Is it still a good time to buy property in regional Victoria?
It was hard to fathom the property market in 2021. A number of pandemic-led factors propelled Australian property prices to unseen levels of growth - especially in our regional areas.
It was hard to fathom the property market in 2021.
A number of pandemic-led factors propelled Australian property prices to unseen levels of growth - especially in our regional areas.
With a growing portion of the workforce working from home, consumers were encouraged to escape the confines of inner-suburbia and spread out in the countryside. Added to that were the restrictions placed on interstate and international travel, forcing many to seek out holiday options closer to home.
Popular holiday destinations across Victoria were at the forefront of the madness with median prices climbing upwards of 40% in some regions.
This surge of demand saw ridiculous results all over the state, not least in the coastal areas. The Surf Coast shire, positioned at the entrance to the Great Ocean Road, saw median dwelling values skyrocket from $979,000 to $1.4 million.
The big question remains; will these city slickers continue to seek out a tree or sea-change after the pandemic?
Will the price of property in regional Victoria continue to grow?
First of all, we can say with almost certainty that the Australian property market won’t have another year like it did in 2021.
There were approximately 653,000 housing and unit settlements over the calendar year; a rate 40% higher than decade average.
These levels of growth are clearly unsustainable and already pricing buyers out of the market.
Many of the regional areas that were once considered affordable alternatives to living in the city are fast becoming out of reach.
An example of this is in Bright, where dwelling values jumped 45% in 2021 to a median price of $890,000 - a crazy number considering the town is a 3+ hour drive from the city.
This, compared with slow wage growth in recent times, has stretched affordability issues to all areas of the market.
We can also expect an easing of the demand that had bottlenecked after months of frustrating lockdowns in Australia’s two largest cities.
The buying frenzy that fuelled the price surge 2021 should begin to taper out as normalcy slowly returns to our lives.
Additionally, with high-end and regional properties recently outperforming the rest of market, we may be in for a correction in the short-term.
Past trends indicate that the market operates in a yo-yo style fashion, with both the high and low ends of the market taking turns at driving property values forward.
With all that being said, it’s likely the regions will become an increasingly attractive option for many couples, families and retirees over time.
Working from home will only become easier for employees and more viable for businesses in the future, which could partially mitigate the dependance on inner-city living.
With Melbourne’s population expected to overtake Sydney’s in the coming decade, problems like heavy traffic and cost-of-living expenses will continue to influence consumer needs.
In fact, it’s hard to see a future in which regional areas within distance from the city aren’t growingly sought after for their quality of life.
Conclusion? The regional market may be in for a slight cooling off period as it readjusts from the last calendar year. Long term however, we can expect regional areas within proximity to the capital cities to continually attract strong demand from consumers.
Which industries will be able to accomodate regional and outer-city lifestyles?
For many workers, the end of the pandemic will mark a permanent return to their places of work.
But for some industries, technological advancements will mean that working from home becomes an increasingly desirable option for its workforce.
Last September, the Productivity Commission released a report with research on which industries had employees working from home during the pandemic.
The research found that many industries were able to double their working-from-home capabilities, with several able to accommodate more their half their workforce working remotely.
Bringing this back to the Australian property market, we can start to predict that a large chunk of the labor pool will be growing less dependant on living within close proximity to their workplace.
Regional areas within a couple hours drive from the state capital would provide ‘hybrid’ workers the capacity to travel into work once or twice a week whilst still being able to enjoy a quieter rural lifestyle.
As business practices continually upgrade over time, we will likely see further migration into the country, particularly from skilled and white-collar workers.
What happens to all that office space?
The pandemic has already delivered an enormous hit to commercial property as more workers from ever are being told not to come into the office.
Before the pandemic, around 500,000 Melburnians commuted into the city for work each day. It’s now increasingly clear that we won’t ever see numbers of anything like that volume again.
The CBD’s biggest employers are already predicting huge reductions in worker numbers in the city, which will have a flow on affect to the rest of the economy.
What the inner-city has lost, regional Victoria has gained with the two sectors operating in direct opposition to each other.
Vacancy rates in Melbourne’s CBD have rose to over 10% in 2022, with lease costs set to fall accordingly.
Due to the uncertain future of office spaces, particularly in the city, commercial property is currently been treated as one of the riskiest sectors of the Australian property market.
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Elephant Advisory is an accounting and mortgage broking firm based in Melbourne, with a successful history of helping our clients achieve their goals. With a little help from us, you'll be prepared to make the right decisions for your business or property journey, avoiding many of the potential mistakes along the way.