The sea-change towns where property prices fell most from their peak

Home values are below their peaks in a string of sea-change and tree-change towns, offering buyers discounts that range from tens to hundreds of thousands of dollars.

The property markets in several popular coastal and country areas boomed during the lockdown years and peaked in 2022, once interest rates started to rise from rock-bottom levels and remote workers were called back to their CBD offices part of the week.

Byron Bay’s median dwelling value is now $1.89 million, 21.3 per cent lower than its peak in April 2022, Cotality figures for August show.

That’s a discount of more than $511,000 compared with its peak of $2.4 million, although it remains the most expensive regional town in Australia, with a higher median value than Greater Sydney.

Values also fell in the NSW Southern Highlands region of Bowral-Mittagong (down 13.9 per cent to $1.15 million) and the South Coast town of Ulladulla (down 12.6 per cent to below $969,000).

Buyers in Victoria can find several regional centres below their peaks, although the more modest boom in the state was followed by more moderate downturns.

Geelong’s median dwelling value is about $732,000, or 9.2 per cent below its May 2022 peak.

Values are also below peak in towns such as Ballarat (down 8 per cent) and the Warragul-Drouin area (down 7.6 per cent).

Cotality economist Kaytlin Ezzy said some regional markets had peaked during 2022 when interest rates started to rise from their emergency levels.

“This is when that availability of money really dried up,” she said. “And also around the time when we started to see people shift back to the capitals.

“That saw some of these markets that had seen exceptional value growth over the first couple of years of COVID start to shift a little bit lower, as what was a slightly overvalued market shifted towards more realistic prices.”

She said that Byron Bay remained the most expensive regional market in the country, despite a fall in median value of about $500,000 from its peak. She added that some of the housing stock in the area was also damaged by the 2022 northern NSW floods.

Parts of southern NSW had a similar pattern of boom and downturn once the demand to buy in these areas evaporated, she said.

Victoria’s regional market did not record such significant price increases in the early 2020s because residents were leaving Victoria, she said. More recently, some investors have been selling due to less favourable conditions such as higher land tax and higher minimum standards for rentals.

“Most of these markets hadn’t seen that same uplift in value as the other regional areas, so over the past year or so it has seen a little bit of growth,” Ezzy said. “It’s regained a bit of affordability advantage, and that’s helped push values higher over the past year.

“One of the reasons why the declines probably aren’t as steep in regional Victoria as some of your more volatile markets like Byron Bay is partially because for your average home owner, as properties were declining, a number of them would have chosen to sit and wait, rather than sell for potentially a loss, or below their peak.”

The regional towns furthest below their peaks were mining towns in Western Australia that soared in value in the mining boom and peaked in 2012.

Iron ore hotspot Port Hedland has a median value of $455,000, 50.8 per cent below its peak. Karratha, a 240-kilometre drive away, fell 29.6 per cent from its peak to $624,000.

PRD chief economist Dr Diaswati Mardiasmo said the Byron Bay property market was more seasonal than that of some other regional towns, and almost an outlier during 2020 and 2021 when it attracted holidaymakers who could not travel overseas.

“There was so much hype around Byron Bay at the time that happened. Zac Efron was there,” she said.

Noting that the town relied on a small number of industries, she said: “What made Byron Bay hot is not sustainable. It’s not like the Gold Coast, where you actually are building the economy.”

She contrasted this with regional Victorian towns that have better fundamentals for property buyers, such as commercial activity and infrastructure development.

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She thought buyers in many towns below their peak could purchase in a more sustainable market now, compared with the era of ultra-low interest rates designed to support a then-weak economy.

“I would actually look at it as an opportunity; I wouldn’t look at it as a red flag,” she said.

“Now we are transacting in a normal, strong economy … You’re actually buying in a time when it’s more sustainable for you.”