Home loan affordability may be declining but the great Australian dream of owning your own home is still alive, if buyers are prepared to look outside capital city and metropolitan areas.
The Roaring Regions: Top 10 Affordable Regional Areas 2023 report showed that in the past 12 months, Australia’s home loan affordability declined to 22.4 index points, with NSW the least affordable state for buyers with 18.2 index points.
This comes despite small falls in the median Australian house price, which the PRD Real Estate-authored report shows dropped 0.9 per cent to $945,474 in the 12 months to the December quarter of 2022.
“In the same period, median weekly family income grew by 6.7 per cent,” PRD Chief Economist Dr Diaswati Mardiasmo said in the report.
“This is a much better statistic for affordability compared to the 25 per cent growth in the weighted average Australian median house price, for the 12 months to the December quarter of 2021, with only 5.3 per cent median family weekly income growth.”
Dr Mardiasmo said the proportion of family income needed to pay a mortgage had still risen in 2022, but not by as much as the previous year.
“Consequently, the proportion of family income needed to meet loan repayments increased by 35 per cent in the past 12 months to the December quarter of 2022, marginally lower than the 37 per cent increase recorded in the past 12 months to the December quarter of 2021,” she said.
Dr Mardiasmo said slower price growth was now evident in many markets, including regional areas and this made homes more affordable, higher living costs mean buyers remain cautious.
“The Top 10 Affordable Regional Areas 2023 report provides options for those looking to achieve the great Australian dream of owning a home, by expanding the search to areas outside of the metro and capital cities,” she said.
In Queensland the affordable regions include The Whitsunday Region, the Mackay Regional Council and the Federation Council local government areas.
In NSW the affordable reasons include Federation Council, Dubbo Regional Council and the City of Lithgow, while in Victoria the regions include City of Greater Bendigo, City of Greater Shepparton and City of Ballarat.
One Tasmanian area also made the list – Central Coast Council.
Each of the regions on the list have a median house price of $600,000, which is about 30 per cent lower than Melbourne’s and less than half Sydney’s median house price.
The report shows the Whitsunday LGA recorded 7.3 per cent population growth in the five years to 2021 and in the September quarter of 2022 had an unemployment rate of 2.8 per cent, both of which suggest a vibrant economy.
The median house price in 2022 was $460,000, the median land price was $190,000 and the median unit price was $320,500.
This year, the Whitsunday LGA is set to see $1.4 billion worth of project developments start, mainly in the commercial sector.
“This signals the creation of new businesses and improved services, thus the potential to create more jobs and stimulate a more vibrant economy,” Dr Mardiasmo said.
“A total of 1821 lots and 80 units will be added to the Whitsunday LGA market, which will cater to the increasing property demand.
“Ready-to-sell stock is much needed, particularly for stand-alone dwellings/houses.
“This suggests any house price changes due to increasing cash rates would be temporary.
“This is now an advantageous time for buyers.”
In the past five years the Mackay LGA in North Queensland recorded a 4.8 per cent increase in population and an unemployment rate of 2.7 per cent, which is well below Queensland’s 3.7 per cent.
The median price of a home is $440,000, while the median price for a unit is $285,000 and land is $214,000.
The Mackay LGA is set to benefit from $511.9 million of projects starting, with much of it being infrastructure and commercial development, which will improve livability, create jobs and stimulate the economy.
“There are 735 lots, 9 dwellings, 192 units, and 6 townhouses planned in 2023,” Dr Mardiasmo said.
“This will assist with current property demand, in particular, buyers wanting to access multiple grants and build their home.
“That said, there is still a need for more ready-to-sell stand-alone houses.”
Charters Towers, Queensland
A rural LGA founded due to gold in the area, Charters Towers is not known for being a transport hub between Townsville and the outback.
Over the past decade the report found the median house price rose 19.3 per cent to $260,000 and 28 per cent for units to $215,000.
“In December 2022, investors in Charters Towers LGA benefited from 5.6 per cent average rental yields for houses, which sits well above Brisbane Metro (3.7 per cent),” Dr Mardiasmo said.
“Units saw an average rental yield of 5.4 per cent in the same period.
“Charters Towers LGA recorded a significantly low vacancy rate of 0.2 per cent in December 2022, well below Brisbane Metro (1.1 per cent); and has remained within the 1 per cent mark in the past 18 months.”
In 2023, Charters Towers is set to see $864.7 million worth of development and a total of 116 lots and 20 units planned.
Federation LGA is on the NSW and Victoria border just west of Albury and is known for its prime sheep and cattle grazing land.
Over the past 10 years the median price for vacant land has risen 147.3 per cent to $182,000, while the median house price has climbed 85.8 per cent to $405,000 and the median unit price has jumped 100 per cent to $372,000.
“As of December 2022, Federation LGA investors benefited from an average house rental yield of 4.5 per cent, well above Sydney Metro’s average house rental of just 2.2 per cent,” Dr Mardiasmo said.
“Units in Federation LGA recorded an average rental yield of 5.3 per cent in December 2022, above Sydney Metro (3.5 per cent).
