- Regional housing markets which increased in value more than capital cities during 2020 are facing future housing threats as government stimulus winds up
- Regional markets have been experiencing increased demand in the wake of COVID-19 as people seek a tree change, but this has put upward pressure on housing and rent prices
- Regional markets have been outpacing growth in capital city housing until March this year, with CoreLogic noting an 11.4 per cent increase in regional housing values over the past year
- In contrast to the housing prices, since March 2020, rents in regions for both houses and units have been growing, with the strongest trends seen in the regional areas of Western Australia, Tasmania and the Northern Territory
- According to the report, an increase in demand for regional rental properties could be due to a slowing of investor activity
Regional housing markets which increased in value more than capital cities during 2020 are facing future housing threats as government stimulus winds up.
This is what researchers from the University of Tasmania found in their pathways to regional housing recovery from COVID-19 report for AHURI, focussing on Tasmania as a case study of a regional economy.
Regional markets have been experiencing increased demand in the wake of COVID-19 as people seek a tree change, but this has put upward pressure on housing and rent prices because of a supply and demand mismatch.
Regional markets have been outpacing growth in capital city housing until March this year, with CoreLogic noting an 11.4 per cent increase in regional housing values over the past year.
In contrast to the housing prices, since March 2020, rents in regions for both houses and units have been growing, with the strongest trends seen in the regional areas of Western Australia, Tasmania and the Northern Territory.
An example can be found in the small mining in Western Australian’s Pilbara region.
Tom Price is home to just over 3000 people, but at the time of writing, only one property was available to rent, 35 Wattle Street — an unremarkable three-by-one asking for $1250 a week in rent.
This puts it on the same level as a home in Perth’s most affluent areas like Nedlands, with 18 Kingsway asking for the same price.
The Tom Price abode sold for $180,000 in May 2019, the Nedlands abode sold for $1.8 million in 2020.
The next closest rental is 80km down the road in Paraburdoo, which is asking for $1500 a week.
“This housing demand, most likely due to regional living being perceived as ‘safer’ than cities in a pandemic, is putting upward pressure on dwelling prices while lowering vacancy rates and reducing affordability in regional Australia,” said the lead author of the report, Dr Julia Verdouw from the University of Tasmania.
“In fact, while values in cities decelerated as a result of the COVID-19 crisis, regional values have been growing at 5 per cent per annum, surpassing the growth rate in cities,” she continued.
According to the report, an increase in demand for regional rental properties could be due to a slowing of investor activity, most likely reflecting lower investor confidence in the wake of fewer incentives to invest in property, increased numbers of tenants who owe arrears, policy which has protected tenants and lower migrant housing demand.
“There is a risk that landlords may shape future risk mitigation strategies in ways that further exclude renting to lower income tenants because they perceive these groups to present a greater risk to rental revenue,” according to Dr Verdouw.
Another important impact on regional housing during the pandemic has been the JobKeeper and related stimulus measures, now winding down, which will expose people to housing risk, the report said.
“Our research identifies that a regional model for recovery requires specific attention to place,” Dr Verdouw said. “COVID-19 has exposed housing policy risks that must be addressed in their regional context.”
“Government strategies to stimulate employment in local economies and establish strategic and targeted income protection measures for vulnerable groups will both need to be a high priority in underpinning regional housing stability,” she concluded.