Unpacking housing affordability in regional Australia
For many aspiring home owners, the great Aussie dream of owning your own home seems to be remaining just that – an elusive fantasy that is becoming harder and harder to achieve
Many in this position might be advised to ‘move to the country’ to capitalise on lower house prices. But the option can often be ignored from a belief that incomes would also drop, making home ownership just as hard.
But what if that wasn’t the case, and prospective homeowners could find locations where housing was affordable, job prospects and incomes were good, and the dream of owning a home could be realised in a matter of years rather than decades?
The Regional Australia Institute (RAI) is now working on a new tool to provide that information.
By comparing average incomes and house prices in Local Government Areas (LGAs) across the country, we are uncovering the most affordable locations for home ownership in regional Australia – and you will be surprised with the results!
While the tool is in the final stages of development, trends have already emerged and we have found four broad types of places, each with distinct attributes. These groups of places can be characterised as:
What defines each type?
This quadrant is made up of places where incomes are high and house prices low. While this sounds like the dream to be living, when we look more closely at the LGAs that make up this group, there is more to the story.
These LGAs depend on their industries and the jobs, trades, and professions that go with them – all of which are quite specialised. This group has been created based on its high income and low house prices, but what defines it are the people and economies of high income regional LGAs. Many of these are mining regions, and when job demand and wages are high and rising, house prices usually follow soon after.
The Rolls-Royce of LGAs, this quadrant is defined by both high incomes and house prices. There are 84 LGAs that make up this group, 70 of which are from metropolitan areas (83%).
Interestingly, there are a number of Connected Lifestyle Regions that fit into this type because their incomes and house prices, although not seven figures, are above the national average.
Connected Lifestyle Regions are substantially influenced by their neighbouring metropolitan areas. People living here have high incomes and the popularity of living in the area pushes up the house prices, setting up the High-End cycle.
The Appreciating quadrant is made up of places where house prices are high but incomes are low. On the surface, this sounds like a difficult combination, but again, the LGA make-up tells another story.
The majority of LGAs in this type are situated along the NSW and south-east Queensland coast – recognisable as lifestyle havens or retiree hotspots. Many of these places have very high percentages of population aged over 65. It is likely that the senior residents are ‘asset rich and income poor’, with modest annual incomes and assets focused on housing. As these coastal towns become more popular, the value of housing appreciates.
In many cases young business owners, start-up entrepreneurs, or other working professionals may be getting priced out of the housing market in these Appreciating LGAs due to the large number of seniors ‘sitting on their nest eggs’.
The Low-cost regions have both below-average incomes and house prices.
While income is low, the number of years it would take to pay off a house in a Low-cost region with that income is considerably less than most metropolitan suburbs. This implies that perhaps Low-cost regions have very good value real estate.
More than 150 of the 244 Low-cost LGAs are in Heartland Regions (64%) which are smaller communities isolated from Regional Cities or metropolitan areas. A house in these LGAs probably comes with a sizeable piece of land.
Typically, these LGAs also do not have strong income growth, which, along with population growth, are the drivers of house price growth in the other three quadrants.
New Tool – coming soon!
While we have given you an insight into the four housing and income categories, the details about where to find these locations will be released shortly when the RAI launches its new Regional Incomes and House prices tool. Watch this space!