Demand for housing in regional Australia has seen unprecedented levels of demand over the past few years.
In fact, demand has been so strong, house price growth in the regional areas has outperformed that of the capital cities.
According to CoreLogic, regional house prices have increased by 26.1% in the year to January 2022, outpacing the capital cities that saw growth of 21.3% for the same period.
The question that investors and homebuyers are now asking themselves, is whether or not that growth is likely to continue.
A Shift in Lifestyle
Rising house prices in regional Australia started with the ongoing lockdowns that occurred throughout 2020 and 2021. During this period of time, tens of thousands of Australians moved out of the larger capital cities and into more lifestyle-oriented locations. There was also a push towards regional areas that were still accessible from the cities with the rise of working from home and more flexible hours. Now that much of the East Coast is slowly getting back to normality, experts are wondering whether people will now return to the cities.
Looking at the data from CoreLogic, we can see so far regional areas have maintained their momentum. CoreLogic notes that coming off the back of eased lockdown conditions across Sydney, Melbourne and the ACT, regional price growth instead accelerated toward the end of the year, while capital city house price growth continued to slow. This created an unusual divergence between the two markets, where price growth accelerated to 6.3% in regional Australia over the three months into January.
CoreLogic Economist Eliza Owen belives house price growth will likely slow in the regional areas in line with the broader market, but that doesn’t necessarily mean falling prices.
Prices Here to Stay
She said, ‘regional housing markets are not immune from economic forces and there may be some room left for growth amid rate hikes in more affordable, peripheral areas to popular hot spots.’
Over the last 12 months, the biggest growth has come in The Southern Highlands and Shoalhaven region in NSW where values have risen by 38.2%, followed by Queensland’s Gold Coast (36.3%) and the Sunshine Coast (35.4%).
These areas have been heavily driven by interstate migrants looking for better affordability and lifestyle.
Regional NSW, Regional QLD (including the Gold Coast and Sunshine Coast) and to a lesser degree, Regional SA, are all continuing to see ongoing demand and tight supply of properties.
CoreLogic notes that the market is still bullish regarding South East Queensland, however, she warned it was unlikely many regions would see a repeat of their 2021 growth rates as the affordability advantage and availability of credit had diminished.
Ms Owen said that the regional areas that are most affordable will likely continue to see upward momentum, as the locations that have seen the most growth in the past 12 months are now becoming increasingly unaffordable to locals.
CoreLogic also notes that the level of normality regarding COVID-19 that 2022 is able to return to, will dictate how many people will make their decision on where they want to live. If employers require staff to come back to the office then that could slow the migration away from the cities.
However, in the short term, CoreLogic expects the current move away from the cities to remain in place for some time with homebuyers prioritising lifestyle above all else.