The flight to the regions appears to have already started taking its toll on regional market affordability.
CoreLogic head of research Eliza Owen said the combination of more people arriving in regional Australia and fewer people leaving for the cities has created additional demand for housing, pushing the number of homes available to buy or rent to extreme lows.
“Affordability challenges in regional Australia have been exacerbated by the effects of COVID-19, where normalised remote work trends and appealing coastal or tree change settings became ‘pull’ factors of demand, while high capital city property prices, and the higher incidence of strict social distancing restrictions, became ‘push’ factors, driving people away from major cities,” Ms Owen said.
According to the ANZ CoreLogic Housing Affordability Report, migration from cities to regions increased 5.9% over the year to March 2021.
Meanwhile, people leaving regional markets declined by 3.5% in the same period.
As of the end of November, the number of dwellings listed for sale across regional Australia remained 36.9% below the five-year average, with just under 60,000 properties in stock.
It is also crucial to note how the affordability metrics across various SA3 markets have changed between the onset of COVID-19 and mid-2021.
The ANZ CoreLogic Affordability Report determined 10 SA3 regions that witnessed the highest change in dwelling value to income ratio, the time taken to save for a deposit, and mortgage serviceability.
Richmond Valley-Coastal in NSW recorded the biggest change in dwelling value to income ratio, from 11.0 to 15.3.
Dwelling values in this region have increased by 34.3% during the period, equivalent to around $290,000.
This rise in dwelling value has resulted in the biggest rise in the years required to save a 20% deposit to 20.5 years.
Buyers with the typical income in the region need to set aside 74.4% of their income to service a new mortgage.
“Reports on the Richmond Valley coastal market, which includes Byron Bay, document the area as subject to high levels of investment for short-term holiday accommodation, and attracting residents on high incomes, which can lead to longer-term residents and local service workers being priced out,” Ms Owen said.
“In fact, many of the areas on this list which have seen the biggest rise in metrics since COVID-19 have seen similar trends.”
CoreLogic’s latest home value index proves that the uptrend in regional values is showing no signs of stopping yet.
Over the month, dwelling prices across regional Australia increased by 2.2% — twice the monthly growth rate of capital city markets.
“The rolling quarterly growth chart below shows that unlike historic periods where a loss of momentum across the capitals was matched by an easing of growth in regional Australia, there is a clear divergence occurring across the two markets,” Ms Owen said.
“This may be the result of a flurry of activity as the major cities of Sydney and Melbourne have come out of lockdowns. A similar trend was seen in the March 2021 quarter, where eased social distancing and travel restrictions saw a surge in migration to the regions.
“This suggests that in the coming months, regional Australia may be subject to disproportionate increases in affordability constraints.”
Collections: Mortgage News