How Australia’s regions are leading the way in house price growth

Since the onset of the COVID-19 pandemic, Australia has seen an increasing number of people seeking tree and sea changes.

As a result, the demand for dwellings in regional Australia has skyrocketed and prices have followed suit.

In this article, we explain how regional housing markets are leading the way in house price growth. We also reveal how you might be able to crack into the property market in a smaller city.

• Related: Auction vs private sale: how to buy and sell property in Australia
• Related: How much can I afford to spend on a house in Australia?

First, what’s happening with property prices in Australia more broadly?

Whether you already own a home or you’re looking to buy, you might have noticed the massive growth in property prices in Australia over the last year or so.

While dwelling prices declined slightly at the start of the pandemic, Australians experienced an upswing in prices towards the end of 2020. There are a few reasons for this sustained growth in prices over the past 18 months.

First, interest rates dropped to an all-time low in November 2020 when the Reserve Bank of Australia (RBA) decreased the cash rate to a historic low of 0.1%.

Government assistance for home buyers also made it easier to get onto the property ladder, while household savings were boosted during continued lockdowns.

This period of growth has seen the average Australian dwelling value increase from $554,229 at the start of the pandemic to $728,034 at the start of 2022.

What has been happening with regional house prices?

The soaring growth in house prices hasn’t been confined to Australia’s capital cities.

Regional dwelling values have experienced significant growth, with a 40% increase since March 2020.

This increase has been boosted not only by low interest rates, government assistance and higher savings, but also by more people moving to regional areas for slower lifestyles thanks to flexible or remote working arrangements.

While growth is beginning to slow down across the country – especially in Sydney and Melbourne – regional areas continue to be resilient to this easing of rapid price increases according to CoreLogic.

House prices in regional areas may be past their peak, but the statistics show they’re still growing.

What to consider when buying in a regional property market

Regional property markets can be appealing for owner occupiers and investors alike.

If you’re looking to make the move into a regional housing market, here are some things you might want to consider.

1. Remember your motivations for buying regional

Whether you’re planning on moving to a regional area yourself or you want to buy a place to rent out, being sure of your reasons for purchasing can help ensure you make the right decision.

Do you want to move regionally for a change of pace, or have you taken a job that is located in a regional area? This might impact how far away from a big city you can move, especially if you still need to commute to the city for work from time to time.

Are you looking to invest in a growing market, or do you want to purchase a holiday rental? This could impact the time of area you choose, whether this is a high growth market or a popular holiday destination.

2. Do plenty of research on the location

It can pay to do plenty of research before you purchase a home in a regional location.

Maybe you are limited in where you can move to, but if you’re undecided, here are some questions to consider:

• Does this city or town have all the amenities you’ll require? (E.g. Shops, parks, hospitals)
• Is this city or town close enough to a big city if you’ll still need to commute to work?
• Does this location suit the lifestyle you’re looking for?
• Will you be close to loved ones?
• Are there infrastructure projects being planned for this city or town? Infrastructure projects in the works like roads and education facilities can indicate a growing region.

3. Look into government assistance schemes for buyers

In the 2022/2023 federal budget, the government announced a new Regional Home Guarantee as part of its Home Guarantee Schemes.

The Regional Home Guarantee is designed to make it easier for buyers to purchase a home in regional areas. Typically, buyers need a 20% deposit for a home loan to avoid paying Lenders Mortgage Insurance (LMI).

Under this guarantee, buyers only need a deposit of as little as 5%, with the government guaranteeing up to the remaining 15%. This can help buyers get into the property market sooner.

If you’re looking at buying regionally, it could be worth checking if you’re eligible for the Regional Home Guarantee. You don’t have to be a first home buyer either – you just can’t have owned property in the last 5 years.

4. Consider if the area might be ‘too affordable’

If you want to invest in a regional area, it can be a good idea to carefully consider whether property prices in the area might be ‘too affordable’.

In some areas, high affordability can indicate low demand, which might not be ideal for an investor. You may want to do plenty of research to find out average rental yields and vacancy rates in the area, so you can make sure the price of the property isn’t too good to be true.

5. Weigh up between holiday rental or long term tenants

Investors might also want to think about whether their regional investment will be a rental for long term tenants, or a short term stay for holidaymakers.

Some regional cities and towns will lend themselves to both types of investment properties, while others might be better suited to one or the other.

For example, a larger regional area like the Sunshine Coast in Queensland could work for both short and long term rentals, while a smaller coastal town like South West Rocks in New South Wales might be better suited to a holiday rental.

It also could be worth thinking about how you want to manage the property, especially if you don’t live in the area yourself. Engaging the services of real estate agents or property managers might save you time and money in the long run.

Do you have questions about buying a home? Our friendly Home Loan Specialists can help. Book an appointment at a time that suits you.

What could your home loan repayments look like?

Got a home loan question? Just ask!

We're here to help. Get free expert advice at a time that suits you. Choose a time to chat with a Home Loan Specialist here

The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.