High-Risk Regional Assets Face Downturns

In this episode of the Follio Property Podcast, hosts Reece Beddall and Lachlan Delahunty deliver an essential property market report unpacking the current changes in the Australian property market, diving deep into why post-COVID regional ‘investor belt’ assets are entering into high-risk territory, how investors can stop cash flow bleeding by restructuring their portfolio and how PropStac can provide actionable property investment advice to help you evaluate your true position before making sudden investment moves.

Key Takeaways & Market Insights

• • Market Split: Sydney, Melbourne and Canberra are leading investment downturns, while Perth and regional WA are holding modest gains, driving buyers towards affordability plays.
  • Regional Investor Traps: Investors who purchased cheaper housing in areas with lower populations such as Toowoomba, Gladstone, Townsville, Rockhampton and Darwin have been “wiped out”.
  • Regional Investors Selling at a Loss: These regional investors who purchased housing at $650-660,000 are now struggling to sell at $600,000.
  • East Coast vs West Coast: The prestige market is softening on the East Coast, while the West Coast (Perth) is yet to show the same pattern.
  • Construction Costs Continue to Rise: Construction costs have consistently risen over the past six years and aren’t expected to drop despite the market change. As a result, quality finished properties are maintaining their price floor and commanding premiums as buyers look to avoid renovation costs.
  • Change in Interest Rate Outlook: In recent weeks, the interest rate discussions are shifting away from rate hikes to potential interest rate cuts entering into 2027.

Current State of the Australian Property Market

The Australian housing market is shifting, characterised by capital city downturns, regional price corrections and some localised resistance.

“The biggest falls were seen in Sydney, Melbourne, and Canberra. Brisbane, Adelaide, and the regions also joined the downturn. Perth and Hobart managed modest gains.”– Lachlan Delahunty – Follio Founder

Regional areas that previously saw heavy demand over recent years are now seeing price reductions and lower buyer demand.

“When times are tough, these low population centres and high volatility areas get exposed, and we’re seeing that in the numbers. So these are areas which were dominated by a lot of investment activity for the last three to five years.”

“Post-COVID, you saw investor groups and investors in general just go from regional city to regional city where there was affordability, and it pretty much went up the north-east coast, starting in Toowoomba, and then it went up the coast to Gladstone, Rockhampton, and Townsville and even made it all the way over to Darwin. That investment belt has just been wiped out.”

“We are now hearing from clients that are coming into our business that have been taken on that journey, not through us, but other firms, that they now can’t sell them (regional properties), and they’re coming to us saying, ‘What do we do?, We’ve paid $650-660,000 for an asset and got told based on the valuation it was worth $750,000, and now can’t sell it for $600,000.'” – Lachlan Delahunty.

Key Drivers Impacting Housing Valuations

Higher construction costs, shifts in interest rate expectations and a changing buyer sentiment are all reshaping property valuations throughout Australia. Buyers are still willing to pay more for newer finished properties.

“Construction prices have only done one thing in the last six years: they’ve gone up, and the forecast is they’re not going to get any cheaper. So people are paying, still paying – a premium for things that are finished.” – Lachlan Delahunty

The property market sentiment has improved in Australia over the past couple of months.

“Market sentiment is better than it was six to eight weeks ago. The data that we track on sentiment shows that it has improved over the last six to eight weeks.” – Lachlan Delahunty.

Strategic Market Advice for Property Investors Looking to Buy or Sell

Successful property outcomes in a changing market rely on detailed portfolio analysis and strategic property presentation. It is recommended to pause and evaluate before taking any action in today’s market.

“Our advice to clients (before they make any rash decisions) is to do nothing. Don’t sell, because you’ll be selling at a discount. Don’t buy until we understand your situation and whether you’re going to expose yourself to more risk. Let’s know your numbers, understand your situation, and then make an informed decision.” – Lachlan Delahunty

For those looking to sell, buyers are willing to pay a premium for fully furnished, premium turnkey properties, making property presentation highly cost-effective.

“If you spend the money and do the work – that’s time, energy, effort, and capital – for every dollar you spend, you will likely get a $2 to $3 return, and that’s time and money well spent!” – Lachlan Delahunty

Market Outlook Summary & Next Steps

• • The market narrative appears to be shifting from rate increases to potential cuts in 2027, helping to stabilise market sentiment.
  • High-quality properties will continue to establish the price floor, with high-quality properties in higher demand as buyers look to avoid build delays.
  • Property investors should continue to move away from speculation and rely on actual performance and property investment advice when making market decisions.

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