After the COVID-19 pandemic increased interest in the already in-demand Kiama area's property market, some buyers are now reportedly choosing it over the likes of Byron Bay.
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CoreLogic's quarterly Regional Market Update, released on Monday, shows Australia's 25 largest non-capital city regions continued to achieve unprecedented increases in value.
Over the 12 months to January 2022, 24 regions recorded double-digit annual growth for houses, with 18 regions notching up gains in excess of 20 per cent.
The report also analyses house and unit figures for 319 regional local government areas (LGAs).
Byron Shire on the NSW North Coast had the highest median house value of any regional LGA at $1,838,286 (up 30.2 per cent), while houses in the Kiama LGA recorded the largest increase at 43.9 per cent, taking its median value to $1,633,086.
Terry Digger from First National Coast and Country said the LGA's recent growth had originated as a result of COVID-19, which then had a flow-on effect.
"Because of the proximity to Sydney, people have created this lifestyle mentality on the back of COVID, and it's just continued," he said.
"The ageing population in Sydney who are looking to retire for that coastal change are eyeing Kiama; we've always been a big retirement market. So they're adding to the competition.
"People are now referring to us as 'Sydney's new Byron Bay'. Some Sydney buyers are still flocking to Byron Bay, but a lot are coming here too now.
"So we're seeing some very high-end people coming down and buying holiday homes.
"Some of these high-end properties, the prices they're getting now used to be unheard of. It's created a trend within the higher-end of the marketplace."
Melinda Budd from Ray White Kiama said Kiama was "such a beautiful small beach town".
"People just want to escape ... They're still escaping from Sydney," she said.
"That's still a broad spectrum of our market.
"But what we're also seeing is the market's starting to free up a little bit, whereby we're getting more houses on the market, so it's giving our locals confidence to upsize and downsize as well.
"Interest rates are still low and money's still cheap, so that gives people confidence to buy too."
Looking at 2022, Ms Budd said she believed the market in the Kiama area was going to "continue along this same path".
"That's unless a significant change is made, which is usually an interest rate rise, or the banks tighten their criteria," she said.
"There's definitely still a lot of confidence in the market."
CoreLogic's head of research Eliza Owen said key drivers for performance in the regions will come down to higher interest rates and affordability constraints, the same headwinds capital city markets are facing.
"Regions have an additional factor to contend with and that is the possibility of a return to 'normality' and what that means for a potential refocus on cities," she said.
"Employers may make a return to physical office space a priority in the years ahead, which would necessitate buyers to reconsider housing options closer to a capital city.
"However, this scenario seems less likely and more long-term than the arrival of the Omicron variant, which in many ways reinforced that this an ongoing health crisis and Australians prioritised their current housing needs to align with their desired lifestyle."
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Ms Owen said despite the "recent exuberance" she would expect growth rates in regional Australia to start slowing early this year.
The Southern Highlands and Shoalhaven SA4 region in NSW recorded the highest annual regional house value growth in the 12 months to January 2022 at 38.2 per cent.
"Positive interstate migration trends may have acted as a tailwind for these popular lifestyle regions, even amid affordability challenges and fixed rates starting to move higher," Ms Owen said.
"Regional areas previously benefited from the easing of social distancing restrictions, which boosted buyer interest and a surge in interstate migration, and that may have continued in the final months of 2021 and into the new year."