Whether it’s the appeal of a regional lifestyle coaxing home buyers out of the city grind and into a less populated (and more affordable) area, or how regional brokers are embedding themselves as the go-to trusted adviser in their community amid a dwindling bank presence, the property market has been booming in the regions ever since COVID-19 hit. Kate Aubrey reviews the trends, brokers and lenders supporting regional borrowers – and what trends they expect to see this year.
It’s no secret the pandemic has fuelled a property boom across regional Australia, and while the spike in prices is anticipated to ease, many regional brokers anticipate the sea change/tree change to remain strong in 2022.
The attraction of the regions provides some welcome good news for the regions. In the last decade, regional communities have borne the brunt of a changing climate, tackling floods, bushfires, and even plagues, all on the back of years of drought, which have pushed many regions to near-breaking point, as crops, houses and lives were lost.
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While the past two years of the COVID-19 pandemic have caused tremendous loss (both economic and social), one of the silver linings has been the tree-change/sea-change trend driving people – and their money – to the regions, which has helped to reinvigorate hard-hit communities.
How is the property market shaping up in 2022?
While the regions are expected to remain attractive to home buyers this year, the surge in property prices will (thankfully) start to ease. There is a general consensus among economists that the property market will slow down in the latter half of the year (especially if the cash rate rises). In fact, group chief economist at NAB Alan Oster predicts house prices may even start to go “backwards”.
“We’d expect to see the pressure on house prices continuing for at least a couple more months and then flattening out a bit as people start to get worried [about rate rises],” he told The Adviser.
“By 2023, we’re expecting something [around] minus 10 to minus 12 per cent fall in house prices, which would also slow housing credit a little bit.”
Regional property prices outstrip cities
The news of cooling house prices is likely welcome for those living and working in the regions, who are increasingly finding themselves priced out of their local markets. Similarly, urbanites moving out of the expensive cities to find a more affordable home will also rejoice at a slowing of sometimes eye-watering property prices.
Indeed, it’s remarkable that while the combined median house price across Australia’s capital cities surpassed $1 million this year, it was house prices in regional towns that saw the highest increases – with Queensland hitting new records.
House prices in the Sunshine Coast region of Minyama saw the highest increase of any regional town at 82 per cent – taking its median house price to $1.8 million, according to Domain data from December 2020 to December 2021.
Across the Sunshine Coast region, the median percentage increase was around 30 per cent.
The jump was partly due to the flow of Australians who migrated to Queensland during state lockdowns to seek refuge or embrace a remote work culture.
According to the Australian Bureau of Statistics data, Queensland gained the most people, about 7,000, from net interstate migration over the March 2021 quarter, while Victoria lost the most at almost 5,000, followed closely by NSW at 4,500 people.
While it’s predicted the interstate migration may slow down this year, Mortgage Choice broker Gordon MacVicar in the Sunshine Coast said that should the markets in Sydney and Melbourne continue to “run hot”, there will be continued movement north.
“There seems to be a correlation between high clearance rates in Sydney and Melbourne to the amount of people moving up here,” Mr MacVicar said.
“People have more money than they anticipated from the sale of the house, which means they’re prepared to spend more to secure a house up here.”
Locally, he said the property boom has meant first home buyers are moving further afield into suburbs that weren’t “on their radar” two years ago, and home owners are harnessing new-found equity gained.
“What we’ve seen now is everyone’s got three to $500,000 worth of equity,” Mr MacVicar said.
And he said that’s given locals the opportunity to consolidate their debt, downsize and upgrade their properties.
“We’re now seeing those upgrader clients accessing equity to do renovations, like kitchens, aircons, swimming pools, modernising their houses,” Mr MacVicar said.
“Or they’re now thinking ‘we’re going to access equity and buy an investment property’.
“As a result, we’re seeing a boom and trades and everything up here because people are now accessing their equity to spend locally.”
House prices across the other most populous states saw a similar increase. For example, the Tweed Shire local government area of Terranora in NSW recorded the largest house price rise of 66.7 per cent to reach a median of $1.3 million, according to Domain data.
But, it was the south-eastern region of Melbourne, Mornington Peninsula that saw house prices increase to a median of $3.76 million (a rise of 44.5 per cent) – making it the most expensive regional town in Australia at December 2021 based on Domain’s data.
While the outer suburbs of Adelaide saw the highest increases with Beaumont recording a 45.5 per cent rise to $1.43 million, the regional town of Port Elliot jumped 32.5 per cent to a median house price of $695,000.
In the west of Australia, South Hedland jumped 30.9 per cent to a median $360,000 to claim their states’ biggest regional house price rises. Meanwhile the ACT’s Red Hill saw its territory’s largest rise of 47.3 per cent, to a median house price of $2.35 million.
