House prices are soaring in some regional areas as COVID-19 accelerates the shift from big cities

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Residential property prices in the coastal hamlet of Austinmer, about 70 kilometres south of Sydney, jumped by more than 40 per cent in the past 12 months as COVID-19 accelerates a shift from big cities.

Prices in Byron Bay jumped by more than 39 per cent, while Queensland’s Sunshine Coast is up more than 14 per cent over the same period, according to an exclusive analysis by Digital Finance Analytics.

Home prices in inland cities, such as Albury-Wodonga, have also increased by more than 10 per cent, the analysis showed.

Overall, regional areas are growing at more than three times the pace of capital cities as COVID-19 accelerates the trend for people to move, particularly from Melbourne, to country centres, according to a separate analysis by JP Morgan Securities.

Improved working from home capabilities and lower base prices have also driven the exodus from Sydney and Brisbane to less densely populated areas within commuting distance of the capitals.

Buyers are more likely to buy detached houses, which is likely to increase downward pressure on prices of high-density apartments – particularly in Melbourne and Sydney, where supply is increasing.

Tim Lawless, head of research for CoreLogic, which monitors property markets, said the move from big cities is also reflected in shrinking discounts, shorter time on the market and reduced properties for sale in popular regional centres.

“That’s creating some urgency among buyers and supporting upwards pressure on housing prices,” Mr Lawless said.

Liz Ritchie, chief executive of Regional Australia Institute (RAI), a think-tank targeting regional issues, said significant growth in regions during the past decade has been boosted by the pandemic.

Between 2011 and 2016 – the most recent comparison available – more than 1.2 million people either moved to regional Australia or moved around regional Australia from one location to another.

Property sales and vacancy rates show Australians are two times more mobile than people in most European nations.

The three most popular destinations include the Gold Coast, Newcastle and Sunshine Coast, according to the RAI analysis. Geelong, Cairns, Toowoomba, Ballarat, Bendigo and Lake Macquarie are also popular.

“Almost overnight, COVID-19 has triggered flexible and remote working,” Ms Ritchie said.

In Victoria, where the COVID-19 outbreak resulted in a lengthy lockdown, property prices outside Melbourne increased by 18 per cent, according to an analysis by JP Morgan Securities.

Regional areas in NSW and Queensland also outperformed. According to the Real Estate Institute of NSW, property values rose 7 per cent across regional NSW in 2020, around double the gains recorded in Sydney.

NSW regional sales volume in the three months to November rose by more than 14 per cent.

The underperformance of urban areas has been exacerbated by a sharp drop in migration and overseas students.

Less time on market

The average time to sell a property across most regions in Australia during the past year has reduced from 40 to 36 days, which is three days longer than in capital cities, according to CoreLogic’.

“Longer selling times across regional Australia might come as a surprise since regional prices are rising at a faster rate,” Mr Lawless said. “But the longer selling time may partly reflect the sale of properties that have languished on the market prior to conditions improving halfway through last year.”

Faster selling areas, such as regional Victoria and NSW, have the smallest average vendor discounts of 2.1 per cent and 2.4 per cent respectively.

The trend is also reflected in falling rental prices for apartments and houses in Sydney and Melbourne, with apartments posting the biggest declines on record, according to Domain.

Asking rents for outer city properties are stable or rising in NSW regions, including the Blue Mountains and Central Coast, and in Queensland’s Sunshine Coast and Gold Coast.

According to Roy Morgan research, about two-thirds of working Australians, around 10.5 million people, have changed their work location because of the pandemic, with a large proportion being forced to work from home.

Flexible employers

Major employers want office-based work for collaboration, learning and customer interaction but are prepared to consider allowing people to work from home, or an office near their home, for a couple of days a week.

“Working from home is the biggest driver of people moving from Melbourne,” said Peter Julian, principal of Belle Property Group in Geelong, located about 75 kilometres south-west of Melbourne.

Mr Julian, who has sold real estate in the region for 20 years, said prices in Geelong and nearby Lorne, have jumped between 7 and 10 per cent in the past six months.

The region’s good road and rail links to Melbourne are a big attraction for buyers who range from first-timers and young families seeking a change in lifestyle through to retirees. he said. “Demand for land, homes or lifestyle properties is outstripping supply three-fold.”

The ability to work from home and commute to the office a few days a week is also driving demand in Newcastle, about 170 kilometres north of Sydney.

Scott Walkom, principal of Walkom Real Estate, said demand is the strongest since before the 2008 global financial crisis, particularly from working families and retirees from Melbourne and Sydney. He estimates prices have risen by about 9 per cent in the past four months.

In Austinmer, Rolf Lokker, director of AM Rutty Coastal Real Estate, says easy road access to Sydney has helped boost “record” demand and price growth.

Lokker, who has been an agent in the area for 30 years, said he has received more than 70 “genuine” inquiries during the past week for a 1980s three-bedroom, single-storey brick house about 6 kilometres from the beachfront.

This story originally appeared in the Australian Financial Review. Read the original story here.

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