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A Two-Paced Market: Rise of Regional

Posted by PRD Nationwide on 5 May 2015
Remember the childhood story of the tortoise and the hare? And how the tortoise steadily gained upon the hare, and won the race due to the hare's laidback attitude knowing he was fast?

Such a 'race' can be likened to our current property market situation, whereby there is a two-paced market. There is a variance in the speed of median price growth between capital city and regional areas, and between states. For example Sydney and Brisbane's median price growth travel at a different speed, as does Brisbane in comparison to Regional Queensland.

A Two-Paced Market: Rise of Regional 

New South Wales economy has lead in growth rate, thanks to a burgeoning housing market; whilst Victoria and Northern Territory ended 2014 in relatively healthy shape. The pace of the economy is slower in South Australia, Tasmania, and Australian Capital Territory. Western Australia and Queensland's final demand for goods and services was lower in the December 2014 quarter compared to 12 months prior.

It is clear that the Australian economy travels at a divergent pace across states and territories, which is mirrored in property market growth rates. In New South Wales, for example, capital city markets grew by 7.0% in early 2015, yet metropolitan and regional markets grew by 6.6% and 4.8%, respectively. In comparison, Queensland capital city market grew by 5.0%, whereas its metropolitan and regional markets grew by 0.5% and 1.1%, respectively. Similar patterns on house median price growth can be found across states and within states, suggesting a two-paced property market is indeed in effect. Figure 1 provides an illustration of the divergence in property market growth, signified by clocks.

Capital city markets have, on average, recovered their title as the hottest areas for property growth; recording 8.7% growth in early 2015. This figure is higher than previous 12 months growth of 3.8%, signifying a definite boost of confidence in the market post second half of 2014 slump. Metropolitan markets continue to perform at a sustainable level, with a slight dip of 0.3% in early 2015.

Regional Australia property growth proves to be on the rise, with all regional markets across Australia reporting positive growth figures based on sales in early 2015. This is in contrast with the second half of 2014 whereby only New South Wales, Queensland, and Tasmania reported positive growth. Figure 1 provides a breakdown of house median price growth in capital city, metro, and regional area.

A lower Australian Dollar, decrease in supply (i.e. number of total property listings), and favourable interest rates conditions have spurred both investment (foreign and local) and owner occupier activity in the market. An increase in demand has created a more competitive environment, resulting in promising price growth for 2015.

Author: PRD Nationwide

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