Much has been written about the affordability of the Sydney and Melbourne property markets, and about the capital city property markets in general.
But what about buying property in regional Australia? It’s a vast area that close to 8 million people – or almost one-third of Australia’s population – calls home1. Read on for more information about why, and where, to buy property in regional Australia.
Why go regional?
For owner-occupiers, regional locations can be attractive for a number of lifestyle reasons including:
For investors – or those who would like to invest in property - lower property prices equal lower deposits, making regional areas more accessible than capital city markets.
Buying a regional investment property while renting a place to live in a capital city – an investment strategy known as rentvesting – could allow you to get an affordable foothold in the property market without sacrificing a city lifestyle.
And even if you can afford Sydney and Melbourne prices, investing regionally instead gives you the opportunity to create a diversified property portfolio - you could potentially buy two or even three properties in different regional locations for the cost of a single property in Melbourne or Sydney.
What to consider
It’s important to remember that in a country as large as Australia, conditions in individual regional property markets are diverse.
And not all regional locations are affordable - for example, the Shire of Wingecarribee, in the NSW Southern Highlands, is the third most expensive property market in Australia, behind Sydney and Melbourne, with a median house price of $750,000, closely followed by Wollongong at $740,000, with both ranking ahead of capitals such as Brisbane, Canberra, Hobart and Perth2.
Some things to look for when considering a regional investment location include3:
population growth, or at least a stable population, which indicates a steady supply of tenants, buyers, and a thriving community
good infrastructure, such as fast rail links and freeways, which could make the location attractive to commuters
proximity to a capital city, which would also make the area commuter-friendly
low numbers of vacant shop fronts on the main street, which is an indicator of a strong local economy
major developments or infrastructure projects being planned that could lead to population growth or make the area more attractive to buyers leading to a rise in prices
a diverse local economy that isn’t reliant on any single employer so that a business closure wouldn’t have an adverse effect
the presence of a hospital, university or military base which offer steady and consistent employment, and a solid base of tenants and purchasers.
Specific housing market measures such as rental yields and vacancy rates, and sales stats such as time on market, level of price discounting and auction clearance rates can also be an indicator of property demand.
In its latest regional update, CoreLogic revealed that4:
The top performing regional property market in terms of capital growth in the 3 months to June 2017 was the Illawarra in NSW (which covers the south coast area around Wollongong), where houses prices rose 15.8% and units were up 14.4%. Newcastle and Lake Macquarie, also in NSW, were the next best performers, with locations close to the booming capital cities and coastal towns performing well in general.
The worst performer was Townsville, where values for both houses and units, as well as rental rates, fell in the year to June 2017, with Townsville also experiencing the biggest fall in sales in the year to May 2017.
Mining towns were found to be stabilising but still doing it tough, while larger coastal regional markets were forecast to continue to show further growth during 2017.
Shane says that Townsville has been suffering from the slump in mining investment, but adds that as the mining slump is close to bottoming out, mining towns could be worth looking at as they may be where bargains can be found.
For more help
Market conditions can change quickly, so it’s important to do thorough research and understand the risks associated with buying a property. It’s also important to get your budget in shape before you begin.
If you’re looking to buy in an unfamiliar market, or somewhere a long way from where you live, you could consider using a buyer’s agent to help with your purchase.
1 Australian Bureau of Statistics, Regional population growth, Australia, 2016, see table.
2 Domain, State of the Market Report, September 2017.
3 Elders Real Estate, Buying an investment property in regional Australia.
4 Core Logic, Illawarra retains title as top performing regional area.