If you’re anything like us, you’d be watching the real estate market like a hawk. While 2020 has been full of surprises, one of the most unexpected market trends we’ve seen throughout this pandemic, is an upswing in regional market performance, while capital cities have for the most part trended downwards.
Regional markets are continuing to outperform capital cities, so if you’re a homeowner in regional Australia, you can breathe a sigh of relief. Especially if you’ve been worried about forecasted double-digit price drops as a result of Covid-19.
Data from CoreLogic’s latest Hedonic Home Value Index shows that across all regional markets, the change in dwelling values has remained virtually unchanged since May at -0.2 per cent. And when you dive down to the region level, you start to quickly see which areas are doing well, despite the pandemic.
The regions where buyers are flocking to
CoreLogic has recently examined the performance of the largest regional markets across Australia, reporting on the performance of both house and unit markets over the year to July 2020.
Of the 50 house and unit markets analysed, 37 have recorded rises in value over the past 12 months to July. Houses have performed better over this period, with 37 regions recording a rise in house values, while only 5 saw a decline across the 12 month period. When it comes to the unit market, CoreLogic’s report showed that 17 regions recorded a rise in values.
According to Tim Lawless, Head of Research at CoreLogic, several major urban centres that are close to Sydney and Melbourne have shown the tightest detached housing market conditions over the past twelve months.
And amongst all regions, there were some key top performers.
Best performing markets for houses
Highest yearly growth: Illawarra, NSW: 12.0%
Highest change in sales volume: Illawarra, NSW: 14.0%
Shortest days on market: Ballarat, VIC: 30 days
Lowest vendor discount: Ballarat, VIC: -2.4%
The Illawarra showed itself to be the best performing housing market across all regional house markets. In terms of sales volumes, the Illawarra was the frontrunner when it came to the highest change in sales volumes for houses, up 14 per cent year on year to May 2020 - and as an added side-note, unit sales in the Illawarra were also up 10.9 per cent.
The region also boasts an annual growth rate of 12.0 per cent, making it the best performing house market across all regional markets analysed in Australia.
Over the year to July 2020, houses in Ballarat in Victoria sold the quickest, being snapped up by buyers within around 30 days. Ballarat vendors are also offering the lowest discounts to secure a sale at -2.4 per cent.
According to real estate agent Neil Webster from Stone Real Estate Illawarra, this performance in regional areas, and in particular the Illawarra, isn’t surprising. In the Illawarra, he believes there are three main factors driving sales volumes.
“One is the lifestyle we offer down here… As a regional city we have good proximity to great beaches, a good educational set-up with the University of Wollongong and a great health system. The public hospital was recently updated with a new private hospital built next to it.
“So in terms of amenities and lifestyle, it’s a great place to live,” he said.
According to Mr Webster the other two draw cards for the market are close proximity to Sydney which makes the Illawarra region a great market for commuters, as well as affordability.
According to CoreLogic data, within this period the largest portion of house sales fell within the $600-$800k bracket, making up 34 per cent. When it comes to units, the largest price bracket for sales was $400-$600k coming in at 46.7 per cent, which clearly shows how affordable this market truly is.
With Covid currently affecting the way we all live, he has also seen an increase in buyers from Sydney who are looking to make the move and gain a bit more space, especially if they have kids and are working from home.
“For the average person, it’s probably cheaper to buy down here than to rent an apartment in Sydney.
“I personally have three or four clients I’m working with at the moment who live in Sydney and who, due to Covid, are working from home three to four days a week.
“They’re living in small apartments and townhouses and they’re thinking, ‘if I only have to commute one day a week for work, why don’t I buy something in Wollongong where I can have a backyard, be close to the beach or lake, that won’t cost me the world?’”
“In the past two-three years the secret about Wollongong has been slowly getting out and we’ve seen a good increase in sales generated from Sydney-based buyers looking to relocate to the region,” he said.
Best performing markets for units
Highest yearly growth: Launceston and North East, Tas: 14.8%
Highest change in sales volume: Latrobe - Gippsland, Vic: 34.6%
Shortest days on market: Launceston and North East, Tas: 26 days
Lowest vendor discounts: Ballarat, Vic: -2.1
Across Australia’s unit market, Launceston and the North East region of Tasmania recorded the biggest annual growth rate of 14.8 per cent. Units in this region also sell more quickly than any other region in Australia, with the time taken to sell sitting at 26 days over the year to July. This is in contrast to the Wide Bay region of Queensland, where it is currently taking over 100 days to sell a unit.
From a sales volumes perspective, Latrobe - Gippsland in Victoria saw the highest change in sales volumes for units over the year to May 2020, increasing by 34.6 per cent.
And according to top real estate agent Colin Gooding, who services the Latrobe and Gippsland region, the market is going from strength to strength.
“June, July and August are the best months we’ve ever had, and that’s driven by the HomeBuilder grant and Job Keeper.
“Land started at around $170,000, and now it’s jumped to around $200,000 in a matter of weeks. It’s up 17 per cent.
“Historically we’ve always had more listings than buyers, but it’s certainly turned the other way now with more buyers than sellers. It is a seller's market now.
“We’ve had 150 sales in the last three months, and the numbers are usually half that. We’re selling a lot of land and residential property,” he said.
The Latrobe and Gippsland region boasts many drawcards, from beautiful valleys and national parks, through to stable industry that supplies residents with a high level of employment stability.
“Prices here are very affordable, and there’s a huge amount of essential work here, so that has certainly been a saviour during this pandemic,” he said.
That stability has woven its way into the rental market as well, with Mr Gooding reporting that out of 700 properties on the agency’s rent roll, there has only been one hardship case.
Mr Gooding says that a lot of baby boomers are drawn to the area for its lifestyle, affordability and strong healthcare system, but anecdotally, before Stage 4 lockdowns in Melbourne he was seeing an increase in city-dwellers making a move into the region.
“We’re an hour to the snow, an hour to the coast and about two hours from Melbourne. We’re an industrial valley, so there’s a lot of work, and it’s really affordable.
“There’s a lot going on here and it’s a beautiful place to live,” he said.
Why people are leaving cities
Demand from buyers seeking a sea-change or tree-change has been demonstrated in search data on realestate.com.au. Chief Economist Nerida Conisbee said, “it appears that during Covid-19, affordability may be of less importance to property buyers in regional areas and that lifestyle factors are becoming more important.”
“People are perhaps looking for bigger places to live and aren’t currently tied to a central workplace,” she said.
In many ways, this pandemic has caused an acceleration of where the future of work was headed anyway. With the rise of technology, many companies were already starting to move towards a highly-distributed team model.
Take Aussie software company Atlassian for example, who have taken the pandemic as an amazing opportunity to explore the possibility of flexible work, and off the back of the pandemic, have allowed their employees to work from home permanently if they choose to.
Other tech giants such as Google and Facebook are reportedly also allowing their employees to work from home until the end of 2020.
Many believe that this move towards remote working is here to stay. A report by research company Gartner showed that 74% of the 317 business finance leaders surveyed planned to move their on-site workforce to permanently remote positions after the pandemic.
There are real financial benefits not just for businesses but for employees too. Recruitment platform FlexJobs has found that remote employees are saving as much as $4,000 USD per year on commuting, lunches and other expenses.
It’s not hard to see why regional real estate markets are appealing during this time.