Key regional areas outpaced Sydney and Melbourne's property price growth during July, but investors and owner-occupiers wishing for a repeat of last year's stratospheric rises are set to be disappointed, with the market showing clear signs of tapering.
Combined, regional areas clocked a 1.7 per cent increase in dwelling prices over the month of July, just ahead of the 1.6 per cent recorded for combined capital cities, according to data firm CoreLogic.
But in NSW, regional areas like the Central West, up 2.9 per cent, and the Mid North Coast, up 3 per cent, are recording returns well above the Sydney market, which recorded a 2 per cent increase in prices over the month.
The Hunter Valley area, excluding Newcastle and Lake Macquarie, recorded an increase of 2.5 per cent, while the Illawarra recorded a 2.2 per cent increase.
In Victoria, the Geelong, North West and Latrobe-Gippsland markets all outpaced Melbourne's 1.3 per cent growth figure.
Year-on-year the combined regional markets recorded price growth of 19.6 per cent compared to 15.1 per cent for the combined capitals, but CoreLogic director of research Tim Lawless said month-on-month figures showed regional prices were now growing at a similar rate to cities.
"Housing trends have clearly started to slow down a little across the regional areas of NSW and Victoria, with the rolling three month rate of growth reducing from a rate of 7.8 per cent in May to 7.0 per cent in July across regional NSW, and from 7.1 per cent across regional Victoria in May to 5.3 per cent by July," Mr Lawless said.
Part of the reason for the slowdown could be due to buyers hitting a price ceiling.
"With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community," Mr Lawless said.
He added that the withdrawal of housing-specific stimulus measures, such as the HomeBuilder scheme, could also be having an effect.
However, tight supply in many markets meant that prices had some way to run, although likely at a slower pace to the year prior.
"With the internal migration trend remaining strong across regional areas, it's likely housing demand will continue to push prices higher across the regional markets, however the earlier rate of growth was unsustainable," Mr Lawless said.
"No doubt part of the attraction to regional markets is the affordability of housing. The median value of dwelling across regional NSW remains about $419,000 lower relative to Sydney's median value and across regional Victoria, the median dwelling value is $267,000 lower than Melbourne's."
CoreLogic uses the Australian Bureau of Statistics SA4 regions to group regional property markets.
If price growth is predicted to slow it's yet to translate into a change of conditions on the ground, according to regional agents.
McGrath Orange director Jacinta Gosper, whose market falls within the Central West region, said that conditions in her patch had shown little sign of slowing.
"We haven't really seen it slow down at all - we're seeing a really high level of enquiry and low number of days on market," she said.
Most buyers in July had been local, although the agency was anticipating a large influx of Sydney buyers after that city's lockdown has eased.
Ms Gosper said that the expansion of the Newcrest mine in Orange was a major driver for housing demand.
"One in four people employed in mining in Orange," she said.
LJ Hooker Port Macquarie sales consultant Greg Laws said that his market, which sits in the Mid North Coast region, had never been hotter.
"The shortage of stock is driving activity. Both the local buying market is still strong and the out of area market he said,"
Demand was for all types of stock.
"We've just recently sold high-end apartments at $2.4 million we've just this last week we sold a three-bed villa in the $600,000 range that was valued in the $400,000 range less than two years ago," he said.
"We've got houses that we're appraising in the mid-$600,000 range that are selling in the mid-$700,000 bracket," he added.
The Sydney lockdown had made little impact on the out of area market, with buyers being drawn from the south and north coast and inland NSW.
"We are seeing people from Brisbane, the Gold Coast, the Central Coast, Canberra, Tassie and then across the range to Tamworth, Dubbo and Orange," he said.