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Speaker 1: Welcome to Fear and Greed Q and A, where we

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Speaker 1: ask and answer questions about business, investing, economics, politics and more.

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Speaker 1: I'm Michael Thompson and today's episode is answering a listener

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Speaker 1: question and it comes from Buster, who lives in far

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Speaker 1: North Queensland. He says, we hear lots about property trends

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Speaker 1: in the big cities, just wondering if you could shed

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Speaker 1: some light on data for regional cities. We'd love to

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Speaker 1: know how prices and growth compares for us in the

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Speaker 1: regions PG, Townsville, Geelong, Cans. So we're going to do

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Speaker 1: just that, but we're going to go a little bit

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Speaker 1: beyond the prices to look at where the growth is,

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Speaker 1: the movement of people out of our capital cities, and

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Speaker 1: perhaps back into what remote work has done for regional growth,

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Speaker 1: whether everyone who made a pandemic era tree change, whether

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Speaker 1: they've stayed the distance. Tim Lawless is executive research director

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Speaker 1: for Asia Pacific at Coatality. Tim, welcome back to Fear

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Speaker 1: and Greed Q and A.

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Speaker 2: Thanks Michael, great to be here mate.

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Speaker 1: As a bit of an overview, we've heard Buster's question there,

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Speaker 1: how have regional centers compared to the capital cities in

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Speaker 1: terms of house price growth over the last year or so.

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Speaker 2: And it's a great question because I think we do

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Speaker 2: focus a lot on the capital cities. That's where most

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Speaker 2: of the attention seems to be. But regional Australia is

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Speaker 2: a huge area, right, and there's a lot of diversity

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Speaker 2: in the trends. So maybe I can just start with

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Speaker 2: some headline numbers. If you look at capital city versus

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Speaker 2: regional value changes over the past twelve months, the regions

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Speaker 2: are leading, right, They've seen about a ten point three

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Speaker 2: percent rise in value, whereas capital cities are up about

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Speaker 2: nine point two percent. Even if we go back, say

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Speaker 2: the last five years or the last ten years, that

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Speaker 2: pattern is held true. So you've got regional housing values

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Speaker 2: the last five years they're up about fifty seven percent,

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Speaker 2: capitals are up about forty three percent. Last ten years,

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Speaker 2: regions ninety eight percent growth, capitals are sixty seven percent growth.

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Speaker 2: So whatever timeframe I'm looking at, at here, at least

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Speaker 2: over the medium owned it to the last ten years,

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Speaker 2: regional markets have actually been quite strong, out performing the capitals.

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Speaker 2: But what makes up those numbers are really different, right,

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Speaker 2: And if you go back to say the pandemic, which

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Speaker 2: was a really high profile time for the regions. A

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Speaker 2: lot of people were leaving the capitals to go to

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Speaker 2: regional Australia. Fewer people were leaving the regions to come

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Speaker 2: to the capitals, and the strongest growth performers back then

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Speaker 2: were really different to what they are now. So there

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Speaker 2: were generally really high profile regional markets like Byron Bay, NUSA,

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Speaker 2: the Gold Coast, Sunshine Coast, those sort of areas we're

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Speaker 2: seeing just extraordinary growth because they ticked the box of

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Speaker 2: being livable, commutable, that a real lifestyle element to them

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Speaker 2: as well, and they were generally kind of affordable as well.

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Speaker 2: At least back in twenty twenty you wouldn't really argue

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Speaker 2: that as much.

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Speaker 1: Now it's a hard argument to mount for Byron Bay

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Speaker 1: or I suspect NUSA these days, right, Yep.

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Speaker 2: Absolutely. I think a lot of these really popular commutable

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Speaker 2: lifestyle markets they've certainly they played catch up for a

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Speaker 2: while and then you know, they're no longer very affordable.

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Speaker 2: In fact, some markets like Buyer and a really good example,

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Speaker 2: actually went through a pretty sharp correction from the middle

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Speaker 2: of twenty twenty two as interest rates started to rise

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Speaker 2: and there's also a lot of pretty severe weather events

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Speaker 2: hitting the East coast as well the course of flooding

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Speaker 2: that made the downturn a bit more significant. So Byron

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Speaker 2: Bay really really did wear about a fifteen percent downturn

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Speaker 2: between twenty twenty two and about twenty twenty four. But

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Speaker 2: what we're seeing now, Michael is radically different. If I

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Speaker 2: look at say the top growth performers around regional Australia

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Speaker 2: now even just around the country including the capitals, they

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Speaker 2: are very different markets. So the top performing market in

