lead to an increase in forced property sales.
“I expect that any increase in forced sales will be small and property prices will keep rising.
“While the recovery in Sydney (0.5 per cent) and Melbourne (0.4 per cent) has been slow, prices are picking up, and we expect to see this momentum continue in the coming months.”