Regional markets set to shine in 2019
The first few weeks of January saw a flood of reports, articles and forecasts outlining the major challenges faced by the nation’s capital city property markets this year.
Sydney and Melbourne - which recorded declines in the median property value of -8.9% and -7.0%, respectively, over 2018 - are tipped to continue their period of softening. The outlook has been amplified by a perfect storm of the Hayne Royal Commission’s final report, a Federal election, and – in Sydney’s case – a state government election, within a period of months.
But while the handbrake has applied to the cities, regional areas – where more than 30% of the national population lives – are gathering speed and set to be the leaders for growth in 2019. There are a number of factors which will ensure that the sea-change, tree-change and any other changes, for that matter, will be the market trend this year.
As mentioned, Sydney and Melbourne - the nation’s largest property markets - have endured price corrections over the last 12-18 months. However, these corrections follow on from accelerated property growth: prices in Sydney and Melbourne increased by almost 50% in the last five years to a median house sales price of $960,000 and $783,000, respectively (CoreLogic). So, looking beyond the softening of the last year-and-a-half, it’s still a challenge for buyers without equity – made even tougher by the Royal Commission spooking lenders – to afford to buy in many areas of our capital cities.
But buyers and investors who look beyond the city limits will comfortably purchase a home in a regional area without the mortgage pressure of a capital city postcode. (Indeed, you might be able to buy several properties for the same price as one on Sydney or Melbourne).
But let’s compare the more populous areas. In the Hunter Valley (the region’s population is well over 600,000, with the main area of Newcastle accounting for around 440,000) the median house price is $530,000, 44% lower than Sydney’s equivalent median. The Central Coast – in some parts, only an hour by train to Sydney – is home to more than 300,000 residents and a median house price of $759,000, or 20% lower than Sydney.
In Victoria, Geelong – about an hour from Melbourne - the median dwelling price is $560,000, making it 28% cheaper than the Victorian capital’s median house price.
Buyers are already catching on to the affordability and lifestyle opportunities of these coastal centres, with the Hunter’s median house price increasing a healthy 6% over 2018, while the Central Coast notched 4% and Geelong enjoyed 14%.
Governments of different persuasions and geographies have been encouraging more people to move to under-populated regional areas, for decades. Relocations boost the economies of regional areas and lessen the burden on city infrastructure (where the bulk of government budgets are focused). But people don’t move without being able to pay the bills.
Decentralisation of government services has happened all around Australia with public departments moved out of the city and relocated to sub-regions.
But beyond that, last year the Select Committee on Regional Development and Decentralisation recommended a roadmap to support areas outside the cities: amongst its suggestions were building ‘enabling infrastructure’ for development, ramping up Regional Development Australia’s powers and strengthening regional universities.
Universities have been pivotal to regional economies, employing and housing tens of thousands of students, academics and staff. In Port Macquarie, Charles Sturt University opened Stage One of its three stage campus in 2016. Its economic contribution has been a boon for the area, which has recorded 23.7% and 24.2% growth in the period since opening for houses and apartments, respectively.
In regional WA, tumbleweeds outnumbered residents in some of the Pilbara’s townships over the last few years as the mining sector wound down. But resources production is now in full flight, again, attracting workers and strengthening the property market. Port Hedland’s median unit price increased 7.5% in the last 12 months, which is a significant turn-around after dropping more than 50% in the last three years.
In Central Queensland mining basin, Moranbah’s median house price increased nearly 30% over 2018 to $207,500, clawing back the losses it made over the last three years when its resources industry slowed down.
And, in general, the digital workplace will enable more people to choose where they want to live based on their internet service rather than their commute. This will result in more people choosing a slower-paced lifestyle outside the cities.
The Aussie Dollar
The weakness of the Australian Dollar points to wider economic influences and isn’t something to crow about. But when the Dollar slides, areas that offer international tourism experiences benefit through an influx of visitors and workers.
Regions like Cairns (the gateway to the Great Barrier Reef), the Gold Coast, Victoria’s Surf Coast, the Barossa Valley and Margaret River will benefit from the appeal of Australia as an affordable international travel destination. Equally, more Australians will choose to holiday at home rather than piling onto a long-haul flight.
And area which are home to our export industries – regional food bowls and other primary production hubs – will also need to employ more people if the Dollar remains low, underpinning demand for property in their neighbourhoods.
We’re getting older
In 2017, one in seven Australians were aged over 65 and over, which equates to around 15% of the population. Our population ageing: in 1927, five percent of the population were in this age bracket, increasing to seven percent over the next five decades (1977). By 2057, 22% of residents are expected to be over 65.
History has shown us that property markets move in cycles. So, with the number of empty-nesters looking to make the move out of the city for a slower pace of life – fattening their superannuation balances at the same time - many will be looking to sell up in 2019 and make the move before prices soften further.