The latest quarterly price report from Domain revealed the average price of a house in regional Australia increased by 3.1%in the first quarter of 2022.
It is a growth rate surpassing several capital cities; the same period saw house prices in Sydney barely move, and dip slightly in Melbourne and Canberra.
But Domain's chief of research and economics, Nicola Powell, said the rate of growth in regional New South Wales was three times slower than the last three months of 2021.
"I think affordability is becoming a hurdle," Dr Powell said.
"Some of these regions will be close to or at the height of their price cycle."
Coastal NSW towns, such as Byron Bay and Kiama, have seen a more than 40 per cent increase in property prices over the past year.
Dr Powell said the recent softening could be because buyers were hesitant to take out a large mortgage, with the average price for a house in regional New South Wales hitting a record high of $730,000.
"With the prospect of interest rates moving higher, that will impact borrowing capacity," she said.
'Lock, stock, and barrel'
While some capital city prices are flatlining, Dr Powell believed people who recently bought in the regions were unlikely to go back.
"Those people who have purchased in regional markets really show that it's kind of a lock, stock, and barrel move," she said.
Dr Powell said the COVID "Escapees" who might return to the city were more likely to be renting.
