The flight to the region appears to already be affecting regional market affordability.
CoreLogic’s head, Eliza Owen, stated that the increased demand for housing has resulted from a combination of more people moving to regional Australia and less leaving for cities. This has resulted in a dramatic drop in the number homes available for purchase or rent.
“Affordability challenges in regional Australia have been exacerbated by the effects of COVID-19, where normalised remote work trends and appealing coastal or tree change settings became ‘pull’ factors of demand, while high capital city property prices, and the higher incidence of strict social distancing restrictions, became ‘push’ factors, driving people away from major cities,” Ms Owen said.
According to the ANZ CoreLogic Housing Affordability Report, the rate at which people move from cities to rural areas rose by 5.9% in March 2021.
During the same time, however, the number people leaving regional markets dropped by 3.5%.
End of November saw a 36.9% decrease in the number of homes on the market in regional Australia compared to the five-year average of just under 60,000 properties.
It is also important to note changes in affordability metrics between the onset of 2021 and mid-2021.
The greatest change in Richmond Valley-Coastal’s income to dwelling value ratio was from 11.0 to 15.3.
Over the same period, the region’s home values increased by 34.3%. This is about $290,000.
This has been the most significant increase in property value in many years. It is now necessary to save 20% for a 20.5 year deposit.
Buyers who have the average income in the region will need to save 74% to service a mortgage.
“Reports on the Richmond Valley coastal market, which includes Byron Bay, document the area as subject to high levels of investment for short-term holiday accommodation, and attracting residents on high incomes, which can lead to longer-term residents and local service workers being priced out,” Ms Owen said.
“In fact, many of the areas on this list which have seen the biggest rise in metrics since COVID-19 have seen similar trends.”
CoreLogic’s latest home value index proves that the uptrend in regional values is showing no signs of stopping yet.
Over the month, dwelling prices across regional Australia increased by 2.2% — twice the monthly growth rate of capital city markets.
“The rolling quarterly growth chart below shows that unlike historic periods where a loss of momentum across the capitals was matched by an easing of growth in regional Australia, there is a clear divergence occurring across the two markets,” Ms Owen said.
“This may be the result of a flurry of activity as the major cities of Sydney and Melbourne have come out of lockdowns. Similar trends were seen in the March 2020 quarter. Due to travel restrictions and social disconnect, this quarter saw an increase of migration to the region.
“This suggests that in the coming months, regional Australia may be subject to disproportionate increases in affordability constraints.”