Housing affordability in Regional Australia

Housing affordability in Regional Australia

Despite early expectations to the contrary, house prices have continued to increase throughout the Covid-19 pandemic. Perhaps more surprising was the increase in median house prices across Regional Australia. In this blog, Nenad walks through the factors influencing regional house pricing and affordability, and looks at the levers Local Government have to affect affordability in their local areas.

When we first entered the pandemic in early 2020, not many of us thought a rapid increase in house prices and decreased housing affordability would be a side effect of Covid-19. Initial predictions about our economy and other measures of financial security pointed to a cooling off or even decline in house prices, largely based on early assumptions about the effect of Covid-19–related restrictions on the economy, employment and overall financial wellbeing of Australians.

Back in March 2020, we were also more concerned about the health outcomes, not knowing how Australia would fare given the impact Covid-19 was already having in other countries. As the year went on and Australia’s financial and economic health record looked better than expected, housing demand and affordability continued to trend as if nothing happened. House prices kept increasing and buyer demand stayed strong. We could identify why the demand for housing in cities and urban centres was strong. Drivers for increased demand were: favourable conditions for home buyers (higher savings, low-interest rates and better access to credit), changes in working arrangements and FOMO, the fear of missing out…buy now before the housing market revs up and gets out of hand, before our borders open up again and competition for housing increases.

What influences regional housing prices?

In regional Australia, those mentioned drivers for increased demand were also factors, as well as more demand for housing by city dwellers who now began to look beyond city limits to peri-urban and regional places as changes in working arrangements enabled many to work remotely some of/all of the time. Focus on cities’ median house prices showed higher year-on-year increases than longer-term trends, but what was happening in Regional Australia? While helping our Local Government partners navigate Covid-19, we kept hearing the same stories from regional areas: “ housing demand is at an all-time high” or “we are seeing more people show up to auctions than ever before”. Soon, statistics validated those claims. Median house prices in Regional Australia were increasing at a rate higher than those in capital cities and demand was booming.

At a recent webinar on regional housing trends, Eliza Owen, Corelogic’s head of residential research mentioned that regional dwelling values increased by 13% over the last 12 months, more than twice the growth rate of capital cities. She pointed out one key piece of information which has not been mentioned much in media coverage of regional housing costs – the median house price rise in the regions was partly driven by a decrease in the volume of listed properties. After decreasing drastically in early/mid-2020, new listings were on the rise again, but overall stock is still lower than in recent years (around 60,000 regional listings in Australia, compared to an annual average of around 100,000 over the last five years). This increase in demand outstripped supply and resulted in scarcity, thus a rise in sale prices as more people competed for fewer listed properties.

Migration and the dynamics of movement within Australia also changed in 2020. While overseas migration virtually disappeared, internal migration trends in Australia were showing different results in different states (often driven by what kind of Covid-19 fate they were experiencing, e.g. Victoria vs Queensland). Internal migration trends were showing an increasing net gain of residents in regional locations, mainly from capital cities.

As we examined internal migration figures, the key message we reiterated to our Local Government partners is that yes, the increase in net migration to the regions was partly driven by an increased number of arrivals but an often unmentioned component of this net increase has been a decrease in the number of departures from regional locations. Net gains weren’t completely driven by arrivals. Traditionally, regional communities, towns and some cities consistently lost 18–24-year-olds, and sometimes slightly older residents. This age cohort represents young adults moving from the regions to cities or larger centres in search of education or employment (and entertainment) opportunities.

In 2020, there was a change in this trend as more regional residents stayed put, stayed at home and stayed in their communities. You can imagine that a planned move by a young adult from, say, the Bass Coast to somewhere in Greater Melbourne, would be delayed in 2020 as Melbourne went into several lockdowns. Perhaps an aversion towards densely populated cities developed in the regions too, and with education institutions and many industries affected by lockdowns, etc., some young adults would rather choose to stay home, in the regions. In fact, for Bass Coast, there was an 8% decrease in migration moves out of the LGA in 2020 compared to the previous year and a 1% increase in migration moves to the LGA, resulting in a higher rate of population growth in 2020 than in previous years.

