Regional Victoria ranks Australia's worst-performing property market

Earlier this year, Claire Tennant moved into her new three-bedroom home in Bendigo, mortgage-free. The 45-year-old had lived in Sydney for 15 years with her husband and two primary school-aged children, but felt "completely exhausted" due to the long commute and high cost of living.

She yearned for a life like her brother's in rural Victoria. "We came here one Christmas, and my brother was so relaxed, he had friends and hobbies, and we thought, 'What are we doing in Sydney?'" Ms. Tennant said. "Meanwhile, my kids were growing up in the back of the car."

The couple sold their Sydney home of seven years and used the profit to buy a $665,000 house outright in Bendigo. This price is slightly above the median price of $649,899 for houses in regional Australia, according to CoreLogic data. The median price for combined capital city homes in Australia is just over $1 million.

Ms. Tennant moved to the suburb of Kennington in Bendigo, where house prices have fallen by 6.72% in 2024. "The garden is huge, we have three blocks, and we are in the heart of the suburbs. It's just fantastic, everything is within a four-minute drive. We've saved three hours a day not being stuck in school and work traffic. We now have our own hobbies and the kids can do activities," she said.

For many homebuyers like Ms. Tennant, now is a good time to relocate as regional homes are more affordable than those in major cities. CoreLogic data shows that regional Victoria is the "worst performing region this year" among Australia's major cities and regional areas, with a 2.8% drop in house prices. "This has resulted in stronger first-home buyer activity rather than more investor activity that we've seen in other parts of Australia," said CoreLogic economist Kaytlin Ezzy.

Ms. Ezzy said that interest rates and high land tax in Victoria are impacting the market. "This has meant reduced demand from investors, and we are seeing an increase in new listings, so investors are offloading properties," she said. "This is putting downward pressure on prices as buyers have more choice and aren't as urgent." Venus Bay in Gippsland has seen the biggest drop, with a 15.4% decrease, while areas around Shepparton have seen increases, with Tatura up 11%, Kialla up 8%, and Mooroopna up 6.5%.

The Ballarat region has seen the largest price declines, with Lake Wendouree down 11.3%, Canadian down 10%, Redan down 10.4%, and Daylesford down 10.8%. "We have to remember these areas boomed during COVID in 2020-21, so it's healthy for these areas to have an adjustment," said buyers agent Ella Cas. Ms. Cas believes that the reason for the price drop is that several areas around Ballarat have been zoned as urban growth zones.

"All of this land is available for development, which means future market supply will increase, which will dampen capital growth," she said. Ms. Cas said that despite the market volatility, it is good for first-home buyers as prices are cheaper and there are more opportunities. "In November, we had two instances in the Bendigo region where we had a better price for our investor clients, but the sellers chose to sell to first-home buyers," she said. "It's disappointing to miss out on the deal, but I'm glad to see first-home buyers entering the market."

Ms. Cas said that despite the high land tax in Victoria, she is seeing increased interest in regional Victoria due to its affordability. "When we are calculating properties around $550,000 in regional Victoria, it's cheaper to own some properties than it is to buy in Queensland because interest rates and insurance are cheaper," she said. Real Estate Institute of Victoria CEO Kelly Ryan said that if interest rates drop next year, house prices in regional Victoria may increase.

"Once we see one or two rate cuts, the market will become more active – Victoria is too good a market to stay flat," she said. "After two years of stability and price drops, 2025 is one to watch."