The regional property markets outperforming Australia's capital cities

Locals face being squeezed out of some of Australia’s most popular regional areas as property prices continue to climb with the influx of cashed-up city slickers.

In NSW, the median house price in Byron Bay rose 26 per cent over 2020, behind only Western Australia’s Port Hedland’s leaping 30.4 per cent and Tasmania’s Derwent Valley’s by 26.1 per cent.

Regional Victoria’s median combined house and unit growth for the year, at 12 per cent, also easily eclipsed Melbourne’s combined house and unit price rise of 3.6 per cent.

“In most of our states and territories, we are seeing regional areas outperforming capital cities,” said Domain senior research analyst Nicola Powell, on the release of the December quarter Domain House Price Report.

“The only exceptions are Queensland – which has such a big regional area that includes the outback – and South Australia, where Adelaide had the strongest annual gain it’s had in a decade.

“But in Sydney and Melbourne particularly, we’re seeing a lot of migration away from the cities to regions which are more affordable and offer more liveability,” Dr Powell said.

Prices in some of those areas have risen so much, it’s proving almost impossible for local buyers to compete with the newcomers. In NSW, for instance, the Byron Bay median house price is now $1.15 million, while Parkes in the central west has seen a hike in its median price of 24.1 per cent from December 2019, now sitting at $335,000.

Kiama and Shoalhaven on the coast have seen price rises of 20 per cent and 19.4 per cent respectively, to new medians of $1.02 million and $645,000.

Property prices in the regional areas of the state rose a total of 8.8 per cent through 2020, compared with just 4.5 per cent for Sydney.

“There was a movement away from Sydney and Melbourne to these places before, but covid has accelerated the trend,” Dr Powell said. “We’re seeing people’s tastes shift away from high-density living and towards coastal areas or small town living.”

Victoria has a similar trend. Its biggest movers have been named as the southern Grampians, with a price rise of 18 per cent to a new median of $295,000, greater Bendigo, up 16 per cent to $435,000, Gannawarra, up 15.9 per cent to $254,400 and South Gippsland, 15.6 per cent up to $419,000.

In WA, it was natural resources and the more picturesque spots in the state that enjoyed the biggest price growth. The iron ore port of Port Hedland saw its median house price shoot up 30.4 per cent to $332,500.

The runners-up were Northam at 16.7 per cent to $350,000, Denmark at 15.8 per cent to $477,500 and Esperance, up 13.8 per cent to $370,000. Overall, its regional area went up in price by 7.7 per cent, as against Perth’s 6 per cent.

Tasmania also saw big price movement. Its top performer was the Derwent Valley, up 26.1 per cent to $365,780, Latrobe at 25.7 per cent to $440,000 and Brighton up 23.9 per cent to $384,000, helping make up stellar growth for its outlying areas of 16.2 per cent, versus Hobart’s 10.7 per cent.

Some regional areas of Queensland saw some incredible price growth – like mining town Isaac in central Queensland with 19.8 per cent to a new house median of $275,000, Noosa up 18 per cent to $860,000 and Gladstone with a 13.6 per cent rise to $335,000. Those strong results were diluted, however, by little movement in prices in outback areas.

“As a result, we did see Brisbane – with a 3.9 per cent rise – outperform the regional areas at 3.2 per cent – but some areas, either resources or coastal, were much stronger,” Dr Powell said.

“Areas on the coast, like the Sunshine Coast and Gold Coast, have always attracted retirees pre-pandemic but many of those are deciding to move sooner, and they’re being joined by people who are able to work from home.

“They are out-pricing the locals as these extraordinary price rises are really stretching affordability. It’s hard for them when they haven’t benefited from the previous price growth of cities like Sydney or Melbourne, and they’re having to compete on price with people on city salaries. It makes it impossible.”

Regional South Australia was the only other part of the country that didn’t outperform its capital city, with prices rising only 1.7 per cent over 2020, against Adelaide’s 7.1 per cent.

Its best-performing regional areas were Light, with an 18.5 per cent rise to $411,250, mid-Murray , up 15.4 per cent to $277,000 and the Clare and Gilbert valleys, up 14 per cent to $325,000.

Dr Powell said this strong regional price growth throughout Australia looked likely to continue at least through 2021. “Historically low interest rates, the easing of restrictions on credit and mortgage lending and the increasing desire for liveable areas will drive this trend for the foreseeable future,” she said.