Regional unit prices grow faster than houses in September

Unit value growth has traditionally lagged that of houses in the regions, but regional unit values grew by 1.9 per cent over September, compared to a 1.6 per cent rise for regional houses.

"In fact, the September quarter saw unit values rising faster than house values across regional Australia. This is probably a reflection of stronger demand for downsizing options and holiday homes in popular coastal markets," said CoreLogic research director Tim Lawless.

And while unit value growth lagged that of houses by a whopping 12.3 per cent in the combined capitals in the past year, it was a very different story for regional unit buyers.

"The differential between annual house and unit growth rates in the combined capital cities was 12.3 percentage points in the 12 months to September, compared to 1.9 percentage points across regional Australia."

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The strongest performing regional markets included the Shoalhaven and Southern Highlands region in NSW, where values grew by 3 per cent, and the Launceston and North East region in Tasmania, where values jumped 2.6 per cent.

Hobart and Canberra were the strongest performing city markets over September, returning growth rates of 2.3 per cent and 2 per cent respectively.

But clear signs are emerging that peak price growth is firmly in the rearview mirror, with a looming credit intervention and a surge in spring listings likely to further take heat out the market, according to the latest CoreLogic update.

Nationally, prices were up 20.3 per cent in the past year, with the combined capitals clocking a 19.5 per cent rise and the combined regional markets recording a 23.1 per cent increase.

CoreLogic head of research Eliza Owen said that while the regional growth rate was at its highest since 2004, an analysis of monthly figures showed price growth peaked in March this year.

"Monthly growth rates in the combined regional dwelling market peaked at 2.5 per cent in the month of March, and have slowed to 1.7 per cent through September. The annual growth rate in the combined regional dwelling market was 23.1 per cent, and unlike the combined national dwelling market, this is the highest annual growth rate since March 2004," Ms Owen said.

The cooling in activity was likely due to many homebuying reaching a budget ceiling, according to Mr Lawless.

"With housing values rising substantially faster than household incomes, raising a deposit has become more challenging for most cohorts of the market, especially first home buyers," he said.

"The slowdown in first home buyers can be seen in the lending data, where the number of owner occupier first home buyer loans has fallen by 20.5 per cent between January and July."

There were signs that some first homebuyers may be seeking out more affordable markets in order to get a foot on the property ladder.

"Over the same period, the number of first home buyers taking out an investment housing loan has increased, albeit from a low base, by 45 per cent, suggesting more first home buyers are choosing to 'rent vest' as a way of getting their foot in the door," Mr Lawless said.

The dip in monthly price growth across both regional and metro markets could be exacerbated in the coming months, with the property sector facing several headwinds.

A likely increase in advertised listings in the coming months, as a result of lifting lockdowns, would give buyers more choice and lead to less competition for properties.

An impending tightening of credit conditions, canvassed by the Council of Financial Regulators this week and Treasurer Josh Frydenberg this week, could also put a cap on the amount that buyers are able to borrow in coming months.