Regional buying experienced a surge in 2021 as buyers capitalised on the lower median property prices and working from home became the norm.

According to ABS statistics, 70,900 people migrated to regional Australia throughout the 2020-21 financial year, while people living in capital cities declined by 26,000.

PRD's latest research revealed the 10 most affordable regional areas across Queensland, NSW, Victoria and Tasmania, which are 'very attractive' for first home buyers looking to get a foot on the property ladder.

PRD Chief Economist Dr Diaswati Mardiasmo said this report comes as housing affordability continues to be a pressing issue, especially in capital cities and metro areas.

"Over the past 12 months to December quarter 2021, the weighted average Australian median house price increased by 25% to $1,021,710. In the same period, median family weekly income also grew by 5.3%," Dr Mardiasmo said.

"But this is nowhere near median house price growth, thus the proportion of family income needed to meet loan repayments increased to 37% and the home loan affordability index decreased by 10.6%."

Dr Mardiasmo called first home buyers the 'winners' of 2020 - thanks to government incentives and a historically-low cash rate - but the tides have changed.

"First home buyer activity declining by 18.3% between the December quarters of 2020 and 2021," she said.

"This was driven by the surge in property price growth in the past 12 months to a level that out priced first home buyers, and the end of historical low fixed interest rates by some financial institutions."

Top 10 affordable regional areas in Australia

Five selection criteria was used to select the top 10 regional areas: affordability (median house price); property trends; investment opportunities; project development; and the unemployment rate.

Three local government areas (LGAs) in Queensland, NSW and Victoria have been selected as well as one in Tasmania. 

Location Median prices - house/unit House/unit rental yield
Whitsunday, QLD $400,000 / $300,000 4.2% / 8.2%
Toowoomba, QLD $430,000 / $310,000 4.8% / 5.8%
Mackay, QLD $412,000 / $309,431 5.9% / 6.4%
Upper Hunter, NSW $373,000 / $231,000 6.1% / 6.4%
Wagga Wagga, NSW $436,250 / $259,950 4.0% / 3.9%
Griffith City, NSW $464,250 / $350,000 3.9% / 5.4%
Northern Grampians, VIC $287,500 / $285,750 4.2% / 3.3%
Wodonga, VIC $450,000 / $288,250 4.7% / 5.1%
Greater Bendigo, VIC $510,000 / $368,000 3.9% / 5.7%
Central Highlands, TAS $250,000 / $180,000 4.2% / 6.6%

Source: PRD

Home loan affordability in Australia has been at the lower end of the home loan affordability index - which reflects the ratio of median family income to average home loan repayments - since its peak in 2001.

"In the past 12 months, Tasmania has declined to sit on-par with Queensland’s affordability, at 30.0 index points," Dr Mardiasmo said.

"Victoria (26.8 index points) sits on par to the Australian average (27.0 index points), while New South Wales (21.5 index points) is the least affordable state for buyers.

"Victoria interestingly saw the highest decline in the home loan affordability index, by -13.5% in the past 12 months. This is closely followed by New South Wales (-12.6%)."

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