By Terry Ryder, 10th September 2012
Regional centres dominate the Top 10 list in the new edition of the National Best Buys 2012-13 report – for good reason.
The best of the regional centres have been out-performing the major cities and the sea change areas for some time. (http://www.hotspotting.com.au/report/50-national-top-10-best-buys-2012-13).
They offer the most compelling set of parameters of any of the investment choices: affordable prices and good rental returns, under-pinned by multi-faceted economies with identifiable growth drivers.
Many of the inner-city markets in our capital cities cannot satisfy these criteria, which is why so many of them have poor capital growth rates and low rental returns.
Many “experts” recommend investors buy only in the “prime” inner-city suburbs. Usually they are arguing from the standpoint of vested interest – they have businesses based on people buying inner-city property!
The research constantly contradicts their advice, which is often self-serving and dishonest.
Another standard piece of bad advice from “experts” is to follow population growth. This is both simplistic and dangerous. Buying in areas of high population growth, without regard to other factors, is fraught with peril - as many people have found after putting their life savings into apartments on the Gold Coast.
Following population growth is looking at only one side of the equation – demand. What about supply? Supply is the problem with high-population-growth areas, because developers flock to those areas and invariably build too much new stock.
It’s significant that the three worst locations in Queensland for capital growth over the past five years are the three highest population growth areas: the Gold Coast, the Sunshine Coast and the Fraser Coast. All have suffered from over-supply and nothing suppresses capital growth like a surplus.
It’s the same with Victoria’s No.1 population growth area – Wyndham City in the south-west of the Melbourne metropolitan area. Many suburbs have double-digit vacancy rates because too many house-and-land packages have been produced.
By contrast, regional centres like Dubbo in New South Wales and Bendigo in Victoria offer most of the elements investors should be seeking: diverse economies, business expansion, ambitious local councils, investment in infrastructure, major new developments and affordable housing.
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