Coastal hotspot at 'bottom of the cycle' tipped for major turnaround

Pristine beaches, buzzing cafes and a laid-back coastal lifestyle, a popular tourist hotspot attracting cashed-up city buyers could be on the cusp of a major revival.

No stranger to the ebbs and flows of holiday seasons, the NSW South Coast region has all the infrastructure in place for the flood of tourists that emerge on its shores over the busy summer months.

But after a sharp pullback in property prices post-pandemic, a ‘golden triangle’ stretching along the river between Terara, Culburra Beach and down the coastline past Jervis Bay has been earmarked for a major turnaround. Local real estate agent Craig Hadfield from Ray White said in his view, there’s a six-month window of opportunity before wealthy city buyers descend back on the region.

“This is my 24th year [in the industry] and there's only so many periods of time where you can actually sense that you're at the bottom of a cycle,” Mr Hadfield told realestate.com.au.

“But I think that as we track through the year, my expectation is that spring could be very, very strong, potentially if inflation comes down and they start to really get serious about interest rate cuts.

“Because there's actually a lot of really good value in the market. I think there's more value in the market now that I've seen for probably three or four years."

A renewed sense of optimism has driven market activity so far this year, as expectations grow that interest rates could start to fall in the back half of 2024.

"Some of the prices [in the region] have come off 15% to 30% last year, and we're now seeing quite a good uptick in activity off the back of those readjusted prices.

“I genuinely think as soon as they cut, and a cut will happen - and it doesn't matter by how much - it's just going to drive the market.”

The great readjustment

The biggest winners of the pandemic-fuelled regional boom have also experienced some of the largest price corrections as rising interest rates, the reopening of borders and a return to in-office working saw conditions normalise.

PropTrack economist Anne Flaherty said the ‘abnormal circumstances’ surrounding these markets during the pandemic have now gone.

“We absolutely saw very significant outperformance in regional markets during 2020 and 2021, with a lot of people moving away from capital cities,” she said.

“One of the reasons why we saw homes sell for such high levels during those times was that there was a lot of buyers competing for those properties, which drove the prices up.

“And with extremely low interest rates during that period, we saw people more able to afford a mortgage on a second home, a holiday home.” Once the hottest market in the country, emerging as a celebrity haven during the pandemic, median house prices in Byron Bay have plunged more than 23% over the past 12 months, falling out of the $3m property club to reach $2.3m in February 2024.

“Prices are still well up compared to pre-Covid,” Ms Flaherty said. “But it has seen a really strong correction, purely off the back of the fact that it was that hottest market in Australia.”

Similar corrections have played out in other regional pandemic-darlings like Gerroa on the NSW South Coast, Somers on Victoria’s Mornington Peninsula, and Sunshine Beach in Queensland’s Noosa region.

The sea-change hysteria reached a pinnacle in 2021, when a beachfront house in the South Coast town of Mollymook sold for a whopping $10m at online auction, five years after it sold for $2.26m. Nothing had been done to the home apart from general maintenance.

But while the regions have come off the boil, Ms Flaherty said they still remain well ahead nationally.

“In every state in Australia, regional property prices are still sitting significantly higher compared to pre-Covid, versus their respective capital city counterpart.

“But I think what we are seeing is that interest rates have increased massively, people are returning to offices and that competition to buy regionally has slowed significantly.” Rather than another dramatic boom, she says regional markets will revert to the long-run trend of gradual, steady growth.  

“For the 20 years pre-Covid there's been more people migrating from the cities to the regions, and that will continue.

“One lingering effect of the pandemic, though, is that people still to this day have more flexibility in where they work.”

And that bodes well for sea- and tree-change regions with good connectivity to cities or major regional hubs.  

“Regional markets that outperform often do have good connectivity into a capital city or a large regional city,” she said.

“So for example, in New South Wales, there's a lot of regional markets that are quite close to larger cities, not necessarily Sydney but maybe other larger regional markets like Wollongong or Newcastle.

“That’s definitely attractive to buyers, so if they can live somewhere really scenic and beautiful that offers a great lifestyle and has good connectivity into a larger hub where they can access things like good health care, a more diverse offering of retail, jobs, then that's the sweet spot.”