Cities are open and travel is back, so is the regional property party over?

Mel Clark and Johnnie Crawford made the move to regional NSW earlier this year. Picture: Sylvia Liber
Mel Clark and Johnnie Crawford made the move to regional NSW earlier this year. Picture: Sylvia Liber

Newly-minted regional resident Mel Clark had wanted to live away from the big smoke since she first saw the stunning cliffs of the Illawarra Escarpment on a road trip from Sydney a decade ago.

She said it was pure coincidence that she and her young family finally made the move in the midst of Sydney's lockdown, in August this year.

"It's always been our dream and it just so happened that we tried to do it a couple of years ago and it was always a financial decision [why we didn't]," she said.

"The appeal is about having that quieter, laid back lifestyle really, in beautiful surroundings and you've got the beach on your doorstep," she said.

They'd previously tried finding a rental in some of Wollongong's more salubrious suburbs, but after finding that financially difficult had opted to rent in the Sutherland Shire.

"[The decision to buy in Wollongong this year] was more around us not wanting to rent again for a year or two years and realising that we didn't want to rent anymore and we wanted to put down roots ... I wouldn't necessarily say it was because of COVID-19," she said.

"We wanted somewhere that was our own home again and where we weren't in limbo, because we've got another child about to start school. We basically wanted to settle in a home that we were in for a good number of years," she added.

They eventually settled for a house in the suburb of Woonona, and Mrs Clark said they are there for the long haul.

Their move coincided with the pandemic, but the pair had been planning on a regional relocation long before COVID-19 hit. Picture: Sylvia Liber

Their move coincided with the pandemic, but the pair had been planning on a regional relocation long before COVID-19 hit. Picture: Sylvia Liber

It's a story that runs counter to the common narrative that the great regional migration trend - and the house price boom to go with it - is the sole product of a desire to flee city lockdowns, enabled by the new found freedoms associated with remote working.

It also gives an insight into the factors likely to drive regional markets in the years ahead, and why fears of a mass return to the cities, and a drop in regional property prices, are potentially overstated.

Simon Kuestenmacherm director of The Demographics Group, said that families like Mrs Clark's would continue opting to live in regional areas as a result of where they wanted their children to grow up, and the type of housing they wanted them to grow up in.

"I think the bigger movement to regional Australia [during Covid-19] was people, young families that needed an extra bedroom, that needed affordable three to four bedroom homes," he said.

"The millennial generation has finally reached the family formation stage of the life cycle - the phenomenon of millennials needing three to four bedroom homes, that is not going anywhere, that is going to continue. That was always going to happen in spite of Covid and it has been super charged by Covid since there are now more millennials that can work remotely," he said.

"This trend will continue into the future probably not quite as strong as it has in 2021 but it will still be there, so regional Australia isn't losing this growth cohort," he added.

It's a sentiment shared by other property market observers, including BIS Oxford Economic's economist Maree Kilroy.

"In terms of that shift towards regional markets our view is that the pandemic accelerated those shifts that were somewhat in their infancy before the pandemic and all the pandemic did was accelerate a lot of that shift, it accelerated that stage of life," Ms Kilroy said.

"So you've got young families who are already constrained by affordability, that [the pandemic] just prompted them to move ahead of when they would have done it," she added.

Commuter regions the ones to watch in 2022

Ms Kilroy said that, broadly speaking, the regional market would likely track that of its capital city counterparts in 2022, though with a slight delay - meaning a slowing, but not a fall, in prices.

"So we expect that regions generally track there capital cities in terms of prices and that the momentum within the capital cities at least, month on month, the pace has started to slow a little. So we still expect house price growth for regional centres in 2022 it just won't be an acceleration, the pace will be slowing, which is what we expect for the capital cities as well," she said.

She said that in some ways regional markets were more resilient to looming threats to property prices, such as a tightening of lending conditions or a rise in rates.

"I think the regional markets are better placed, especially than Sydney because it's got affordability issues on top of that because if you're tightening credit and you've got higher interest rates in somewhere that';s already unaffordable then its probably the most vulnerable so regional places are probably better placed with that," she said.

Aside from interest rates and any new regulatory restrictions on lenders, experts say one of the biggest determinants of where regional real estate prices will go in 2022 is what happens with work-from-home policies.

Mrs Clark had been working remotely for a few days a week for years prior to COVID-19, and no longer needs to go into the office at all - something she said does make the move away from the city easier.

But husband Johnnie Crawford still commutes to his job in Homebush, in Sydney's suburbs, and continues to do so now that they've moved.

Now that they're in the regions, Mrs Clark said the family is in for the long haul. Picture: Sylvia Liber

Now that they're in the regions, Mrs Clark said the family is in for the long haul. Picture: Sylvia Liber

Its cities like Wollongong in NSW and Ballarat and Bendigo in Victoria, which are within the one-and-a-half hour commuter sweet spot and cater to workers like Mr Crawford, that will perform well regardless of what happens with future work patterns, Ray White chief economist Nerida Conisbee said.

Many of these locations were already experiencing rising prices prior to the pandemic as a result of offering a good compromise between commuting distance and lifestyle considerations.

"If you have a look at places like Geelong and Ballarat, Bendigo, you look at say Launceston or the Gold Coast and Sunshine Coast, those areas were already doing really well prior to the pandemic and so what the pandemic did was just accelerate their pricing and I don't think that that, those are the areas I don't think will have significant pull back [next year], she said.

While the peak of the regional property boom had almost certainly passed already, buyers could still expect to make money buying in these areas.

"If you'd bought in one of the good suburbs of Wollongong and you bought now and wanted to sell in 12 months it's a risky strategy but I don't think it's necessarily the case that you will see a drop in the value of your home," she said.

Holiday towns susceptible to price drops

But it was a mistake to treat the regional market as one whole, Ms Conisbee said, and some regional areas could well be in line for price declines in the year ahead.

"The areas that are probably a little more susceptible to declines are those areas that aren't within commuting distance to a capital city and have had big pick ups in pricing as a result from demand for second homes and also people whose work suddenly became more flexible during the pandemic," Ms Conisbee said.

"They're the ones who I think are more at risk of having a pullback in prices, just primarily because demand for second homes is going to be reduced next year because people can travel overseas again and also because people are getting called back into the office so having a holiday or being able to live somewhere that's not within commuting distance to a capital city will be less feasible for more people."

Ms Kilroy said that speculation about people being called back to the office was unlikely to have any instantaneous affect on the regional property market, regardless of distance from capital cities.

"Things don't just happen instantly in the property market," she said.

"That whole process of moving is not an instant process, people have to sell their house and they've got to rebuy in the same market. So that exodus from the capital cities to the regions, I don't see that as something where 'Oh, I only did this for one year and now I'm going to move back". They've done that because they were always going to make that decision and they're just doing it now rather than later," she said.

For Mrs Clark, it doesn't matter what happened to property prices in the year ahead, or the years following that.

"When we bought we obviously could see that the prices were getting higher but we decided that this would be where we stay and we wouldn't look to move until the kids are through high school. The decision to buy wasn't anything to do with whether we thought we could make money," she said.

"It may happen that house prices stop rising and they may go backwards but that really didn't have anything to do with it. We just wanted to live here but whatever happens with the housing market we should be here long enough that it won't matter."

This story Is the regional property party over? first appeared on Illawarra Mercury.