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, as COVID-19 increases people’s desire to live outside the big smoke.
- CoreLogic data shows national house prices rose 1 per cent in December
- Regional prices grew almost 7 per cent compared to 2 per cent growth for capital cities
- Government stimulus saw house prices finish the year 3 per cent higher
Annual data by real estate analysts CoreLogic shows dwelling values in capital cities rose 2 per cent during 2020.
That compares to an almost 7 per cent increase for regional markets.
“Regional markets haven’t outperformed the capital city markets since 2004,” CoreLogic research director Tim Lawless said.
“So this is quite a new phenomenon.”
There has been intense speculation about Australians choosing to relocate regionally during the pandemic, as working from home arrangements make it easier for people to move away from big cities where major employers are typically based.
Mr Lawless said there was now enough data both out of CoreLogic and the Australian Bureau of Statistics to back up this speculation.
“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,” Mr Lawless said.
Mr Lawless said the hottest markets were those that were only a few hours drive from major capital cities, such as the Gold Coast, Sunshine Coast, Geelong, Daylesford, Ballarat, Wollongong, and Newcastle.
“They’re leading the pack in terms of strongest growth,” he said.
“People can have the best of both worlds and live in a marketplace with lifestyle benefits and lower prices, as well commute back to big cities if they need to,” Mr Lawless said.
Sea and tree changes predate COVID
Mr Lawless said it was not as simple as saying the pandemic caused the regional demand. It was more likely COVID-19 had sped up an existing trend of people wanting a sea or tree change.
While ABS population data out in November did show regional relocation trends during 2020, it also showed this trend had been happening in some locations pre-COVID.
For instance, people leaving Melbourne for regional Victoria had already been trending up pre-2020, with capital city house prices from 2017 reflecting this.
Mr Lawless said if this trend continued into 2021, it may lead to homes in regional Australia becoming even more expensive.
That may be good news for investors in regional markets, but it is not good for renters in regional locations who have previously been settled there with cheaper rents compared to big cities.
“We are seeing demand going into those regional markets. Supply is low. Homes are selling quickly,” Mr Lawless said.
“Perhaps as we go into mid-2021, we will start to see affordability diminish between capital and regional markets.
“If we look at the trend where regional house prices and rents are rising quickly, at a time when incomes are quite stable if not falling, with JobKeeper declining as well, I think we will see affordability issues creep into these markets.”
National house prices rise in December
As well as showing the full data for the year 2020, the CoreLogic figures also show what happened to house prices in December.
Across the country, house prices rose by 1 per cent in the last month of 2020 as Victoria began to open up after months of heavy lockdowns due to coronavirus.
It is the third consecutive month CoreLogic’s national home value index rose, following a 2.1 per cent drop in dwelling values between April and September.
Regional Tasmania saw the biggest year-on-year growth with prices rising 11.9 per cent, followed by regional NSW jumping 8.3 per cent and regional South Australia up 8.1 per cent.
Darwin recorded the biggest rise in capital city housing prices, up 9 per cent, with Canberra coming in second (7.5 per cent), followed by Hobart (6.1 per cent).
Darwin enters ‘very strong recovery’
Darwin’s rise comes after the tropical capital city with a population of just over 100,000 people experienced a major housing downturn following a gas-led boom.
“It does look like Darwin is in a very strong recovery now,” Mr Lawless said.
“It is still below its 2014 peak, but the Darwin market has gone from one of the weakest housing markets in Australia to the strongest.”
Melbourne was the only capital city to record a drop in house prices compared to 2019 (-1.3 per cent).
Melbourne’s dip comes after the major capital city endured not one but two lockdowns during COVID.
“We have seen a lot of diversity across the capital cities,” Mr Lawless said.
“The prices for housing markets is very much in line with how those cities have contained the virus and how their economies are performing.
“Melbourne is definitely playing catchup. That really reflects the weakness of the market through two rounds of lockdown.”
Source: ABC News