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Speaker 2: terms of value growth over the past twelve months is Albany,

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Speaker 2: that's down the far south coast of Western Australia. Again

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Speaker 2: it's a bit of a lifestyle market, but it also

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Speaker 2: it's really popular with sea changes, a bit of a

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Speaker 2: demographic trend favoring more mature age folk to be polite

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Speaker 2: to them. But the second strongest market is Kratha, right,

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Speaker 2: so classic mining town where Caratha's seen growth over the

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Speaker 2: past twelve months of twenty three percent, but interestingly enough,

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Speaker 2: values there are still down about twenty percent on their

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Speaker 2: twenty and twelve peak. Right, So if everyone remembers the

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Speaker 2: mining boom, post mining boom, cities like Karratha up in

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Speaker 2: the Pilborough they went through a massive downturn. Values were

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Speaker 2: down about fifty percent. So even though we've seen Kratha

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Speaker 2: one of the best performing cities over the past twelve months,

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Speaker 2: it's still well below its record highs from more than

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Speaker 2: a decade ago.

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Speaker 1: Okay, so they're too both from w A and then

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Speaker 1: in terms of say New South Wales, Victoria, Queensland, are

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Speaker 1: we are they still kind of focused around those areas

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Speaker 1: that were your traditional kind of sea change spots or

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Speaker 1: has it expanded perhaps more inland as well.

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Speaker 2: They're completely different now. So Queensland the best performing market

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Speaker 2: over the past twelve months is Warwick, if anybody is

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Speaker 2: familiar with sort of a little bit west of southeast Queensland,

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Speaker 2: Warwick major service center. I mean, if you really wanted

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Speaker 2: to commit to Brisbane from there, you could, but it's

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Speaker 2: probably just out a bit of a high it's a

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Speaker 2: bit of a mike, yeah, absolutely, but it's quite affordable.

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Speaker 2: And I think this is the commonality with a lot

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Speaker 2: of the regional markets we're seeing as the strongest performers now.

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Speaker 2: They tend to have this blend of affordability. Warwick, for example,

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Speaker 2: has a median home value of about six hundred and

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Speaker 2: five thousand dollars. Compare that to say Brisbane, where the

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Speaker 2: median values is about a million dollars, So there is

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Speaker 2: an affordability advantage here. Warwick is a major service center,

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Speaker 2: it's got strong schools, healthcare, pretty decent levels of migration

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Speaker 2: or a population growth driving that area as well. And

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Speaker 2: still like Victoria, it's mill Dura Miljura is the strongest

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Speaker 2: performing market right on the border. Yeah, exactly. It's five

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Speaker 2: hundred and sixty thousand dollars median value. It's again a

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Speaker 2: major service center. It's got its own economic diversity and

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Speaker 2: economic ecosystem. It's quite attractive. So I think it's that

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Speaker 2: blend of both affordability, major service center, so there's amenity

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Speaker 2: and stronger migration coming to those areas. Probably just just

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Speaker 2: lure it in by the cheaper housing costs as well

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Speaker 2: as an ability to get a job.

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Speaker 1: All right, So would affordability be the main thing though?

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Speaker 1: I mean infrastructure and those service centers are clearly important.

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Speaker 1: But it almost feels as though it's a chicken in

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Speaker 1: the egg scenario. Do people move there and then all

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Speaker 1: of a sudden, the facilities, the infrastructure starts to expand

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Speaker 1: to meet the demand, or is it usually the case

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Speaker 1: that these are centers where just because of the virtue

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Speaker 1: of where they are within a state, they already have

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Speaker 1: a lot of that infrastructure in place.

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Speaker 2: It's exactly that I think this is not just about affordability.

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Speaker 2: It's also about the ability to have a job, to

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Speaker 2: have amenity, infrastructure, all the essential services that people need.

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Speaker 2: It was just about affordability, then you'd be seeing areas

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Speaker 2: like I don't know, Alice Springs or kuber pet or

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Speaker 2: long reachigh in the list. But the reality is those

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Speaker 2: areas don't really have a lot of economic diversity, and

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Speaker 2: they're surely not featuring in the top the league tables here.

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Speaker 2: So they do tend to be markets that they have

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Speaker 2: their own economic ecosystem. They have jobs, opportunities that generally

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Speaker 2: have affordable housing prices, but they also have a strong

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Speaker 2: community as well.

