Investors and first-home buyers who stay out of the market in 2020, particularly in regional Australia, are missing a huge opportunity to take advantage of affordable prices, financial incentives and value growth.
Tim Graham, COO of property and financial services company Reventon, says there are plenty of opportunities outside of the expensive capital city markets which first-home buyers and others should be jumping at, particularly with grants and other incentives currently available.
Graham says massive infrastructure spending in many of Australia’s major regional towns make them an appealing place to live and work with plenty of amenity.
“These are not tiny little rural areas we are talking about, when we are talking about big regional areas, cities like Geelong, Ballarat, Bendigo, the Sunshine Coast and Newcastle.”
Graham says those markets should appeal not only to owner-occupiers but also investors.
He says a home in Melbourne or Sydney would come with a mortgage of $800,000 to $1 million but in a regional area like Geelong, there were still homes available for around $400,000.
Recent research by Propertyology reveals major regional centres have been outperforming capital cities for the past five years.
Sydney prices increased 22% on average over five years, but areas like Byron Bay, Ballina, Coffs Harbour, Port Macquarie and Wollongong have done a lot better than that, growing at double the Sydney rate in some cases.
Melbourne prices increased by 40% in the past five years, but Geelong and Ballarat performed better and in Queensland, Brisbane recorded moderate growth but the Sunshine Coast and Gold Coast did considerably better.
Graham says many regional areas offer investors an opportunity to secure something for less than $500,000 which would rent well and pay its own way.
CoreLogic figures reveal the best annual growth in the past 12 months has been in regional Tasmania and Darwin where prices increased by 7.5% while in regional New South Wales they were up by 5.5%.
Some regional locations are performing much better than that including the Sunshine Coast where some suburbs increased by around 30%.
“In Melbourne and Sydney, the affordability is just not there for many families now,” Graham says.
“Instead, they are choosing lifestyle, they are choosing affordability, moving to areas like Geelong and Ballarat which are great examples of somewhere within an hour or so on the train.You can sit and watch Netflix and not get a single red light on the way to the CBD.
“When we talk about the commute times that’s a big thing but second to that is the amount of money being spent in these regional areas in the last few years on health and other facilities.
“And it’s not just the affordability play for the younger generation, I think there is a really big issue of affordability for downsizers as well.”
Graham says retirees who don’t have huge superannuation balances can sell their expensive homes in Melbourne or Sydney, move to a regional city well serviced with health facilities and retire debt-free with some money left over.
For investors many regional cities have extremely low vacancy rates, some of the lowest on record, with dozens of applications for every property that becomes available for rent.
But not all regional cities are going to give investors a decent return.
Graham warns against buying based on price point alone, particularly if your aim is capital growth in the next five to ten years.
He says regional towns with smaller populations may not have the economy to drive future price growth.
Investors should focus on regional centres with a decent population base to begin with and evidence that population is likely to growth.
It needs to have job nodes and infrastructure such as schools, retail and hospitals and investors should look at what type of industries drive the local economy and whether they can withstand a future downturn.
“We need to know that the economy is robust,” he says.