Regional Property Markets: Shifting Demand Out of the Cities

Recent data shows Australia’s regional home markets are booming, outpacing the capitals. Regional dwelling values jumped 3.2% over the three months to January, compared with just 2.1% growth across all capital cities. High prices and tight listings in city markets mean many buyers are looking to the regions for better value and lifestyle.

Source

• Market data highlights: Regional home values +3.2% vs capitals +2.1%. Western Australia’s regional markets led the gains at +6.1% (quarterly), and Wagga Wagga (NSW) saw the biggest rise of +8.1%. Queensland and South Australia also saw solid growth. By contrast, markets in NSW and Victoria were relatively subdued (around +2–2.5%), with a few local areas seeing small price falls.

• Selling conditions: Demand is brisk in booming regions. In WA and Queensland, median sale times are just 20–24 days, with vendor discounts averaging about 3.3%. Most regional markets still have tight inventory, keeping competition strong and sales quick.

• Rents & affordability: Regional rents are rising faster than in the cities. Over the past quarter, regional rents climbed about 1.6%. In the past five years, regional rents have jumped roughly 41.9%, far outpacing 17.5% wage growth. These rent pressures add to local affordability stress, especially where wages haven’t kept pace.

Implications for Buyers and Brokers

Mortgage brokerages have observed strong demand and competitive behaviour within the market as rapid sales occur, but only limited properties become available. More importantly, many high-priced urban buyers are looking to purchase rustic homes because of affordability issues; this represents a shift in their buying strateg,y resulting from high levels of demand for rental accommodation in major cities.

• Affordability-driven demand: Many borrowers priced out of the capital are seeking regional homes. Cotality notes that with city prices near record highs and stock levels tight, “many households are once again looking to regional Australia for greater value and liveability”. Brokers can expect more clients asking for pre-approval on regional properties and advice on comparing city vs country budgets.

• Rent growth and serviceability: Rising regional rents tighten household budgets. Since rent costs have grown ~42% over 5 years, lenders will scrutinise borrowers’ expenses. Many first-home buyers and renters feel the pinch of high rents, which can reduce their assessed borrowing power. Brokers should factor higher rents into serviceability calculations and advise clients on budgeting accordingly.

• Valuation risk: Certain markets across the nation (but more so in NSW and VIC), have achieved modest increases or even mild reductions in value. If the property is acquired at a lower value there may be a lesser or negative future valuation. This presents issues for brokers who are structuring loans that require requiring a lower 'loan-to-value' (smaller loan amount) or for the borrower to contribute a larger deposit in the event of having purchased within a softening market.

• Loan structuring & yields: Higher regional rents also mean better yields for investors. Brokers can help clients structure loans (e.g. split principal-and-interest vs interest-only) to maximise cash flow. For investor clients, Ask Financials provides guidance on financing strategies. For example, see our Investing in Property guide for tips on balancing rental income with loan costs and tax benefits.

Take Action with ASK Financials

Understanding the data is just step one. Ready to make your move? Contact Ask Financials for tailored advice on your borrowing strategy. Give us a call at 0433 944 055 or book a free consultation today. Our team is here to guide you through regional and city markets alike, helping you secure the right finance and property.

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