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Speaker 1: What about the population flows kind of in and out

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Speaker 1: of the main cities. And perhaps, based on the stats

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Speaker 1: that you mentioned before, perhaps I tend to focus too

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Speaker 1: much on the impact of the pandemic. It was just

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Speaker 1: that that really elevated it into the kind of the

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Speaker 1: daily conversation of hey, is it worthwhile moving out of

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Speaker 1: the cities to get a bit of space, especially with

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Speaker 1: the rise of remote work. Do we see a lot

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Speaker 1: of people moving to regional areas and then kind of

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Speaker 1: coming back into the cities or is it more a

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Speaker 1: case that if you move, they tend to stay there

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Speaker 1: because of the lifestyle factors.

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Speaker 2: Now, there was definitely an element of bounce back after

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Speaker 2: the pandemic, so a lot of people that did make

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Speaker 2: that regional shift through the pandemic. Not everybody stayed and

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Speaker 2: you can see that in the internal migration flows. So

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Speaker 2: for anybody that loves demographics like I do, Maybes is

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Speaker 2: a great source, right, just showing my inner nerd coming

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Speaker 2: out here.

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Speaker 1: In a very safe place here.

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Speaker 2: But the ABS demographic data is really lagged, right, You're

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Speaker 2: looking at data that's nearly a year old by the

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Speaker 2: time you see it. So I'd strongly recommend looking at

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Speaker 2: like the Regional Australia Institute, for example, publish fantastic quarterly

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Speaker 2: data on internal migration rates and it highlights exactly what

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Speaker 2: we're just talking about, Michael, that the pandemics saw this

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Speaker 2: absolute explosion in regional population growth, partly fueled by more

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Speaker 2: people leaving the capitals to go to the regional markets,

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Speaker 2: but also by a lot more people staying in regional

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Speaker 2: Australia rather than moving in the capitals after the pandemic.

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Speaker 2: As border has reopened, that correct it a little bit

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Speaker 2: fell off pretty sharply, but we're running through a second

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Speaker 2: wind of that population growth that's favoring regional Australia now.

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Speaker 2: I think part of that simply reflects just affordability. There's

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Speaker 2: been the structural change of hybrid working arrangements that seem

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Speaker 2: to have some permanency to them now as well that

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Speaker 2: really do open up regional markets to increase population flows

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Speaker 2: and still benefiting from their affordability advantage. But I think

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Speaker 2: it's going a little bit beyond those commutable satellite cities

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Speaker 2: now like the Woollongong's and Newcastle's, Gold Coast, Sunshine Coast, Geelong.

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Speaker 2: It's now gone a little bit more far flung. I think,

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Speaker 2: probably driven by affordability.

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Speaker 1: All right, if we are running out of time, but

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Speaker 1: just taking a look ahead the regional spots that are

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Speaker 1: best primed for growth I suppose in the next day

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Speaker 1: twelve months, And as part of that, in a rising

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Speaker 1: interest rate environment, we've had one interest rate rise already,

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Speaker 1: perhaps another one, maybe another two this year. How much

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Speaker 1: do they affect regional prices compared to capital city prices

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Speaker 1: where you have people with more expensive properties, larger mortgages,

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Speaker 1: more likely to get hit hard by rise and interest

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Speaker 1: rate And does that then play out in kind of

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Speaker 1: helping those values in these regional centers to hold up

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Speaker 1: for a bit longer.

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Speaker 2: Yeah, I think it does. And generally interest rates sensitive

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Speaker 2: cities tend to be the largest capitals, and I think

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Speaker 2: to your point, that's where we see the debt burden

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Speaker 2: a little bit higher and households more sensitive to the

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Speaker 2: cost of debt, So Sydney in Melbourne in particular, you

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Speaker 2: can already see those markets seem to have flattened out

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Speaker 2: in the growth rates. So for regional markets having still

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Speaker 2: an affordability advantage, especially those that are a little bit

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Speaker 2: outside of the commutability range, I think they will continue

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Speaker 2: to be quite popular, especially if they've got a diverse economy.

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Speaker 2: We haven't talked too much about some of the more

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Speaker 2: sort of rural markets like well the rules that the

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Speaker 2: bad words you use here, but like townsbo it's your

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Speaker 2: one of the most diversified economic regional townships or cities

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Speaker 2: in Australia, and prices there have been very strong, still

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Speaker 2: quite affordable. So I think markets like that that do

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Speaker 2: show that blend of affordability and economic diversity are going

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Speaker 2: to be the ones that really shine through.

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Speaker 1: Okay, all right, Tim, thank you very much for talking

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Speaker 1: to Fear and Great absolute pleasure. Thank you. That was

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Speaker 1: Tim Lawless, Executive Research director for Asia Pacific at Caatality.

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Speaker 1: I'm Michael Thompson and this is Fear and Great Q

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Speaker 1: and a