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Could cost of living pressures start a new regional migration wave?

As the cost of living crisis continues to squeeze Victorians, many are seeking affordable housing and lifestyle alternatives in regional areas.

As a former country boy myself, it got me thinking. Could the regional migration sparked by the COVID-19 pandemic be experiencing a second wave? This time caused by the cost of living crisis.

And as a result, should we be considering buying investment properties in regional areas over Melbourne? 

The lifestyle pull of regional living

The regional allure over recent years has been driven by a multitude of underlying factors not just Covid-19 culminating to offer a desirable alternative to city living for many.

These include slower pace and reduced traffic, outdoor lifestyle, a stronger sense of community, a quieter, more natural living environment, and safety considerations, amongst others.

Melbourne vs regional: Prices 

Regional areas typically offer more affordable housing options, whether for purchase or rent.

This is evident in the median dwelling prices across major regional cities in Victoria. According to CoreLogic data, the current median dwelling prices in major Victorian regional cities are Ballarat $541,000, Bendigo: $546,000, Geelong: $728,000.

Comparatively, the median dwelling price in Melbourne is $780,000. However, it’s important to note that this figure might be skewed down due to the higher proportion of apartments in Melbourne compared to regional areas.

When we take a step back and look at the five-year percentage change from 2019 to the present, we see Ballarat, Bendigo, and Geelong have seen between a 30 to 40% increase. Meanwhile Melbourne has seen a 23% increase. 

There’s no doubt the once-off pandemic-induced shift towards regional living played a major role in driving this growth, compared to what has been a subdued Melbourne market recently.

Melbourne vs regional: Rents

The rental market in regional Victoria also presents distinct trends. Weekly rental prices for regional centres include, Ballarat: $425, Bendigo: $466, and Geelong: $524. That’s compared to Melbourne at $589.

When we look at the data of the last five years (2019-2024), we can see that regional areas recorded a 20-30% increase. Meanwhile, Melbourne saw a 24% increase

While the difference in rental prices between regional areas and the city is not as pronounced as in median dwelling prices, a lot of Melbourne’s growth has only come recently particularly in the last year, with a nearly 10% rise. 

Melbourne vs Regional: Affordability

The price difference between regional areas and Melbourne, even in rental prices, presents substantial savings opportunities for those considering regional living. 

For instance, the difference in median dwelling prices between Ballarat ($540,000) and Melbourne ($790,000) is considerable, translating to significant savings in mortgage payments or rental costs.

Moreover, regional areas further from Melbourne often offer even more affordable housing options. 

Quality, good value regional education options  

Education costs are another crucial aspect of affordability. In metropolitan Melbourne, annual private school fees can hover around $30,000 to $35,000. However, regional areas offer a more affordable alternative. 

For instance, renowned schools like Ballarat Clarendon College in Ballarat, known for their excellent VCE results, have fees ranging from $15,000 to $20,000 per year. This substantial difference in costs can be a decisive factor for families prioritising private education, while seeking a more affordable lifestyle.

Growing employment opportunities and remote working

Fast evolving technology and working trends since COVID-19 have opened up new employment opportunities in regional areas. 

The rise of remote and hybrid work models has made regional living a viable option for a wider range of professionals.

This flexibility has significantly benefited those seeking to move to regional areas without sacrificing their careers. Moreover, regional cities like Ballarat, Bendigo, and Geelong, with their well-established transport links to Melbourne, offer convenient commuting options for those who need to be in the office occasionally.

Where are people moving?

Sea Change: Areas like the Bellarine and Mornington Peninsulas, as well as locations along the  Surf Coast and Gippsland, offer seaside living with varying degrees of proximity to Melbourne. 

Tree Change: Areas around Daylesford, Hepburn Springs, Castlemaine, Macedon Ranges, Yarra Valley, and the Alpine regions are popular choices. These areas offer picturesque landscapes, a slower pace of life, and a strong connection to nature.

Regional Cities: Regional cities like Ballarat, Bendigo, and Geelong provide a compromise for those seeking the benefits of regional living while still having access to many of the amenities found in metropolitan areas. These cities offer a diverse range of services, including education, healthcare, and cultural events, often at more affordable prices compared to Melbourne. Additionally, their proximity to Melbourne and well-developed transport links make them viable options for those who need to commute occasionally.

When do people make the move to regional areas?

Regional migration tends to peak during three distinct life stages:

  1. Post-Graduation: Young graduates often seek employment opportunities in regional areas, where recruitment challenges can translate into better job prospects for newcomers.
  2. Young Families: Families with established careers and a desire to settle down often consider regional living to raise children. Access to quality education options, affordable housing, and a family-friendly environment are key considerations.
  3. Retirement: Retirees seeking a peaceful and active retirement often gravitate towards regional areas. Proximity to medical services and a range of recreational activities, such as golf, fishing, and community events, are important factors in their decision-making.

Regional growth potential in the post-pandemic era

While the pandemic-driven regional boom might not be sustainable in the long run, it’s important to acknowledge that the structural and lifestyle changes brought about by COVID-19 have permanently altered the landscape.

The rise of remote work has opened up new possibilities for regional living, making it more attractive and accessible for many. This newfound flexibility, coupled with a growing desire for a less stressful lifestyle, will likely continue to drive demand for regional properties.

However, it’s unlikely the regional price growth launched during COVID-19 will continue at the same trajectory, when compared to what has been a subdued Melbourne market in recent years. 

With Sydney’s median dwelling value surpassing $1.1 million, Brisbane’s exceeding $800,000, and Adelaide rapidly catching up to Melbourne, in the broader national landscape, Melbourne offers good value for investors.

While regional markets may experience steady growth, Melbourne’s strong fundamentals, including population growth, economic stability, and infrastructure investment, suggest that it will remain a more competitive investment option.

Take home message 

For investors, the key lies in identifying the right types of properties in both regional and metropolitan markets. Careful research and due diligence are crucial to understanding the specific dynamics of each area and making informed investment decisions.

While regional areas offer affordability and lifestyle benefits, Melbourne’s current valuation and potential for long-term growth make it the best option for investors seeking capital growth and rental yield.

Ultimately however, a diversified investment approach that considers both regional and metropolitan markets could be a prudent strategy for those

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