Media: By Michael Parris February 17 2023
Hunter house price changes are not linked to Sydney’s because it is too far away, a new study has found.
The research co-authored by University of NSW housing economist Chyi Lin Lee found “strong house price linkage between Greater Sydney and each of the cities in the Illawarra, while there is no comparable evidence for the cities in the Hunter”.
“Out-priced” Sydney residents were far more likely to flee to the Wollongong area than Newcastle to escape an overheated property market.
“Our findings show that a few factors like travelling time, distance and net migration determined whether a regional area’s house prices moved in similar ways to Sydney’s,” Associate Professor Lee said on Thursday.
“Besides market fundamentals, we found that connectivity plays a vital role in whether a region’s housing market becomes pinned to Sydney’s housing market.
“For example, cities in the Illawarra region like Wollongong, Shellharbour and Kiama are directly pinned to Greater Sydney house prices, meaning that if prices go up or down in Sydney then we can expect to see its impact on these regional places.”
The study said house price fluctuations in the Hunter were more likely linked to “local factors” and “market fundamentals” such as housing supply and demand than to changes in Sydney prices.
Wollongong is 45 minutes closer than Newcastle to central Sydney by car or train. Kiama, 40 kilometres south of Wollongong, is also closer than Newcastle to Sydney.
The University of NSW study used house price data from 1991 to 2017, before the COVID-inspired real estate boom sent prices skyrocketing across Australia.
Newcastle’s median house price jumped to $919,000 last year before slipping to $815,000 last month. Wollongong’s median is still $1.077 million, down from a peak of $1.285 million in April 2022.
Committee for the Hunter chief executive Alice Thompson said the study confirmed the Hunter was a large, relatively self-contained economy which benefited from its proximity to Sydney but was not dependent or pinned to its economic factors.
“This diversification is healthy for NSW, making the state more resilient to shocks that hit Sydney and its linked metro markets,” she said.
“This is a key message we have provided to governments on why more investment in the Hunter is important and will create enduring dividends to the state and national economy.”