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The exodus from Sydney and Melbourne driven by the pandemic and work-from-home edicts is here to stay, driving regional house price growth beyond capital cities as the combined value of Australian homes exceeded $10 trillion in the first three months of the year.
Data from the Australian Bureau of Statistics shows the total value of Australia’s 10.8 million residential homes swelled by $1.8 trillion in the 12 months to March 2022 to $10.2 trillion. The national mean home price is now $941,000 by the ABS measure.
Residential homes across the country are now worth a combined $10 trillion.Credit:Peter Rae
House price growth in regional Victoria and NSW outpaced growth in the capital cities, according to the bureau’s data.
Over the 12 months to March, the median house price in Sydney rose 16.4 per cent to $1.25 million and in Melbourne, it rose by 9.4 per cent to $930,000.
In the same period of time the median house price in regional NSW jumped 29.1 per cent to $800,300, and in regional Victoria it rose 17.4 per cent to $640,000.
Domain economist Nicola Powell said Australia has seen “extraordinary rates of price growth” in regions because of the coronavirus-related work disruptions, and she expects regional hubs like Wollongong or Geelong to continue to perform well.
“The pandemic has been around too long for it not to have a long-lasting impact and change consumer behaviour,” she said.
“Particularly in our housing market, the thing that has changed is the acceptance of employees working from home. That’s here to stay.”
While annually house prices are higher, the ABS data shows median house prices in both capital cities have fallen since peaking in the December 2021 quarter: dropping $95,000 in Sydney and $105,000 in Melbourne.
In the regions, house prices have not faced similar drops, easing by $10,000 in NSW and $5000 in Victoria.
The Reserve Bank started lifting the official cash rate in May, and CoreLogic research director Tim Lawless said there were other factors softening the housing market, including falling consumer sentiment, a tightening of credit regulations for lenders, and worsening housing affordability.
By CoreLogic’s latest monthly data, the combined value of residential homes fell to $9.97 trillion at the end of May, Lawless said, and dwelling values in the capital cities continued to fall as properties took longer to sell.
“There’s a lot of factors outside of just interest rates that have been conspiring to slow down the growth rate for more than a year now,” he said.
“The reality is that we’re probably moving to the early stages of a downturn now that will become more broad based and faster paced as interest rates rise.”
One of the reasons for the downturn in Sydney and Melbourne is affordability: Powell said borrowers were hitting the limits of what they could afford.
Lawless said that affordability was one of the key drivers of regional house price growth. Regional Tasmania saw the biggest jump in house prices, with values increasing 30 per cent over the year to $520,000.
“Just look at the difference in the median price, it just stands out how affordable regional markets are,” he said.
Most of the growth in the regions would be in major regional centres that are within a commutable distance from capital cities, or areas that have lifestyle appear.
“The best performers are typically areas that have a mix of both of those things,” he said. “They might be coastal markets within a few hours drive of the major capitals.”
Both Lawless and Powell said the strong trend of internal migration to the regions from capital cities was likely to continue, as businesses keep hybrid work models adopted during the pandemic.
“I think that’s probably going to be somewhat of a structural change we’re seeing,” Lawless said.
“Rather than having their staff back in the offices permanently, they might be back in for two or three days a week. So that is really opening up these regional housing markets.”
A previous version of this article said the national median home price is now $941,000 by the ABS measure. The correct term is mean home price.
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