“A low vacancy rate of just 0.4 per cent in December 2022 was below Sydney Metro (1.8 per cent), with Federation LGA historically having lower vacancy rates than Sydney Metro for the past three years.
“As an alternative investment perspective, Federation LGA is an attractive regional market due to affordable pricing, higher rental returns, and quicker occupancy.”
Dubbo, in the Orana region of NSW, has recorded significant median price growth over the past 10 years.
The median house price has climbed 68.4 per cent to $495,000 and the median unit price has risen 91.7 per cent to $230,000.
The median land price is $340,000.
“From an investment perspective, as of December 2022, Dubbo LGA investors benefited from average rental returns of 4.7 per cent for houses and 5.4 per cent for units,” Dr Mardiasmo said.
“These are well above those achieved in Sydney Metro (at 2.2 per cent and 3.5 per cent for houses and units, respectively).
“Further, Dubbo LGA recorded a very low vacancy rate of just 1.2 per cent in December, with a steady trend of being within the 1 per cent mark for the past 12 months.”
Dubbo is set to benefit from a development pipeline of $887.7 million in 2023, with 517 lots, 7 units and 34 dwellings planned in the LGA, but the market is expected to remain undersupplied.
Lithgow City, NSW
Over the past decade Lithgow City LGA experienced extraordinary median price growth, with the median house price rising 119.8 per cent to $500,000, the median unit price climbing 150 per cent to $250,000 and the median land price rising 59.1 per cent to $350,000.
“As of December 2022, investors in Lithgow City LGA benefited from average rental yields of 3.3 per cent for houses, well above Sydney Metro (2.2 per cent),” Dr Mardiasmo said.
“Units recorded an average rental yield of 3.3 per cent, which is almost on par with Sydney Metro (3.5 per cent).
“Lithgow City LGA has a lower median entry price than Sydney Metro, and with higher or on-par rental yields, is an attractive alternative for first-time investors.”
Greater Bendigo, Victoria
Located in the central part of Victoria, Greater Bendigo is the state’s third largest economy.
Property prices have climbed over the past 10 years with the median house price rising 88.7 per cent to $585,000, while the median unit price has risen 78.3 per cent to $410,000.
The vacant land median price is $290,000.
In December 2022, investors reaped house average rental yields of 4 per cent, while units recorded an average rental yield of 5.4 per cent.
“With a lower entry price compared to Melbourne Metro and combined with strong rental returns, Greater Bendigo is attractive for investors,” Dr Mardiasmo said.
She said 132 lots, 12 dwellings, 27 units and 13 townhouses are planned this year, which will answer current demand.
“However, with Greater Bendigo LGA being one of the fastest growing regions in Victoria, a future undersupply is imminent,” Dr Mardiasmo said.
Greater Shepparton, Victoria
Located two hours north of Melbourne, Greater Shepparton is known for its food bowl and agriculture industry.
Over the past five years the population has grown 3.9 per cent, which signals higher property demand.
Over the past decade the median house price has risen 82 per cent, while the median unit price has jumped 77.7 per cent.
Houses (1019 sales) and units (165 sales) showed a decline in sales volume between 2021 and 2022, however sales grew by 30.1 per cent for houses and 55.7 per cent for units in the past 10 years,” Dr Mardiasmo said.
“The land market has also shown an increase in demand. Greater Shepparton’s property market saw an upwards trajectory for the past decade, with an undersupply in 2022.”
In 2023 21 lots, 42 dwellings, three units and 12 townhouses are planned.
“That said, given the high level of house sales in 2021 and 2022, the amount of ready-to-sell new houses does not fully satisfy the market,” Dr Mardiasmo said.
“In the current high cash rate environment, this creates a buffer. However, it is not sustainable in the long term.”
With the third highest population in Victoria, Ballarat is known for its innovative growth and development.
Over the past 10 years Ballarat has recorded significant property price growth with the median house price rising 105.2 per cent to $595,000.
The median unit price has climbed 77.7 per cent to $405,000 and the median land price has jumped 127.2 per cent to $309,000.
In 2022 Ballarat recorded the lowest number of house sales, softening 9.3 per cent in the past decade.
“Interestingly, unit sales grew by 31.3 per cent during the same time frame, which suggests a potential transition in consumer needs,” Dr Mardiasmo said.
“This can potentially create a buffer to increasing cash rates, maintaining price growth (albeit at a lower rate) for the rest of 2023.”
Central Coast, Tasmania
Over the past 10 years the Central Coast LGA recorded excellent growth in the housing market, with the median price growing 102.2 per cent.
The median house price is $515,000, while the median unit price is $122,500.
“House sales saw an overall steady amount between 2017 and 2021, with 2022’s sales volume suggesting an undersupply,” Dr Mardiasmo said.
“This is beneficial to homeowners, especially those looking to sell and achieve final sale prices closer to their first list price.
“As strong levels of demand and higher prices in metropolitan areas of TAS have pushed buyers further out, regional areas of the state such as Central Coast LGA are set to benefit.”