Migration to regional areas fuels rising house prices
Regional home prices had increased nearly twice as fast than capital cities between mid-2020 and 2022, as more city dwellers relocated to the regions in search of affordability and better living conditions.
New research by the Australian Housing and Urban Research Institute (AHURI) showed that migration to regional and rural areas have increase dwelling prices since the mid-2000, with a steep growth during COVID-19.
The research, Inquiry into projecting Australia’s urban and regional futures: Population dynamics, regional mobility and planning responses, analysed what drives people to move between urban and regional Australia and its impact on the housing market.
Australians have been relocating to regional and rural Australian since 2007, with every year more people relocating to the regions than moving into the city, except in 2013, including a peak during the pandemic.
The report found that the bulk of city dwellers moved to regional areas near the coasts and metropolitan cities, with smaller urban areas growing around cities like Newcastle and Bendigo.
The University of Sydney study author, Professor Nicole Gurran, said Australians often move to afford home ownership.
“Our research found that the people leaving cities are typically not young people at the start of their careers, but instead are older people with more financial resources,” Gurran said.
“They are often seeking a better lifestyle and often become home owners in their new locations.”
Following population movements, the report showed a “knock on effect” of higher prices – both on dwelling prices and rents.
While regional house prices have been increasing gradually since the mid-2000, house prices grew by 41.6 per cent between mid-2020 to April 2022, compared to 25.5 per cent in capital cities.
Gurran said rents and house prices were found to increase not only in the actual area where people relocated, but also had a ripple effect on other regions, both near and further afield.
Both regional and rural areas in NSW and Victoria experienced sustained a price growth after 2000, while metropolitan and fringe areas showed stagnation or decline over the same period.
However, despite the slowdown both regional and metropolitan areas experienced a sharp house price increase during the COVID-19 period.
While capital gain in the region has been welcomed by owners, the report showed that price growth has had a “spillover effect” as the housing dynamic changes impacted the local community welfare.
“The research highlights the growing connections between urban and regional house prices. Importantly, with more people moving to regional areas putting pressure on housing costs, low-income renters in regional areas need support through financial help and rental relief,” Gurran said.
“House prices in regions further away are impacted as low-income households are forced to move significant distances looking for housing they can afford.”
Between 2009 and 2019, Queensland, NSW, the Northern Territory, and Tasmania were net contributors to house price spillovers.
Meanwhile, the ACT, Western Australia, Victoria and South Australia were net receivers of these spillovers.
Gurran said the influx of city dwellers moving to regional areas should be taken into account when creating policies.
“There is also a real need to increase social and emergency housing investments in regional Australia,” Gurran said.
The report suggested that policymakers could support regional migration by expanding employee incentives, improving infrastructure, and providing financial help for low-income renters.