Regional Markets Rise as Aussies Move Away from Cities
COVID-19 is having a huge effect on the Australian housing market, but in a different way than predicted by many experts. While national prices remain stronger than expected, regional house prices are soaring much higher than capital city markets. More and more Australians are leaving traditional centres like Sydney and Melbourne, which has led to rising demand, skyrocketing prices, and tough rental conditions for locals in some regional parts of the country.
According to data from CoreLogic, house prices in regional Australia have risen at a higher annual rate than in capital cities for the first time in more than 15 years. While Australia has long experienced a two-speed housing market, the health impacts, lockdown response, and economic fallout of the global pandemic continues to push regional prices higher. Annual data from CoreLogic shows capital city prices up by just 2% during 2020, compared to almost 7% for regional markets.
According to CoreLogic research director Tim Lawless, "Regional markets haven't outperformed the capital city markets since 2004... So this is quite a new phenomenon." Despite the novelty of this trend, it's expected to continue for a while yet, as entire markets adjust to shifting internal migration patterns. "I think this trend is quite entrenched now and it will persist into 2021. Perhaps as we go into mid-2021 we will start to see affordability diminish between capital and regional markets." said Mr Lawless.
Not all regions are outperforming the cities, with some locations doing much better than others. According to CoreLogic data, prices are very high in Victoria's Grampians region, Byron Bay in New South Wales, and Queensland's Noosa and Noosa Hinterland among other regions. The Yorke Peninsula in South Australia has also seen strong upwards movement, with prices rising 14.6% in the past year. Prices are also rising sharply in some remote locations, with house values in Maranoa in south-west Queensland jumping by 13% last year.
There are many reasons for this movement, including a lifestyle exodus away from busy capitals and the availability of more money due to a lack of overseas travel opportunities. The widespread acceptance of remote working has also had an influence, with a greater number of people able to work from home and move away from their CBD offices. COVID-19 has created fear and put things into perspective for many people, as the pandemic catalyses internal migration shifts and gives people an incentive to pack their bags.
The movement away from Australia's cities has put additional pressure on the rental market, with long-term locals in some regions struggling to find accommodation. Normally heated urban markets recorded rising rental stock levels in 2020, in sharp contrast to places like the Surf Coast, Noosa, and Byron Bay. According to SQM Research, the Victorian capital finished the year with vacancy rates of 4.7% compared to 2.5% the year before, with Sydney recording a vacancy rate of 3.6%. In one year, Darwin moved from the second-highest rental vacancy rate in the country at 3.5% to the second lowest at 0.9%, as people look for a fresh start in the far-flung corners of Australia.