Victoria’s towns with the biggest house price falls

“It does suggest that the negative move in prices may be behind us and that what we’re going to see is more of a sideways move,” Powell said.

“I think regional Victoria will be more subdued overall due to affordability and weak population dynamics. Population is the main driver of housing demand.”

Ray White Inverloch principal agent Fiona McMahon-Hughes said an oversupply of homes for sale on the Bass Coast, driven by an increase in the number of properties being sold by investors and second-home owners, had caused prices in the holiday resort to fall.

“Our land tax is affecting people. It’s happening with every second-hand property in Inverlochy and across the Bass Coast,” she said.

McMahon-Hughes said many of the homes for sale are intergenerational vacation homes.

“These are people who were making normal wages … and all of a sudden they’re getting bills for $7,000, some for more, and they’re getting this bill every year,” she said.

“Some of them are converting their homes into permanent rentals or holiday rentals to try to get some income, but again, we have homes available but no jobs for people.”

McMahon-Hughes said while the region was a buyer’s market, cost of living pressures were pushing away holiday home buyers.

“We’re a vacation destination … but the people who buy vacation homes aren’t there,” she said.

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“If we’re lucky, we’re dealing with six buyers looking to buy more than 120 properties.”

KPMG regional economist Terry Rawnsley said demand for property in regional Victoria had fallen since the pandemic began, contributing to weaker house prices.

“The whole COVID-19-related migration wave will be over by 2023 and these regional centres will no longer see population growth, so the situation will return to supply and demand fundamentals,” Rawnsley said.

He agreed Victorians would sell their holiday homes to reduce costs in an inflationary environment.

“Holiday homes will be the first luxury items to go,” Mr Rawnsley said. “That probably reflects the wider impact of rising interest rates. People’s purchasing power is being suppressed by interest rates and that’s hitting regional markets.”

Mr Rawnsley said the biggest price falls were in council areas where supply and demand economic fundamentals had returned to normal and local buyers were now unwilling to pay lockdown prices.

McGrath Mansfield principal agent Kate Mcdougall said properties in the popular alpine town remained highly sought after as house prices returned to pre-pandemic levels.

“They’ve gone from what I would call crazy to normal,” she said.

Mr McDougall said despite the year-on-year decline, house prices in Mansfield were still high, but homes were taking longer to sell.

“It’s not that prices have dropped dramatically, it’s that the time on market has gotten longer. It’s now 90 days on the market instead of 30 days,” she said.

“We’re finding that we’re still getting good results simply because of our tourism volumes and the ski resorts we have… but it’s taking a lot longer to sell.”

Mr McDougall added that while Mansfield’s rental market was strong, investor activity had fallen since the land tax increase.