Regional Australia should be front and centre in any discussion about real estate growth and where people should buy, but often it is overlooked by mainstream media and by investors who think the best prospects are always found in the big cities.
In the past two years, the strongest markets in the nation in terms of the number of locations delivering strong price growth have been Tasmania and Regional Victoria.
And in the past 12 months, many locations in Regional South Australia have recorded good growth in the median prices, but few Australians would know about it.
In terms of uplift in sales volumes in late 2019/early 2020, leading markets across Australia included the regional areas of New South Wales, Queensland and Victoria.
Dozens of locations in the eastern states were showing strong upwardly-mobile trends in their property markets as we entered the coronavirus period.
The location-by-location analysis conducted every quarter by Hotspotting shows that markets with rising prices are the rule, not the exception in these regional areas.
A characteristic common to many of these markets is very low vacancy rates, as well as strong and diversified economies and increasing demand for real estate.
This means these locations were solidly-placed to withstand the worst of the virus crisis and to resume their growth paths once we get to the other side of the period of restrictions on normal life.
In some ways, regional areas are better placed to ride out the virus crisis than the big cities.
Regional cities and towns are less directly impacted by the coronavirus, with most of the cases focused on the larger population centres.
And while there are direct and indirect impacts from the social isolation measures mandated by state and federal governments, many regional centres have economies well-placed to ride out the tough period and recover quickly once the restrictions are eased.
Some sectors of the economy are thriving in these unusual times, including supermarkets (and those who supply them) and bottle shops (and those who supply them). This means regional economies based on agriculture and viticulture are likely to do better than many others.
The resources sector is another steady sector and one that is expected to enter a strong growth phase as we emerge from the period of restrictions.
The government sector is crucial in this period of economic upheaval and is more likely to be adding jobs than shedding them. Many of the locations featured in this report have strong government sectors.
This suggests that locations with diverse economies that include elements of those sectors mentioned above will be the most resilient during the virus crisis.
Orange in New South Wales has a tourism industry that will be impacted, but it also has strong sectors in government departments, medical services, education, agriculture and viticulture, manufacturing and mining (with the Cadia gold mine embarking on an $800 million expansion).
This suggests that this important regional city is better placed than most to remain resilient during the national economic downturn and resume a solid growth path on the other side.
Townsville in North Queensland will also see impacts on its tourism industry but will be buffered by its big military economy, its importance to the resources sector, and its strong economic sectors in government administration, education, medical services and manufacturing.
Queanbeyan will be bolstered by its proximity to Canberra, the city that will weather the economic crisis the best because of its status as the national capital with an economy based on government services (and always the lowest unemployment rate in the nation).
For these and other reasons, thinking regional makes sense for property investors contemplating how to negotiate this unusual period in our history.
Looking beyond the virus crisis, the key factor for property investors relates to the underlying fundamentals. And the best of Regional Australia ticks all of the boxes.
I often describe buying in good regional areas as a win-win-win scenario:
- Win 1 is cheaper prices than the capital cities,
- Win 2 is higher rental yields, and
- Win 3 is the potential for strong capital growth.
