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Business trends

Australian rural property booms as homebuyers flee cities

Coronavirus pandemic spurs urban residents to reassess their lifestyles

JAKARTA -- When Australia's nationwide lockdown began on March 23, real estate agent Christian Sergiacomi's phone went dead. But since travel restrictions around the country were eased in June, his phone has not stopped ringing.

"At the end of every conversation, I check my messages and see four or five missed calls," said Sergiacomi, director of Pacifico Property in Byron Bay, a trendy beach town 624 km north of Sydney.

"Buyers from Sydney and Melbourne are driving the market," Sergiacomi added, "and that is a large result of remote working -- people being told their businesses and offices will never be the same so they want to pack up and move to the coast or country.

"We're also getting lots of inquiries from expats living overseas who want to move their families here. The market is so hot we've sold three properties to interstate buyers who only had video tours -- something I never thought was possible before the pandemic."

Sergiacomi's most recent sale was a four-bedroom family home that adjoins the commercial space occupied by the Top Shop cafe, a favorite among locals, including Australian actor Chris Hemsworth, who owns a mansion and 35-hectare ranch at Broken Heads, 12 km to the south.

The property went for AU$4.2 million (US$3 million).

The average price of a free-standing home in Byron Bay has climbed 21% over the past year, a sign Australians are piling into the most attractive rural areas as the pandemic forces many to reassess the benefits of city living.

It is one of scores of popular destinations experiencing double-digit price growth, according to the website Domain House Price Reports. Others include the Cassowary Coast, the closest point to the Great Barrier Reef in Far North Queensland, up 15%; Mansfield, a small town in the foothills of the Victorian Alps, up 13.3%; and And Tasmania's Huon Valley, up 21.9% since the start of the year.

"I've been watching the data globally," said Nick Bond, a property agent with Harcourts Huon Valley, "and what we are seeing is the cities dying off pretty quickly and people moving to rural places."

Bond recently sold a Federation-style homestead on 50 acres [20.2 hectares] for AU$1.45 million -- AU$250,000 more than the reserve price set by the owner.

"The attraction here is obvious," Bond added. "We're less than an hour from the city, you have the World Heritage area and high mountains with snow behind us, river running through it, rolling green hills. It's the closest thing you get in Australia to New Zealand or Europe."

These trophy destinations skew the increased dwelling values in rural areas, which actually fell 0.1% in the quarter ending June 3, according to CoreLogic's most recent Home Value Index. But rural property markets in Australia are showing much more resilience than those in cities, which have fallen 2% in the same period.

In Sydney, declines in property values match the national average. In Melbourne, currently facing one of the world's strictest lockdowns to curb a wave of COVID-19 infections, prices have tumbled by 3.5%.

The rental market is following a similar trajectory. In Melbourne's inner-city, the number of advertised rental properties has skyrocketed by 57% while rental listings in Sydney's inner-city have seen a 53% jump, according to the ANZ CoreLogic Housing Affordability report from July.

The median rent for houses in Melbourne is now $430 per week. In Sydney, it's $525. But in Byron Bay, "you can't find a house for less than $700 a week," said Barel Wachtel, a former Sydney-Sider who moved to the beach town in March. "I love Byron for the community and nature," Wachtel said. "Sydney is far from its best right now."

Data by buyer's agency Propertyology shows that 39 of 52, or roughly 75%, of Australia's population centers have a housing undersupply with residential vacancy rates below 3%. Five of these centers are cities, but the remaining 34 are in rural areas.

Independent property analysts say COVID-19 is accelerating changes that have been evident for years.

"If you look at the data from the Australian Bureau of Statistics, in the three years ending June 2019 the net population of our eight capital cities dropped by 52,650," said Simon Pressley, a property analyst with Propertyology. "And that is net movement that was heavily pulled the other way by international migrants who nearly all choose Sydney or Melbourne to live in because they're the only places they know.

"But domestic migrants who make more informed decisions are leaving the cities because of congestion and affordability. ... COVID-19 has significantly accelerated the trend."

Peter Koulizos, a property lecturer at the University of Adelaide, further dilutes the theory of a COVID-19-inspired change in Australia.

"I have not heard anecdotal evidence that people are making the big move, because it costs a lot of money to sell one property and buy another," he said. "What I am hearing is that there are lots of people looking to rent short-term, three to six months, in lifestyle areas away from the capital cities because the boss said you can work from home, which is creating a lot of demand in regional areas that are relatively close to the capital cities."

Eliza Owen, head of research at CoreLogic Australia, concurs. "An emerging narrative around regional dwelling markets is that they may see increased demand as a result of COVID-19," she said. "This is thought to be driven by the way the pandemic has forcibly introduced remote work for knowledge-based or clerical workers."

The "positive outcome is short term and more likely tied to cyclical patterns than changes in demographic trends," she said, adding that growth rates in rural areas "could nudge into negative territory later this year without significant improvement to economic conditions. And in the wake of the pandemic, the return to an office environment may still be desirable for some employees and employers."

But according to Adam Woods, a realtor with McGrath Central Tablelands in Mudgee, a picturesque country town with well-preserved colonial buildings and world-class wineries 260 km northwest of Sydney, the changes are here to stay.

"In 21 years in the business, this is the busiest I have ever seen the market," he said, listing a number of luxury four- and five-bedroom homesteads set on acreages with swimming pools, horse stables and all the trimmings that recently sold for more than AU$1 million. "We don't know how long it will continue but what COVID-19 has done for a lot of people is let them slow down and start thinking about all the hours they spend stuck in traffic and cubicles in the sky. We often make big life decisions like real estate purchases in times of crisis, and that's exactly what's happening now."

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