Working from home sparks regional property boom – The Australian Financial Review - Freelance Rack

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Thursday, June 18, 2020

Working from home sparks regional property boom – The Australian Financial Review

“We are also looking forward to raising a young family in a regional city,” says Richard, whose wife, Lisa, is a primary school teacher.

Buyers’ agents such as Cate Bakos say interest in big regional cities around Melbourne and Sydney is rising in response to the opportunities – and concerns – created by COVID-19.

Increasingly popular destinations include Bendigo and Ballarat in Victoria and Newcastle in NSW, which are a reasonable road and rail commute from their respective capitals, have big hospitals and excellent infrastructure.

The $900,000 it costs to buy a two-bedroom apartment in Cammeray could secure a brick, two-storey, three-bedroom house with a large garden and lock-up garage on Ballarat’s Lake Wendouree foreshore, an exclusive tree-lined suburb close to the central business district.

Cheaper housing makes it easier to qualify for the federal government’s HomeBuilder Scheme, which offers $25,000 for properties worth up to $1.5 million.

Richard is also enthusiastic about Ballarat’s sporting and recreational advantages, while Lisa is confident of a successful career transition because the city is a regional education hub.

Thomas Hook, director of Walkom Real Estate, Newcastle – which is about 160 kilometres, or a two-hour commute, from Sydney – says local demand is being driven by lifestyle buyers with secure incomes, such as medical professionals working at Newcastle’s John Hunter Hospital, a big regional medical centre.

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A house in Charlestown, about six kilometres from the centre of Newcastle, recently sold for $500,000 higher than the previous record to a Sydney buyer who believes big regional cities will benefit from the COVID-19 fallout, says Hook.

About 80 potential buyers have been calling or driving from Sydney to inspect a nearby development site as investors believe more buyers are confident they can avoid harbour city prices by working remotely, he says.

In Bendigo, about two hours drive north-west of Melbourne, lower prices, and excellent infrastructure (including a big medical complex) are also boosting demand, say local estate agents.

Rory Somerville, managing director of the local Ray White estate agency, adds: “The national residential property market is soft, but we are seeing the opposite. COVID-19 showed to many people that they could work remotely, maintain their salary and still commute – but not as often.” Pandemics are also likely to be easier to contain in spacious, decentralised centres.

Although moving should encourage home loan reviews, comparison site Canstar finds that only 16 per cent, or close to 1 million mortgage holders, review their home loan when they move – meaning they’re potentially missing out on big savings.

“Rates are low, but there is still a wide gap between lowest and highest,” says Steve Mickenbecker, personal finance expert for Canstar, which monitors fees and rates.

The current lowest variable rate is 2.19 per cent from Reduce Home Loans, which is 1.28 percentage points less than the average rate of 3.47 per cent. That’s a potential saving of about $272 a month on a $400,000 loan, or just over $3200 a year.

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What about the risks involved in moving to a regional lifestyle away from friends and social networks? These could include finding another job if the work arrangements don’t work out.

Unemployment rates in some big regional centres in Queensland, Victoria and NSW are higher than 10 per cent.

Daren McDonald, a partner with property advisory group ShineWing Australia, says companies based in tower blocks in the nation’s capitals are still measuring productivity and business success during the pandemic. “They are also still assessing their new needs,” McDonald adds.

Analysis by CoreLogic, which monitors national property prices, also shows that property price growth varies widely across the nation, which could influence investors seeking to make the most of an emerging trend.

For example, house prices in Bunbury, about two hours south of Perth, fell more than 6 per cent during the January quarter. And properties in NSW’s New England and north-west are taking nearly 100 days to sell.

Vendor discounts in central Queensland average about 7 per cent and apartments in Hume, 34 kilometres north of Melbourne, have fallen more than 10 per cent.

Houses in Ballarat are selling the fastest, typically on the market for about 30 days. Launceston, which experienced a spillover of demand from Hobart, posted the highest annual growth of about 10 per cent.

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The analysis compares the January quarter with the same period last year, which reflects much of the demand before COVID-19.

The onset of recession, rising unemployment and the winding down of government payments, such as JobKeeper, could also further slow property growth.

National prices are down about 0.6 per cent since peaking in mid-to-late April, according to Tim Lawless, CoreLogic’s head of research. Falls during recessions going back 40 years highlight the possibility of more dips, even if the underlying reasons for the economic conditions are not identical.

During the early 1980s, house prices fell about 7 per cent from peak to trough. They fell just over 6 per cent during the recession from May 1989 to 1991 and were down about 8 per cent in the 12 months following the February 2008 global financial crisis.

During the 2018 banking royal commission and macroprudential tightening, they fell 10 per cent.



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