Top 20 for long-term growth are all regional

Posted on 10/07/2015  
Top 20 for long-term growth are all regional

The top 20 locations in Australia for long-term capital growth are all regional locations.

That may surprise many people because the general theme in media is that the capital cities out-perform their regional markets.

The misconception arises when research houses spit figures out of their computers and rush them off to media without providing any analysis of the realities behind the generalised figures.

A general figure describing growth in regional New South Wales will often produce a low growth figure because there are lots of mediocre small town markets, which drag down the average. The generalised number for regional Queensland will be low because there are numerous markets in decline, thanks to their links to the resources sector and/or developer oversupply.

But the best individual towns often deliver higher long-term growth than the best of the capital city suburbs.

The latest Hotspotting survey for the Capital Growth Superstars report - examining long-term capital growth rates for every suburb and town in Australia - shows that, once again, the best growth rates are all regional.

The best of the capital cities are two suburbs of Darwin, Gray and Fannie Bay, which average 10.2% per year. But that’s barely good enough to make the Top 20 list for regional Australia.

The Top 20 regional locations have growth rates ranging from 10.2% to 20.7% per year.

Most of them are mining towns, resources regional centres or country towns boosted by recent resources activity. This is despite the sharp decline in prices in many resources-impacted towns over the past 2-3 years.

But the No.1 location in Australia for long-term capital growth is not a mining-related location. It’s the oddly-named Humpty Doo, a town of 6,000 about 40km from Darwin on the road to Kakadu National Park. It has a capital growth rate of 20.7% per year, largely because of growth generated by the outward sprawl of Darwin.

Newman, an iron ore town in the Pilbara region of WA, is No.2 with a price growth average of 18% per year over the past decade. This is actually a significant drop on the town’s peak, about three years ago, when it averaged 30%-plus as the median price reached $780,000. It has dropped back to $685,000, according to the latest figures, but the growth rate is still the second best in the nation.

Let’s be clear. I don’t advocate investing in mining towns or mining regional centres. They are just too volatile and too high risk.

A few short years ago the iconic coal-mining town of Moranbah in Queensland had a long-term capital growth average above 30% per year. Back then its median price was $750,000. Today it’s $250,000 and the capital growth average for the past 10 years is now minus 0.2%.

In other words, all that capital growth since 2005 has been wiped out and values are now lower than they were 10 years ago.

Moranbah is the most extreme boom-bust story I have encountered in Australian real estate, but there are other mining-impacted locations which have soared and are now very busy plummeting.

Port Hedland once had a median house price above $1.2 million and a capital growth rate close to 30% per year. Today the median is around $800,000 and the capital growth rate has dropped to 11.6%.

That’s still good enough to rank No.10 in Australia and it means that if you bought there 10 years ago you’re still well in front. But if you bought there three years ago, you’re feeling a tad sick.

Despite the sharp decline in their markets in recent years, mining towns and resources regional centres still have the highest long-term capital growth rates in Australia – other than Humpty Doo. By comparison, the best of the capital city suburbs fade into insignificance.

 

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