Want a smaller home loan? Consider regional property spots below $650,000

It’s true that in the big cities, median property prices are very high and the home loan required for such properties is a sizable ask.

For example, in Sydney the median price is about $1.2m, as per CoreLogic, and so a 20% deposit on such a home would be $240,000 - leaving a loan of $960,000 to pay off with interest. 

The interest rate you end up paying plays a crucial role on your expense ledger, which is why we encourage prospective buyers to find the best home loan rate they can. And yet, the size of the loan - largely determined by your property price - is highly important. It may be the difference between something you can afford and something that is ‘unaffordable’.

Many people regard Sydney as generally unaffordable, or at least only affordable to a small percentage of people. But that doesn’t mean you should give up on your hopes of owning property. 

Regional property is interesting right now because on the one hand some spots are going up in value, while on the other, some areas are deemed more affordable than in the capital cities. 

Yes, untangling what you might end up paying for a home in early 2024 is a bit tricky because no two suburbs are the same. And this is true in the regions, too.

Home prices in regional suburbs could be more affordable

In general, home values in regional Australia recorded a quarterly increase of 1.2% in the three months to January 2024, reports CoreLogic, compared to the capital cities' 1.0% increase over the same period.

This can be misleading though because the rate of growth across the combined regions has eased of late. CoreLogic research director Tim Lawless said this follows the sector’s ‘boom’ during the worst of the pandemic on the back of high migration and strong affordability.

“Outside of the pandemic growth between 2020 and 2022, the outperformance of regional markets relative to the capital cities is a fairly new phenomenon,” he said.

“The more recent trend where growth in regional housing values has outpaced the capital cities is attributable to a slowdown in capital city growth rates rather than an acceleration in regional growth.”

Okay, so what does that mean if you’re considering a regional purchase?

CoreLogic says that capital growth remains varied across Australia's 50 largest “significant urban areas” (or SUAs), with many of the standout performers in WA and Queensland.

For example, WA’s coastal towns of Albany and Bunbury recorded the highest quarterly rises, with value growth of 7.7% and 6% respectively, ahead of Northern NSW's Lismore (5.5%), and Townville (4.7%) in Queensland's North, CoreLogic says.

Only six SUAs recorded an annual increase of 10% or more including WA's Bunbury (16%), and Central Queensland's Bundaberg (12%) and Rockhampton (12%).

Such price growth might seem like another hurdle, but you have to remember that many regional areas have spiked from very low price points to start with. Take Rockhampton, where houses in the year January have gone up by 6% to a median of $240,000, as per the REA Group. 

Units there have spiked, too, up to about $455,000 median in the year to January - and yet the price growth has slowed and dipped lately. 

All up, these are fairly affordable price points when compared to major capitals such as Sydney, Melbourne and Brisbane. And with a little digging around, you could apply the same comparison to similar locales in regional Queensland or even New South Wales, for example. 

Some regional spots slow: New home buying opportunities?

You could also turn your attention to towns that have had recent price dips. 

For example, Tasmania's Launceston (-2.3%) and Devonport (-2%) recorded the largest quarterly price falls, as per CoreLogic. (The median on a three-bedroom house price in Launceston is $639,000, REA Group).

“The weakness across Tasmanian housing markets is broad-based but follows a solid run of growth with values up 91% over the past decade,” Lawless said.

“A combination of affordability constraints following the pandemic surge in values, negative interstate migration and a normalisation in internal migration rates are other factors that are likely contributors to the softer conditions across Regional Victoria and Regional Tasmania.”

Indeed, annual declines were recorded in 11 regional markets across Victoria, Tasmania and NSW where the coastal market of Batemans Bay (6%) had the largest annual decline (the median unit price in Batemans Bay is $555,000, REA Group).

Sure, buying in a regional spot isn’t for everyone, but for those willing to look farther afield, it may present a chance to get on the property ladder. 

Two top property questions to ask

There are two basic questions to ask yourself if you’re looking to invest in such a location: are you looking to buy in a growing market where your property will see good capital growth? Or do you want to purchase a holiday rental with potential yield returns? 

In short, you’d hope to be looking for one of these growth factors: a high growth market for business or employment, or perhaps a popular holiday destination. 

Of course, no matter what prices are doing you need to organise your finances and think about the long-term commitment of a home loan. The journey starts with some simple home loan comparisonswhich you can do right here at Mozo.