Is a regional move post-COVID right for you?

Is a regional move post-COVID right for you?

If offices are enacting work-from-home policies for longer and longer, does it still make sense to stay living in your expensive, inner-city apartment right by your work?

That’s the question some workers may already be asking themselves, as regional centres across Australia see an increase in capital growth over the last three months, according to the latest figures from CoreLogic.

However, the notion of moving to greener pastures is not unique to COVID-19 and has been steadily becoming more popular throughout the last decade.

And with home prices at decade highs across capital cities, there are potentially thousands of dollars to be saved, and time taken to save a deposit to be reduced, just by making that sea or tree change you’ve been daydreaming of.

Regional areas have strong appeal

For some, there is an obvious appeal in regional areas, particularly at a time of global pandemic crisis.

Not only are these regional areas typically more affordable than capital cities – particularly in terms of housing – but the smaller populations are a draw when trying to avoid a contagious illness.

As early as May this year, the Real Estate Institute of New South Wales (REINSW) predicted that regional areas would “do well in the long-term as a result of the pandemic”.

REINSW President, Leanne Pilkington, said she expected to see a “rise in demand for rural and regional properties”.

"I think we have all realised now that we can work from home very effectively and we don't actually need to travel to meetings like we used to," said Ms Pilkington.

COVID-19 the push some would-be movers need

According to CoreLogic research, in the June 2020 quarter, regional centres have seen higher capital growth than the capital city regions.

Eliza Owen, Head of Australian Research at CoreLogic, noted that this positive outcome for June 2020 is “short term, and is more likely tied to cyclical patterns than changes in demographic trends”.

In fact, growth rates have seen a slowdown in momentum, as they peaked around late 2019.

Ms Owen also noted that the “normalisation of remote work amid COVID-19 is more likely to bolster regional migration than slow it.

“But in the wake of the pandemic, the return to an office environment may still be desirable for some employees and employers,” said Ms Owen.

Migrating from big cities not unique to COVID-19

Between 2011 and 2016, more than 1.2 million people either moved to regional Australia or moved around regional Australia from one location to another, according to Regional Australia Institute (RAI) research.

RAI CEO, Liz Ritchie, said the notion of how we work has been “turned on its head” and that she hopes this change will “see significant population growth in regions, following on from a trend that has already been set over a decade”.

“From 2011 to 2016, our two biggest cities, Sydney and Melbourne lost more residents to regions than they gained – and this was well before COVID-19.

“Over the last few months, we’ve all had to change how we work, and this has allowed staff and employers to see that location is no longer a barrier for where we choose to work,” Ms Ritchie said.

According to RAI report ‘The Big Movers’, in the five years to 2016:

  • Sydney saw a net loss of 64,756 people to regional Australia.
  • Melbourne saw a net loss of 21,609 to regional Australia.
  • Adelaide recorded a small net loss of around 1,000 residents.

Interestingly, Brisbane reported a net gain of 15,597 people, perhaps as it appears as an ideal location for those seeking a “sea change” from bigger cities - Sydney and Melbourne.

How much more affordable is housing in regional areas?

When it comes to deciding between buying property in a big city and buying in a regional area, the price differences are unsurprisingly sharp.

CoreLogic figures show that the median dwelling value for combined regional areas of Australia was $394,570 at June 2020. This is 38.5 per cent lower than the combined capital city median of $641,671.

RateCity research shows that on average, would-be buyers looking to buy in regional areas will take almost half the time to save for a 20 per cent deposit than those looking to buy in capital cities, based on savings amount of $400 a month.

Time taken to save a 20% deposit – capital cities vs. regional areas

Location Median house price Deposit (20%) Time taken to save based on weekly deposit of $200 Time taken to save based on weekly deposit of $400
Combined Capitals $641,671

$128,334

11 years 3 months 5 years 11 months
Combined regional $394,570

$78,914

7 years 2 months 3 years 8 months

Source: RateCity.com.au, Median house prices based on latest CoreLogic figures.

Note: Does not factor stamp duty or LMI as different across each state and territory. Time taken to save factors in savings interest rate of 1.50 per cent.

Making the move from a big city to a regional area is a personal decision, and the motives to do so will differ for each individual and household.

There are also important factors to keep in mind, such as access to hospitals, schools, banks, and, in some remote areas, access to internet, when considering making that sea or tree change. All of these components should come into play when making a decision as significant as relocating.

If you are serious about making a move, you may want to consider using the higher affordability of housing as a means to save a larger deposit, i.e. 20 per cent or greater.

Lenders typically reserve their most competitive interest rates for homeowners with larger deposits, as it lowers the level of risk that you will default on the loan. Further, it should mean you can avoid paying costly lenders mortgage insurance.

Here are some low-rate home loans from the RateCity database:

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about home loans

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

What is appreciation or depreciation of property?

The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

What is the average annual percentage rate?

Also known as the comparison rate, or sometimes the ‘true rate’ of a loan, the average annual percentage rate (AAPR) is used to indicate the overall cost of a loan after considering all the fees, charges and other factors, such as introductory offers and honeymoon rates.

The AAPR is calculated based on a standardised loan amount and loan term, and doesn’t include any extra non-standard charges.

What is a fixed home loan?

A fixed rate home loan is a loan where the interest rate is set for a certain amount of time, usually between one and 15 years. The advantage of a fixed rate is that you know exactly how much your repayments will be for the duration of the fixed term. There are some disadvantages to fixing that you need to be aware of. Some products won’t let you make extra repayments, or offer tools such as an offset account to help you reduce your interest, while others will charge a significant break fee if you decide to terminate the loan before the fixed period finishes.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

Mortgage Calculator, Loan Term

How long you wish to take to pay off your loan. 

What happens to your mortgage when you die?

There is no hard and fast answer to what will happen to your mortgage when you die as it is largely dependent on what you have set out in your mortgage agreement, your will (if you have one), other assets you may have and if you have insurance. If you have co-signed the mortgage with another person that person will become responsible for the remaining debt when you die.

If the mortgage is in your name only the house will be sold by the bank to cover the remaining debt and your nominated air will receive the remaining sum if there is a difference. If there is a turn in the market and the sale of your house won’t cover the remaining debt the case may go to court and the difference may have to be covered by the sale of other assets.  

If you have a life insurance policy your family may be able to use some of the lump sum payment from this to pay down the remaining mortgage debt. Alternatively, your lender may provide some form of mortgage protection that could assist your family in making repayments following your passing.

How is the flexibility score calculated?

Points are awarded for different features. More important features get more points. The points are then added up and indexed into a score from 0 to 5.

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

What is appraised value?

An estimation of a property’s value before beginning the mortgage approval process. An appraiser (or valuer) is an expert who estimates the value of a property. The lender generally selects the appraiser or valuer before sanctioning the loan.

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.