Australia's regional property markets have recorded their first decline in values since 2020, new figures show, marking the end of two years of unprecedented growth levels and the beginning of a "short but sharp" correction, one expert says.
Dwelling values in the regions fell by 0.8 per cent in July, CoreLogic figures show, with house prices falling 0.9 per cent and unit values falling 0.3 per cent.
In the three months ending July, values fell 0.2 per cent. The median value of a regional home is now $600,105.
Regional NSW and regional Victoria led the downward trend in July; values in regional NSW fell by 0.8 per cent, with regional Victoria recording declines of 0.5 per cent.
The figures come after home values had boomed by 41.1 per cent from the early stages of the pandemic to their peak last month, CoreLogic's Tim Lawless said.
"This is a sharp reversal in the marketplace, coming on the back of housing values across regional Australia rising by nearly 42 per cent through the upswing," Mr Lawless said.
This rate of growth was far higher than the 25.5 per cent increase in values experienced in capital cities, he added.
Mr Lawless said that declines were concentrated in "commutable" regional markets that had seen the biggest upswing during the pandemic, with rural markets further from the city still holding up well.
"We've definitely seen some diversity - it really seems to be those areas that are commutable and went through a much more spectacular upswing that are really dragging down the regional New South Wales average [for example]," he said.
Despite speculation that the rate of growth would mean regional markets are in for higher declines than capital cities, Mr Lawless said there had been a structural change in the underlying demand for regional property that would limit declines.
"I think we probably will see these markets following the capital city lead, but not necessarily recording a larger decline than their capital city counterparts," he said.
Mr Lawless warned regional home owners to expect further price declines in the coming months in response to further rate rises, but said there was a chance the decline would end in 2023.
"I think this will be quite a short but sharp downtrend. And it really depends on, if a lot of the cash rate forecasts are right, and we started to see the cash rate stabilising maybe early next year, or in the middle of next year, and potentially even coming down through the second half of next year and early 2024.
"That will be the cue for housing markets to at least stabilise if not start to move into some subtle level of growth."
