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Until recently, the majority of property investors (particularly in the Sydney property market) were on the hunt to secure properties in bustling inner-city postcodes.
But in 2020, real estate news sites are saying the Australian property market looks completely different for tenants, buyers, and investors.
This has given workers the opportunity to swap expensive inner-city rentals for more affordable out-of-town properties, leading to skyrocketing prices in the regional property market.
So, what does the regional housing boom mean for owners in the Australian property market? Is now the right time to buy outside of the Sydney property market, and is this a trend set to last the test of time?
What is happening in the regional property market?
Since the start of the pandemic, house prices in regional areas have exploded.
The latest CoreLogic data indicates Australian property market prices in the Grampians (VIC), Noosa (QLD), and the York Peninsula (SA) have grown by over 13% in 2020 alone.
And in some coastal areas, prices have nearly doubled (with the beachside oasis of Austinmer, just 70km south of the Sydney property market, seeing property prices jump by over 40% in the past 12 months).
The regional property market in Australia is seeing a tremendous boom.
This shift in supply and demand in the regional property market has seen buyers snapping up faster than ever before. The average time on market across the majority of regional Australia has shrunk from 40 to 36 days (according to CoreLogic).
At the same time, rental properties in capital cities have plummeted, with rental rates for apartments in the Melbourne real estate market (one of the capital cities hardest hit by the COVID-19 lockdowns) currently at their lowest levels in four years, setting a new record for the steepest fall in prices, ever.
Plus, vacancy rates have jumped to 9% in the December quarter (up from just 2.3% in December 2019). Without international students, the oversupply of short-term accommodation and the loss of jobs in the CBD, it’s now possible to rent an apartment in Melbourne for $395 a week (down by a whopping 16.8% year-on-year).
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Why is the regional property market boom happening?
There are three main reasons why the Australia real estate market is changing:
- The closure of international (and even state) borders has put holiday plans on ice, giving many Australians surplus cash to pour into a property purchase.
- The shift towards flexible and remote working means workers no longer need to live within a short commute of the CBD, removing significant barriers to making a sea or tree-change.
- Plus, properties in regional areas historically tend to be more affordable, making it possible for many Australians to purchase their first home and ditch the rental market for good.
In a nutshell, the shift towards remote working during the pandemic has enabled workers to move to the regions, causing a boom in regional property prices, while rental returns for inner city apartments has fallen and vacancy rates have soared.
What should property owners do now?
For owners looking to get into the regional real estate market, there is plenty of reason to make the move. There's great appeal in strong schools, spacious properties and easy access to beaches and parks.
Plus, historically low mortgage rates mean now could be the time to refinance and take advantage of these big home loan savings.
Properties in regional areas are now more lucrative than ever, and should have investors second-guessing the go-to default of investing in urban areas.
But there are important risks to consider, including:
- High unemployment rates in regional centres (over 10% in some areas of QLD, VIC and NSW) can make it difficult to find work if you were to unexpectedly lose your job.
- Data from previous recessions indicate that further dips in the property market are possible, which could reduce your chances of making a capital gain on your regional home when it comes time to sell (especially if you’re purchasing at the height of the boom).
However, the challenges for investors in capital cities are set to continue into 2021, which may increase the appeal of selling in the city and buying up in the booming regions. That’s particularly true for investors in areas hit hard by the pandemic, such as the Melbourne real estate market.
It’s the question on everyone’s lips: will the regional housing boom last? While no one has a crystal ball, experts believe prices in the regions will continue to climb and hold value in 2021 with experts tipping a large majority of these workers will continue to work remotely well after the pandemic, too.
The regional property market boom is expected to keep growing through 2021.
With international borders set to remain closed until the second half of the year and many businesses embracing work-from-home for the long term, the regional property market is tipped to remain a lucrative option for buyers and investors.
While the growth in regional property value has been rapid, many believe the change in the Australia real estate market will be a long-term shift that will extend beyond 2021.
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