Highest house price and house price growth regions in Australia

Byron Shire, on the far north coast of New South Wales, had the highest median house price in December 2020 of $1,150,000, an increase of 26% from the previous year. As an attractive and nationally popular coastal settlement, it's not too surprising that demand (and house prices) are so high in Byron Shire. Some other local government areas on this list, such as Kiama (to the south of Wollongong) or Surf Coast Shire and Noosa, are also attractive coastal settlements that likely benefited from increased demand by city dwellers. As an example of how a shift in net migration gain influences house prices, Surf Coast Shire's population grew by 3.9% between 2019 and 2020, making it the 6th fastest growing LGA in Australia. This had an effect on local house prices as they increased from a median of $868,750 in 2019, to $980,000 in 2020.

In terms of LGAs that experienced largest jumps in median house prices, some of those coastal communities mentioned earlier (Byron, Kiama, Shoalhaven, Noosa) saw above-average increases, as did some inland rural areas (Parkes, Cootamundra-Gundagai). A macro-level economic influence also increased house prices in mining areas such as the Town of Port Hedland, where the median house price increased by almost a third from the year before as Australia's iron ore exports reached record highs in 2020. Mining areas such as Port Hedland are particularly volatile when it comes to house prices. Although the 2019–2020 median increased by 30.4%, the 5-year comparison shows that the December 2020 median house prices are actually 39.5% lower than what they were in December 2015. At the peak of the last mining boom in 2012-2014, median house prices here were between $1.1 million and $1.2 million. The current median house price is $332,500.

Why housing affordability in Regional Australia matters

House price increases in Regional Australia become a problem for local residents once they affect affordability in a way that prevents locals from purchasing a home in their own community. If housing costs (purchasing or renting) become unaffordable for people in need of housing, they’ll likely need to move elsewhere. This in turn affects people’s connectedness to their communities and can limit employment opportunities.

An unaffordable housing market also affects an area’s ability to attract essential/key workers and to keep them close to their places of work. Education and childcare workers, healthcare workers such as GPs, nurses and midwives, aged care or emergency service workers, among others may be forced to live far from their place of employment, leading to a shortage of more experienced workers or these workers commuting long distances, affecting their ability to be on-call and respond quickly to emergency situations or spikes in service demand.

We recently completed some housing affordability analysis for Yass Valley Council who wanted to quantify the effect of increased net migration from places such as Canberra on housing costs. The analysis found that for many residents, purchasing a home has already been out of reach for a few years and that even for moderate-income households, the number of listed properties affordable to them, is decreasing sharply.

How can you understand and influence housing affordability in your region?

The housing market may feel to many like an uncontrolled force that cannot be influenced by policy, strategy or intervention; however, Local Government is far from powerless in improving housing affordability. The Australian Housing and Urban Research Institute (2018) has identified the housing policy levers of Commonwealth, State and Territory, and Local Government on their website. They focus on the demand and supply-side policy levers.

Local Government can influence housing affordability by:

  • Amending and advocating for changes to land zoning (inclusionary zoning, planning permits and restrictions, heritage overlays)
  • Minor infrastructure (increasing desirability of living in a particular area by adding or improving roads and minor infrastructure, roads and community spaces).
  • Rates (influencing council rates to encourage living in certain areas)
  • Advocating State Government affordable housing funding with a strong evidence base (using up-to-date accurate information, such as the that included in, to convince the State government to invest in your areas which need affordable housing).

Here at .id we firmly believe in Local Government's power to make a meaningful, positive impact on people in their communities. It's why we dedicate so much energy and expertise to this level of government. If you need help unpacking your local housing story, developing your housing strategy or would just like to discuss a housing challenge or project, we're here to help.

Nenad - demographic consultant

Nenad’s background is in geosciences and geographic information systems. At .id, Nenad has experience as both as a demographer and population forecaster. His areas of expertise are place-based analysis, identifying spatial patterns in demographic trends, community profiling, catchment analysis and an understanding of role and function of different communities.

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