Australia's regional markets are expected to record increased housing demand due to the COVID-19 outbreak's impacts on the economy, work arrangements, and house prices. The question, however, remains — will the outbreak cause a regional boom?
Eliza Owen, head of residential research at CoreLogic, said regional markets in Australia are considered appealing for their relatively low levels of density, less congestion, and typically lower price points for property.
In fact, the median dwelling value of all regional areas sits at $394,570, significantly lower than the combined capital city median of $641,671.
To fully get an insight into whether the COVID-19 will bring a surge in demand in regional areas, Owen said it is crucial to examine the population insights prior to the onset of the outbreak.
"Areas with the highest levels of net internal migration over the financial year 2018-2019 include the Capital Region of regional NSW, the Sunshine Coast, Melbourne — West, the Gold Coast and Ipswich. From these examples, there was already a trend of movement from more suburban or metropolitan areas to regional areas," Owen said.
However, the two highest levels of net internal migration are actually still within capital-city bounds. Owen said this indicates two things. For one, available developable lands are transitioning to large greenfield housing estates. Another is that inner-city renters and first-home buyers are buying in more affordable areas that are still commutable to the central business districts.
"That is an important trend to consider, because it is a scenario where past migration may have been driven by affordability instead of a preference for a regional lifestyle," she said.
If this is the case, Owen said a mitigating factor to the draw of regional areas during COVID-19, is that dwellings closer to the city are also becoming cheaper. This could slow migration to the city fringe.
While the normalisation of remote work amid the COVID-19 is likely to boost regional migration, the return to an office environment may still be desirable for some employees and employers.
"Furthermore, it is important to note that the broad-based impact to housing demand from the pandemic could see prices fall in regional centres over the second half of 2020," Owen said.
These price declines, however, are unlikely to be as sharp as what will be observed in capital city markets.
"Regional growth rates peaked around late 2019, and could nudge into negative territory later this year without significant improvement to economic conditions or a demonstrated shift in demand side factors like population growth," Owen said.
