Are the regions losing their edge?
I know a lot of people who leveraged ‘regional cheapies’ into successful investing careers.
These cheapies could often give people a way to create some quick equity gain, which they could then leverage into another deal.
But is the era of the ‘regional cheapie’ over?
Probably not, but it is true that the regions are losing their edge on pricing.
For instance, the Housing Industry Association’s (HIA) Affordability Index is calculated for each of the eight Australian capital cities and regional areas and takes into account the latest dwelling prices, mortgage interest rates and wage developments.
The latest report to June Quarter 2021 shows that affordability across Australia’s regional property markets has deteriorated at a faster rate than the capitals.
The HIA clocks the change:
“Over the past two decades, housing affordability was a greater challenge in Sydney and Melbourne than the rest of the country. Yet since the pandemic began it is the rest of the country that has seen a faster deterioration in affordability.
“This is not surprising given the rapid exodus of population out of Sydney and Melbourne to other states and regions.
“The number of people who left Sydney and Melbourne in the last year was tens of thousands more than the number of people who arrived. This is not unusual for Sydney but was a uniquely damaging development for Melbourne.
“In addition to this, Sydney and Melbourne suffered disproportionately from the closure of international borders and the associated loss of overseas migrant, student and tourist arrivals.
“This is why the deterioration in housing affordability was most acute outside of Sydney and Melbourne…
Across the regions, regional New South Wales saw the biggest deterioration in affordability in the nation, down by 22.8 per cent over the year. This was followed by regional Tasmania (-13.6 per cent), regional Queensland (-10.3 per cent), regional Northern Territory (-8.6 per cent), regional South Australia (-8.1 per cent), and regional Victoria (-6.5 per cent).
I think we do need to be a little careful here about creating a myth that isn’t quite true.
It is true that population growth has surged in the regions and fallen in the cities.
However, this is not so much about an ‘exodus’ from the capitals. Rather, it’s because nobody is leaving the regions for the capitals. The the regions has stopped, like a blocked pipe, and population is backing up and overflowing.
So it’s not about city people fleeing the capitals. It’s about regional people avoiding the capitals.
But otherwise it’s true. The regions have been outperforming. It’s not often that you see stronger price growth in the regions than you do in the capitals (with Sydney already growing close to 20%pa mind you!) but that’s what we’ve got.
A combined regional growth of 19.6% is epic.
It’s one for the history books.
But then there are just so many things about this boom that make it special.