Understanding the interconnectedness of house prices between cities and regions during COVID-19: Evidence from Australia
The COVID-19 pandemic disrupted economies and lifestyles worldwide, profoundly altering housing markets. In Australia, the pandemic triggered significant shifts as remote work and lifestyle changes prompted many to leave cities for regional areas. This research examines how the pandemic influenced the relationship between urban and regional housing prices, focusing on whether these markets became more interconnected during this period.
Our findings show that the pandemic substantially increased the linkage between housing prices in cities and regional areas. Pre-pandemic, these markets operated more independently. However, urban centers like Sydney and Melbourne emerged as key drivers of price changes in nearby regional markets during the pandemic. Factors such as migration to regional areas, reduced commuting requirements, and preferences for larger, more affordable homes contributed to this dynamic. Regional hubs like Wollongong and Newcastle saw price growth surpassing Sydney's central business district. Similar trends were observed in Melbourne and Brisbane, a "doughnut effect" phenomenon where regional housing markets gained prominence.
These results significantly affect regional planning, housing affordability, and economic development. The surge in migration has strained regional housing markets, escalating prices and affordability challenges. Policymakers and urban planners can use these insights to enhance housing supply, infrastructure, and economic strategies in urban and regional contexts. Real estate investors can also leverage this understanding to navigate a rapidly evolving market. This study underscores the need for strategic interventions to manage the interconnectedness of housing markets in a post-pandemic world.
Jayawardena, N., Roca, E., Morawakage, P. S., Liu, B., Earl, G., & Singh, V. (2024). Understanding the interconnectedness of house prices between cities and regions during COVID-19: evidence from Australia (external link, opens in new window) . Regional Studies, 1–16. DOI: 10.1080/00343404.2024.2425215