It’s one of the most fundamental shifts in the Australian psyche in recent history: city slickers who’d never seriously considered making the move to a regional area before suddenly had their eyes opened to the idea en masse.

Enticed by the promise of getting better value for their hard-earned dollar and more flexible working arrangements introduced during the COVID-19 pandemic, they exited the big smoke in droves. 

A trend that began with the seachangers and treechangers of decades past was magnified by what demographer Bernard Salt coined VESPAs – Virus Escapees Seeking Provincial Australia. 

As discussed in this year’s McGrath Report, the population of regional Australia grew by more than 100,000 in FY22, building on 70,000 the year before.

The impact this trend has had on these regional areas cannot be understated, with unprecedented jobs growth and more money being poured into the regions, leading to improved services and infrastructure and greater liveability.

Property values soared too, creating an attractive market for investors. The average distance between where landlords live and invest is reportedly now 857km, compared with 559km in the year to November 2021, and 294km pre-pandemic, according to data from MCG Quantity Surveyors.

This indicates investors are looking further afield for opportunities, particularly in the regions. 

This move towards remote investing has largely been driven by the perception of better capital growth prospects in the regions, and higher rental yields that usually come with more affordable properties. 

Another benefit of buying in regional areas is the opportunity to buy houses, which have historically delivered better capital growth than apartments – which are the only affordable option for many investors in the capital cities.

With banks charging higher interest rates on investor loans, investors are also being forced to look towards more affordable markets.

Advancements in technology necessitated by the pandemic, such as video inspections, 3D floorplans and signing contracts electronically, have also enabled this trend. The prospect of phone bidding and purchasing properties sight unseen is no longer foreign.

Buyers lured to the regions who find themselves priced out of hotspots have started to look in neighbouring ‘ripple regions’ where the lifestyle is similar but the housing is more affordable. 

For example, whilst the median price of houses in ever-popular Byron Bay fell 8.7% over the 12 months to June 2023 to be $2.875 million, other nearby towns that offer excellent value a bit further from the coast have fared considerably better. 

In the hinterland town of Clunes, the median house price rose 6.1% to $1.35 million, whilst in Nimbin it rose 2.3% to $655,000. 

On Queensland’s Sunshine Coast, house prices in Noosa Heads rose by 5.8% to $2,157,500 in the 12 months to June, but there were more dramatic increases a bit further inland. 

House values in Kin Kin shot up 21.5% to $1,032,500, whilst in Black Mountain they climbed 24.4% to $1,244,000.

On Victoria’s Mornington Peninsula, median house prices in highly sought-after Portsea dipped 1.7% over the same period to $3.4 million. 

But elsewhere buyers have turned to relatively affordable areas such as seaside Dromana, which has seen a 2.6% increase to $1,100,500, and neighbouring McCrea, which has increased 3.1% to $1,299,500. 

I predict more regional price growth going forward as working from home becomes part of the new landscape. From an investment and capital gain perspective, I can see many lifestyle areas performing as well or better than their city counterparts over the next decade. 

In particular, areas that are within two hours of the big cities will outperform and coastal towns are still the star performers. 

So, as empty nesters and work-from-homers demand more lifestyle and housing affordability within an easy drive to the CBDs, they will drive prices materially higher over the next decade. 

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

For more information including articles, checklists, guides and more visit McGrath’s Insights Centre.

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