The Victorian tree-change towns where property prices have fallen

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Key points

  • House prices in regional Victoria fell 3.2 per cent over the year to March.
  • The Moyne and Alpine shires recorded the largest price drops, at 10.7 and 9.9 per cent.
  • Sea and tree-change activity has eased, cooling demand for regional homes. 

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Victorian regional house prices are lower than a year ago for the first time in more than a decade, as the tree-change exodus finally stalls after Melbourne’s reopening.

Rising interest rates have put pressure on the budgets of local buyers and city escapees, although regional price falls have been more modest than those in pricier Melbourne.

Regional Victorian house prices fell 3.2 per cent over the year to March, to a median of $576,000, according to the latest Domain House Price Report, released on Thursday. It is the first fall on a previous year since mid-2012.

Melbourne’s median house price fell 6.2 per cent in the same period to $1,023,000.

The falls are a marked turnaround from the height of the tree-change trend, when Melburnians who could work remotely sent the annual pace of regional house price growth north of 20 per cent during and after the final lockdown.

Domain chief of research and economics Dr Nicola Powell said the initial exodus was driven by city buyers seeking lifestyle and affordability.

“That outward flow from Melbourne into regional Victoria has occurred now,” she said.

“It was this once in a generation change in price point – this wasn’t just one particular area in regional Victoria, this was broad-based.

“The dynamic now will be reflecting what local buyers will be facing, in terms of the ability to keep up with this level of increases.”

Powell said buyers nationwide had been affected by interest rates rises that reduced their borrowing power.

The Moyne Shire, which includes Port Fairy, recorded a fall in house prices over the year to March.Credit: Janelle Lugge

House prices in Moyne Shire, which includes Port Fairy, dropped 10.7 per cent to a median $607,450.

Moyne was followed by the Alpine Shire, which includes Bright in the state’s north-east, where house prices were down 9.9 per cent to $725,000. The median house price there was just $390,000 five years ago.

Yarriambiack Shire to the west of Bendigo, South Gippsland and Greater Geelong had declines of between 5 and 10 per cent.

Elsewhere, prices were higher than a year ago in Greater Shepparton (up 11.9 per cent) and Murrindindi (up 11.2 per cent).

Greater Geelong Council’s median house price fell 5.2 per cent over the year to March.

In Bright, Four Peaks Real Estate sales executive Stephanie Petricevich said the market boom had come and gone.

“People are getting the chance to think before they buy,” she said. “In the boom, people were just buying sight unseen.”

Buyers were still coming from other parts of Victoria as well as Sydney and Queensland, including investors looking for Airbnb properties, while local buyers wanted to upsize and downsize.

But rising rates had made some warier, Petricevich said, and there were few young first home buyers looking.

A Bright buyer could expect to spend $1.2 million on a three- to four-bedroom house, but could purchase a unit in nearby Porepunkah for about $700,000 or an entry-level house under $1 million, she said.

In flood-affected Shepparton, where the rental market is also tight, sale prices have held up so far, said Stockdale & Leggo Shepparton managing director Scott Butler.

“It is holding quite well at the moment, [but] who knows what it is going to look like in six months time,” he said.

“We did have an influx of people coming into this area from Melbourne and other regional towns, but that has slowed.”

Butler was fielding demand from investors at the sub-$400,000 price point as well as local buyers. Some younger buyers had rising interest rates on their minds, but this had less of an impact for buyers in mid-life or beyond.

KPMG demographics expert and director of planning and infrastructure economics Terry Rawnsley said the flow of Melburnians to the regions had slowed from the heights reached earlier in the pandemic.

“We had that big surge of people coming out of Melbourne in 2020 and 2021 which soaked up all the spare housing, and had this push up effect [on prices],” Rawnsley said.

“Now we’ve hit a bit of an equilibrium in terms of the out flow of migration into regions.”

The huge run-up in prices and lack of affordable housing supply had reduced some regions’ appeal at the same time as more Melbourne workers returned to offices and interest rates rose.

“The days of cashed up big-city buyers coming in and pushing up prices is over … it’s coming back to the average [local] wage and borrowing capacity,” Rawnsley said.

He said regional cities and centres close to the capital cities, or with diversified economies, would continue to appeal to tree changers, and likely hold their value better, than areas further afield.

“If you’re in one of bigger regional centres waiting for prices to return to pre-COVID levels, I think you will be disappointed, but in far-flung locations there may be more of a bargain to have, but not back to pre-COVID levels.”

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