Regional property boom a COVID blip?

Since the COVID-19 pandemic began, there has been lots of discussion claiming that Australians are fleeing from capital cities to the regions, which is helping to fuel the region’s rapid price growth.

For example, the Australian Bureau of Statistics’ (ABS) latest internal migration data shows that Australia’s capital cities lost around 22,000 residents over the September and December quarters of 2020, led by sharp falls across Sydney and Melbourne:

Internal migration capital cities

The capital cities lost 22,000 people via internal migration over the second half of 2020.

However, new research from CoreLogic shows that the rise of the regions has been driven more by locals choosing to stay put than by city slickers opting for tree/sea changes. CoreLogic also believes that recent migration patterns favouring the regions may only be temporary:

There has been a stark difference between capital city and rest of state dwelling value changes over the year. While the combined capital city market has been resilient through the pandemic, increasing 6.4% in the 12 months to April, the growth rate in the combined regions was more than twice this, at 13.0%.

Through 2020, it is likely that COVID-19 deterred the usual migration from regions to cities, which has contributed to a net internal increase of almost 43,000 additional residents from cities through the year. This is more than double the average net gain observed over the ABS series of internal migration.

The charts below show that while there was a marginal uplift in arrivals from capital cities to regions through 2020, the net position was exacerbated by a lack of departure from the regions.

Regional migration

Subdued regional departures likely contributed to the very low listings levels observed across regional Australia through COVID-19.

As of May 23rd, total listings for sale in regional Australia totalled 60,141, compared to an average in the previous 5 years of 102,717. The lack of supply amid increased demand for regional property has contributed to the acceleration in property values.

It is difficult to ascertain whether this trend can continue. As restrictions eased in late 2020, the December quarter already saw a significant uplift in regional departures from capital cities, bringing the net position down slightly on a quarterly basis.

Assuming COVID-19 remains well contained, and life in Australia returns to some kind of pre-COVID ‘normality’, more people may make the move to cities through 2021.

On the other hand, increased affordability pressure in capital cities, combined with a new normalisation of remote work for some, may create longer-term interest in regional Australian housing markets, especially those within commuting distance of the larger capital cities.

In any case, the growth rate gap between the regions and cities has started to narrow on a monthly basis. March marked the first month since the onset of the pandemic that the increase in combined capital city dwelling values (2.8%) outpaced combined regional dwelling values (2.5%). In April, combined capital city market values rose 1.8%, with combined regionals eclipsing this monthly rise by just 10 basis points at 1.9%. The two markets have rarely shown inverse performance, meaning both capital cities and regional markets could see increased dwelling values through to the end of 2021.

Regardless, the surging demand for regional property has not just juiced property price growth but rents as well.

The latest CoreLogic data shows that regional property rents are growing at triple the rate of capital cities, soaring 9.6% in the year to April 2021:

Regional property rents

An unprecedented rise in regional property rents.

The next chart shows the growth in rents at the state and capital city levels. Here, regional rents are stronger across all states & territories with the exception of WA and NT.

Annual change in rents

Regional rents are growing faster across most jurisdictions.

Once COVID vaccinations have been rolled out, and society returns to ‘normal’, old migration patterns of people leaving the regions for the cities are likely to resume.

Therefore, the regional property boom is likely to be short-lived.

Unconventional Economist
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Comments

    • kannigetMEMBER

      Sounds about right, $980K for a middle of the road house in an area with a median income of $52K…

      Must be some good Gunja growing up there for a Locale of only 686 people to have that high a median income….

  1. I’ve got a mate in Orange (NSW). That town is going INSANE for houses at the moment. Also helped along by a few tree changers with “sydney-money” looking to come in.

  2. ChristopherMEMBER

    We recently moved to the Bellarine peninsular, just south of Geelong no regrets on the move so far working from home 3/5 days and 2 days in the office.

    Debt free after the move trading our Melbourne house for a better house on the coast, 10 minutes walk to the beach, 30 minutes to Geelong and 1 hour 30 minutes to Melbourne on car train.

    Edit to add, worst case that work from home does not persist I can now easily move out of my high stress job and in another position – sure the pay won’t be as good but I do not actually need the extra money of which nearly 50% goes to Scomo anyway.

  3. Regional rents aren’t just rising in a vacuum. There are many stories of long-time local people who can no longer obtain shelter in their town.

    You might think that simply giving the locals so more money that they could also pay the higher rents and rent alongside the new arrivals.

    Sadly this is not true, because there is a shortage of housing in those towns. There were no extra houses for new arrivals to move into. For every new family that moves in, one old family must move out.

    Now that extra people are wishing to live outside the cities we need many extra houses to be built outside the cities.

    • No shortage of empty houses – some derelict in large central goldfields town in Vic. 2-3 rental available every 3-4 weeks. Plenty of homeless folk living at home or mum & dads or mates garage – unrenovated – just a garage…

  4. MB readerMEMBER

    I don’t know. I suspect that part of the population started smelling the roses and like what they smell.

  5. You should unlock the Clotty Moronson abdication article for sharing outside MB borders, ie a PSA

  6. Not in my experience on Mid-North Coast NSW.
    Population has boomed with the house price rises. RE agents still have prospective buyers on their books from Melb/Syd still buying sight-unseen with demand outstripping supply. Locals are staying put if they have work and are not renting.