The Trends Driving Regional Property Price Growth

I can see many lifestyle areas performing as well or better than their city counterparts over the next decade. This capital growth will be driven by two main trends.

Firstly, as our population continues to age, more empty nesters will be purchasing premium houses and apartments in desirable seachange and treechange regional areas for their retirements.

Secondly, more young families that can work from home will seek better affordability in regional areas, particularly those within a 90-minute drive of the capitals. COVID created a mindset shift on work/life balance that continues to inspire people to consider a different lifestyle in non-metro areas.

I think these two groups will drive regional property prices materially higher over the next decade, and we’re already seeing this underway now.

Coastal towns remain the star performers of Australia’s regional markets, with empty nesters typically buying premium houses or lifestyle apartments close to the beaches. They often have the budget to buy their dream homes for retirement after selling long-held family houses in the cities.

Their large and flexible budgets are among the reasons that home values have soared in many of Australia’s best regional locations, as the following list shows.

Australia’s top 10 most valuable regional markets

Portsea, Mornington Peninsula, Victoria ($3.035M)

Flinders, Mornington Peninsula, Victoria ($2.337M)

Sorrento, Mornington Peninsula, Victoria ($2.05M)

Byron Bay, Richmond-Tweed, NSW ($1.939M)

Austinmer, Illawarra, NSW ($1.886M)

Suffolk Park, Richmond-Tweed, NSW ($1.875M)

Casuarina, Richmond-Tweed, NSW ($1.875M)

Noosa Heads, Sunshine Coast, Queensland ($1.828M)

Aireys Inlet, Geelong, Victoria ($1.817M)

Sunshine Beach, Sunshine Coast, Queensland ($1.752M)

Source: CoreLogic, median home values

These highly desirable regional markets are popular with young families, too. However, younger buyers are typically restricted by what they can borrow from the bank, and rising interest rates have reduced their spending power.

As a result, young buyers who want to live in these popular areas are increasingly expanding their search to within a 30-minute drive, which has created a ripple effect in price growth. Other young families are targeting cheaper coastal areas. For example, demand has pushed local home values more than 10% higher over the past year in areas like Wongaling Beach in Cairns (median $295,000) and Forrest Beach, Townsville ($304,000).

Last year, the best capital gains recorded across Australia were predominantly in affordable suburbs with median house prices below $500,000. Prices went up due to more demand for cheaper homes from local first home buyers, young families leaving the cities, and also local and interstate investors.

Since the pandemic, investors have become more open-minded about where to buy. The appeal of cheaper markets offering better yields and prospects for growth is outweighing the traditional psychological comfort of buying an investment close to home.

For example, we’re seeing some East Coast investors buying in Perth and regional Western Australia, where prices have been depressed for a decade and strong rental growth has materially raised yields. Brisbane and regional Queensland also offer great affordability for long-term investors.

While regional values have already gone up significantly in recent years, I predict more growth going forward as work from home becomes part of the new landscape, baby boomers retire, and investors expand their horizons.