The southern state of Tasmania also experienced a significant rise, with the highest increase up 39.1 per cent in the north-east coastal town of St Helens, taking its median house price to $445,000.
Single borrowers hardest hit
While regional Tasmania remains comparatively affordable against other major states, Tasmania broker Kirsty Dunphey at Up Loans said the local property market had been “chaos”, causing affordability issues for low-income and single borrowers wanting to enter the market.
“I deal with a lot of single parents and a lot of people going through separations and I find that segment – single borrowers – have been hit hard with the borrowing capacity changes that have been put forward,” she told The Adviser.
“Previously a first home buyer could stack together like a $20,000 deposit, and then we could easily find them something new to buy with the first home builder’s boost. Those properties just don’t exist at the moment.
“So for first home buyers, we’re seeing a lot more people using guarantors [and] getting gifts from family members.”
As remote working conditions become more normal, Ms Dunphey said people are setting themselves up for the future – with many people looking for “bush blocks” and “out-of-metro purchases”.
“I’ve had a lot of clients buying that property thinking [about] the future in terms of climate change and those sorts of things,” Ms Dunphey said.
A similar trend has been observed in Western Australia, according to local lender Bankwest, with large numbers of people relocating to locations that offer an “alternative lifestyle” and “cheaper housing options”.
“In our home state of WA, we have also seen over the past five years major mining companies starting to shift their policies away from FIFO workers to a much more local ‘live in’ workforce in many of our regional centres,” John Ellis, state manager third party at Bankwest said.
“[This is] resulting in stronger community growth and the development of a raft of tertiary industries that are committed long term in the regions.”
And as more and more people choose to use a regional broker, Mr Ellis said it will continue its investment in its broker portal, adding that providing “digital solutions” will also be key in 2022.
Western Australia broker Belinda Bradshaw at North West Finance has also noted that as the state’s mining communities become more “self-sufficient” and “rents stabilise”, banks should start to provide policies similar to “major regional centres” rather than viewing them as “remote one trick pony mining towns”.
“With ever evolving policies it is a challenge to find a bank to accept rental income in any form,” Ms Bradshaw said.
Ms Bradshaw said part of her role as regional broker was therefore to “push for policy change” to ensure the big banks see past old policies and “champion the area”.
Rural markets strengthening post-pandemic
But it’s not just favourable remote working conditions and cheaper property prices fuelling the regional boom. According to NSW-based broker and managing director of Regional Finance Solutions, David Traynor, there’s also an “increased confidence in the rural sector” after the drought.
The Inverell-based broker said: “As the rural economy improves, that increases economic activity in the towns, which creates opportunity for all sectors – retail, hospitality, mechanical services – [which] flows through the entire township.”
Mr Traynor added that a downside has been the challenge for first home buyers entering the market and younger generations trying to enter the agriculture industry.
“In the rural sector, prices are just surging astronomically. For younger people trying to enter the ag industry, it’s becoming more and more challenging,” Mr Traynor said.
Brokers needed out bush
Another challenge facing some borrowers is the ability to find a local lender they can talk to about their finance needs. More than 500 regional banks closed their doors in a five-year period (2017-2021) – according to Choice data – which means that the role of a “trusted local advisor” has become even more important.
“People – especially in the smaller communities – are feeling really isolated and they’re feeling left out of the banking sector,” Mr Traynor said.
“They have to go online and do the research, but when they want to make that final decision, they actually want to talk to someone and they prefer that on a face-to-face basis.
“That’s the role of the country broker.. It’s becoming more of a mobile role where we’re covering a larger area.
“People really value our conversation and they value our involvement in a transaction.”
How long will the boom in the regions last?
While regional brokers are generally optimistic of what the year 2022 has in store, REA Group director of economic research Cameron Kusher has suggested that as the economy improves, people may start to divert their spending away from housing and feel the pull of the cities once more.
“I think with the economy improving, people want to go and do things. And I think for the housing market that will mean that people’s willingness to spend as big of a share of their income as they have on housing... is probably going to reduce this year,” he said.
“I wonder if there’s actually this year going to be a bit of sort of homesickness for the capital cities now that the lockdowns aren’t on anymore.
“Talking to some real estate agents from regional parts of the country… people moved to these areas (out of Melbourne or Sydney) because they love going there on holiday but the realisation is [that] there’s not a lot of events in these places.
“If that influx of people to the regional parts of the country actually slows, that would probably be a really good thing for locals, that would give them a chance – particularly those that don’t already own a home to get a home.
“For anyone trying to enter the market for the first time, it has been difficult, if not impossible for their savings to keep pace with the increases in prices.”
Given the uncertainty and challenges ahead, it’s clear that now, more than ever, borrowers need brokers in the regions.
