Will regional property prices keep growing?

Buyers seeking an escape from eyewatering capital city prices will continue to push prices up in regional property markets in 2022 according to one economist, particularly in NSW and Tasmania.

Virgin Money Australia chief economist Peter Munckton is predicting property prices in regional areas will continue to grow in 2022, albeit at a slower pace than the huge gains experienced in 2021 when prices were up 25.9 per cent according to CoreLogic.

“It’ll be a mixed performance, but it [the regional market] won’t outperform capital city markets to the same extent it did in 2022, and the main reason is that the big drive for the outperformance was the flow of people leaving the cities and that flow is not likely to continue [at the same pace],” he said.

Whereas a desire to escape COVID-19 or make the most of work-from-home policies had pushed regional market activity in 2021, in 2022 the key driver would be the relative affordability of regional houses compared to city markets.

This would be felt most keenly in regional areas located within commuting distance to major cities, Mr Munckton said.

In particular, property markets in regional NSW and Tasmania could be set to benefit from affordability concerns in capital cities.

“Where affordability in capitals is toughest is Sydney and Hobart, so I would therefore expect regional areas close to those cities that have affordable housing to do well,” Mr Munckton said.

Mr Munckton named markets like Bendigo, Ballarat and Geelong in Victoria and well as Wollongong and Newcastle in NSW as among those likely to benefit from this trend.

Advice for regional investors

Investors seeking to cash in on future capital growth in these regional areas, as well as the current red hot regional rental market, would do well to look at lower profile suburbs in 2022, Mr Munckton said.

“Some of these regional areas have done pretty well, so it’s not going to be the highest priced suburbs that will do well [in the future], it’ll be suburbs a few rungs down that still look like good value,” he said.

“Within the suburbs that have done really well, the places that will come up more in value are smaller places.”

He cautioned that though interest rates wouldn’t make much of an impact on the regional property market in 2022, they would start to be felt in 2023 and 2024 and could lead to a slowdown in price growth.

For this reason, regional investors needed to think to the long term and choose properties underpinned by fundamentals that would continue to be attractive regardless of interest rate rises.

“When you make housing decisions you should always make long term decisions… If that regional area has got good economics about it, and it has got good transport, over the long term it is likely to do well anyway regardless of interest rates,” he said.

– BY REALESTATEVIEW.COM.AU