The upside and downside of regional shift

Attend an open home in the regional city of Newcastle and you’ll see a flurry of phones out, Facetime on and the real buyer sitting in a Sydney lounge room, looking to pick up relatively affordable real estate or planning an escape from the big city hustle.

It’s a similar story throughout regional Australia as a century of urbanisation is turned on its head and cities that have for so long been population magnets lose their citizens to the allure of slow living in the bush or by the beach.

The long-term consequences of this demographic shift are yet to play out but in the short-term the impact is already being felt.

And, as with any change of this magnitude, there are positives and negatives. Let’s start with the upside.

Regional and rural towns are critical to Australia, it’s where much of our export dollars are generated and they offer a balanced lifestyle that the pandemic only served to magnify.

But one of the greatest threats to their survival over many years has been the drift of young, bright and productive people to the city.

In many small towns the difference between having an adequate allocation of teachers can depend on just a child or two.

The population increase in such a town can mean a school remains viable. 

People quickly become an economic generator, bringing new money to a town and benefiting a range of industries, from construction to retail and professional services.

Those moving from well-resourced cities also come with higher expectations than regional Australians and their electoral weight could well motivate state governments to provide more than lip service for essential services in the bush.

And here we encounter some of the downside of the regional drift – the social and economic impact upon towns that have clung on to their heritage and way of life, the essence of what makes them attractive to sanctuary seeking city dwellers.

Property prices in regional NSW increased 15.5 per cent from January to August this year while regional Queensland experienced 22 per cent price growth, with an accompanying 14 per cent increase in rental prices.

That’s a powerful motivation for an investor, providing rental accommodation to local working families, to cash out while the market is running hot.

The jobs these local families occupy are the very essential services that keep a town running.

Opportunities to rent elsewhere are slim and in any case rents have soared in tandem with demand and inflated property values.

Many of the newcomers to these communities are not working locally but drawing a capital city wage working from home in an industry that requires little more than a laptop, a phone and their knowledge.

When a local teacher, nurse, childcare or retail worker with long-standing ties and commitment to the town can no longer find or afford accommodation, the flirtation with regional living starts to unravel with potential harmful impacts.

Increased school attendance generates a need for more teachers but recruitment stalls when those who would take up the opportunity can find no place to live.

There is every likelihood that many of those who have taken up rural residence are at a stage in their lives and working careers where the opportunity to work from home brought forward plans to scale back or enjoy more of life’s pleasures that the hybrid work model allows.

But it is unlikely that these new residents, who have contributed to pushing property prices to near Sydney levels, will be putting up their hands to take on essential jobs at the local supermarket checkout, mechanical repair shop or bank.

There is a question mark, too, over how long working from home will remain an option.

Certainly, many observers believe a hybrid model is here to stay, with workers required to put in an appearance in a CBD office at least two or three days a week.

However, the drag of even the occasional commute is likely to drive home the reality that it is difficult to live in two worlds.

Another factor to bear in mind, is that maintaining two homes is not too burdensome while interest rates remain low but the pinch may be felt when the inevitable rise happens or when career progression requires a more visible workplace presence.

Families, too, will face the reality that regional communities have come to accept, that education and career opportunities are far greater in the economic hub of capital cities.

And let’s not forget that the bright lights and noise of the city have a more potent appeal to the younger generation than parents who’ve developed a passion for home grown veg.

Tourism plays a major role in the economies of regional towns.

Towns impacted by bushfires saw their recovery stall when the first wave of COVID-19 hit in 2020.

They came roaring back as Australians satisfied their urge to travel domestically, unable to leave Fortress Australia.

But then the Delta wave kept city dwellers locked out, except of course for those seeking real estate in the regions.

Now that international borders are open again, to a degree, the world is our oyster and outbound travel is high on the agenda for many.

History shows us that inbound tourists are unlikely to deliver sufficient tourism dollars to support regional towns.

As good as it is, most of regional Australia misses out on the Top 10 must-see places for international tourists.

The net loss of tourism dollars will be felt by regional areas and combined with the gradual movement back to the cities, there is a real risk that much of regional Australia will experience a hangover as the various markets recalibrate over the next few years.

But for those young people priced out of real estate in the big cities, there will remain a strong temptation to shift to where home ownership is still a viable proposition, provided they can retain their city incomes or find alternate work in their new locale.

If this cohort can make the transition to regional centres and put down long term roots, finding local jobs and investing social and financial capital locally, then the rush to the regions may be the best thing to come out of COVID, easing population pressure in the cities and breathing new life into the bush.

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Andrew Cocks

Andrew Cocks is the Executive Director of Richardson & Wrench.