While it is hard to predict the future in these unpredictable times, Deakin University property experts believe major regional centres will continue to outperform metropolitan areas in 2021 but this will not be good news for everyone.
Dr Adrian Lee, an associate professor in property and real estate with the Deakin Business School, said affordability and proximity to Melbourne will continue to draw buyers to gateway cities, such as Geelong, Bendigo and Ballarat, but he did not foresee the Melbourne CBD becoming a ghost town.
“We should continue to see a recovery trajectory for the economy in general, which will flow on to the property market,” Dr Lee said.
“If this doesn’t result in people moving back to metropolitan areas for work, then the less densely populated and cheaper regions seen to be more liveable are going to become even more popular and we will keep seeing the regions outperform capital cities.”
Dr Jerry Liang, a Deakin Business School property and real estate lecturer, said his own modelling suggests the trend of people moving to regional areas will continue in 2021.
“My statistical modelling for 2020 showed that the areas further away from the CBD performed best,” Dr Liang shared.
“For example, in Victoria during the first pandemic wave from March to June 2020, house sales in regional areas outperformed CBD area by around 10 per cent, metropolitan areas by around 4.9 per cent, and outer metropolitan by 1 per cent, with similar results for units. For the house rental market, these figures were 7.2 per cent, 1.8 per cent and 1.7 per cent.”
“The trend will continue upward unless another wave of COVID pandemic happens in Australia or there is some other Black Swan event.”
Dr Liang expects that towns closest to the three main capital cities will be most in demand.
“Geelong, Wollongong, Gold Coast, Sunshine Coast, and suburbs like Frankston and Mornington in Victoria will likely be in highest demand,” he said.
“Perth should also have very good performance because of the growth of mining industry as the consequence of economic stimulus policy in most of the countries.”
While continued interest in regional properties might be good news for local economies, Dr Lee said there is a downside.
“There is a risk that local residents will be priced out of their home market,” he said.
“Property prices in regional centres are increasing as they are seen to be more affordable particularly with buyers from metropolitan areas.”
“However, at some point these properties will no longer be as affordable.”
“I would say some regional centres like Geelong and other areas in close proximity to metropolitan centres are already no longer affordable for many, including local people looking to rent or buy.”
“Using Geelong as an example, this is because people from Melbourne are moving to the area with more money to spend.”
“The issues of affordability are definitely something that local governments will need to address.”
Dr Liang further commented that property/land owners will be among the winners in 2021.
“Property/land owners, especially the ones who invested in the property in the last year will be the winners considering the historical low level of mortgage interest rate and growing house prices,” he said.
“While the growth of building costs this year may erode the profit of the developer this year, even with the low interest rates.”
The gains in regional areas will come at the cost of central business districts, Dr Lee added.
“In Victoria, Melbourne city will be the biggest loser,” he said.
“Properties closer to the CBD will not be as valuable because there is less need to work and have a business in the city, so property prices and rents will flatten due to less interest from buyers and renters. Interest in offices and commercial space has already fallen.”
Dr Lee believes the CBD will not die but it will have to change.
“It will always be the centre but has to focus on different offerings, other than commercial, such as retail, entertainment and dining experiences not available in the regions,” he noted.
“Commercial owners will need to adapt their offerings to become more about services, temporary office space or to cater for retail, entertainment and dining.”
