While it is common knowledge that households priced out of Sydney tend to migrate to the coastal regions of NSW, few analyses have been able to explain exactly how migration from Sydney’s property market impacts regional property prices. 
A new study, published in Habitat International and co-authored by Associate Professor Chyi Lin Lee, a housing economist at the School of Built Environment at UNSW Sydney, provides an explanation for the phenomenon.
The researchers analysed more than 30 years of data to investigate the link between house prices in some coastal regions of NSW and Greater Sydney. 
They found factors such as travelling time, distance, and net migration determined whether a regional area’s house prices moved in similar ways to Sydney’s. 
In addition to market fundamentals such as interest rates, GDP, and population growth, the study considered deeper factors that impact regional housing markets, including connectivity and housing supply.
“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,” Associate Professor Lee said. 
“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.” 
However, researchers found no comparable evidence for house prices in the Hunter region. 
The results suggested that improved transport connections like highways and public transport between Illawarra and Sydney CBD create the conditions for a strong house price link between the locations.
Associate Professor Lee said the findings can give people in the surrounding regions an idea of what to expect in the property market, given the recent market corrections taking place in Sydney. 
He said the study’s implications for policymakers were that there is more nuance and even a limit to how big cities affect regional house prices. 
“Our findings could also inform housing policymakers that seek to create regionally balanced cities across a state,” Associate Professor Lee said.
The study is the first to turn its attention to the regions and investigate how they link up to major cities, validating what is observed anecdotally with hard data explanations. 
The results suggest that regions that improve their connectivity to CBDs can expect an increase in the value of properties and land.