Affordability: Pam Walkley Beyond the hotspots
Regional cities and towns are an attractive alternative for first-time buyers
Regional areas provide some of the most pleasant places to live in Australia, with open spaces, clean air, limited traffic hassles, beautiful vistas and, best of all, houses that cost a fraction of those in the cities. But the downside is that many of these towns and cities have a lack of jobs and limited growth prospects. And for retirees some also have limited health services.
Of course, this is not true of all regional areas, as highlighted in a new report from PRDnationwide, the Top 10 Affordable Major Regional Areas.
To assist those seeking an affordable property, the report highlights regional areas across Queensland, Victoria and NSW, says Diaswati (Asti) Mardiasmo, national research manager at PRDnationwide. “These key areas identified not only highlight price affordability but also solid fundamentals for sustainable growth.”
The areas are Toowoomba, the Fraser Coast and Ipswich in Queensland; Tamworth, Maitland, Wagga Wagga and the City of Shoalhaven in NSW; and Ballarat, Greater Bendigo and Shepparton in Victoria.
“As capital cities, especially Sydney and Melbourne, continue to see property price growth and inflation levels beyond the standard wage increase, the battle to enter the property market has become more difficult,” says Mardiasmo.
The research concentrated on the three eastern states for a couple of reasons.
“First of all, the question of affordability – which is what the report is mainly geared around – is more of a problem on Australia’s east coast. Secondly, we wanted to ensure that regional areas nominated fitted into the selection criteria and we found that there was a larger volume of those in the east coast states,” says Mardiasmo. (See Selection criteria.)
Anyone looking to buy a home or invest in residential real estate in regional or outer urban areas should not only pay attention to short-term price growth, says Mardiasmo. “Look at price growth over the past five to 10 years. It partly depends on your motivation. Some investors are out to make a quick buck but most home buyers and investors want stable, positive price growth indicating continuing capital growth.”
Checking vacancy trends is especially important for investors, but also some home buyers will eventually move and may want to rent out their property, so choosing areas with enough rental demand is important, she says.
Also tied to rental demand is jobs growth, so find out from the local council what future developments there are in the pipeline. Some councils hold regular sessions where they outline their vision for the next 10 years. “Remember, no jobs, no growth,” Mardiasmo points out.
If you stick to areas with good connectivity to major hubs – especially within a twohour commute to major centres like Sydney or Melbourne – these should flourish. Make sure there is reliable and pleasant public transport available, if not now at least planned for the future, she says.
Retirees moving to regional areas will need to make sure there are reliable health facilities. The good news is that lots of regional hospitals are getting an upgrade, says Mardiasmo. Families with children will pay special attention to educational and recreation facilities.
“The areas we have chosen are not in ‘Woop Woop’, they all have good amenities including entertainment and shopping. They are highly liveable,” she says.
With mortgage rates at an all-time low and the likelihood that these will rise, buying regional or outer-urban property means less of your disposable income will go towards paying the mortgage, which means more to sustain a better lifestyle.
Selection criteria
Affordability – areas with a median below the average loan for each respective state. Property trends – indicative of future growth such as median price, low vacancy rates and good rental yields.
Infrastructure – it has the capacity to improve surrounding property values.
Commercial prospects – interest from private entities indicate economic growth and employment opportunities.
Other economic factors that indicate a vibrant and growing area such as population growth, income and wage growth, strong employment rate and local council plans.
PRD nationwide’s top 10 1 TOOWOOMBA QLD
Toowoomba, 127km from Brisbane, with a population of approximately 163,000, is Australia’s second largest inland city. It’s experienced 15-year price growth (to 2016) averaging 7.9% for houses, 8.4% for units and 9.1% for vacant land.
A key development has been the Brisbane West Wellcamp Airport, 15.6km from the Toowoomba CBD, which caters to international flights.
During 2017 Toowoomba is set to see about $615 million in new project development, demonstrating substantial interest from private entities.
2 FRASER COAST QLD
The Fraser Coast, about 276km north of Brisbane, has a population of about 102,000, hosts over 32,000 local jobs and produces a gross regional product of $3.18 billion.
Over the 15 years to 2016, Fraser Coast Regional Council has experienced an average annual price growth rate of 7.2% for houses, 8.8% for units and 7.7% for land.
Over 2017 there will be about $704 million in new developments, including the Mary Harbour master planned community, valued at about $500 million. Expected to start in December 2017 it will add 1097 residential lots to the market.
Local and state government are investing an estimated $69.1 million in infrastructure this year and private entities are showing interest with about $66.4 million of commercial projects.
3 IPSWICH QLD
Ipswich is located about 42km from Brisbane, and combines affordable housing with direct train transport to the Brisbane CBD. Its population of about 190,125 is expected to grow to 435,000 by 2031.
Over the 15 years to 2016, Ipswich has experienced an average annual price growth rate of 9.8% for houses, 9.5% for units and 9.9% for land.
This year new development valued at about $2.3 billion is planned, with the majority commercially focused.
4 TAMWORTH NSW
Tamworth, about 405km from Sydney, is famous as Australia’s country music capital. It’s one of the largest councils in the state with a population of over 58,000.
Over the 15 years to 2016, Tamworth experienced an average annual price growth rate of 6.6% for houses, 5.8% for units and 7.5% for vacant land.
In April 2017 Tamworth’s rental yield for all houses was 5.3%, well above Sydney’s 2.7%, making it an attractive place for investors.
This year Tamworth is set to see $125 million of new development start, mostly from the commercial sector.
5 MAITLAND NSW
Maitland, about 164km from Sydney, is set on rich agricultural land with a diverse range of economic activities including mining, agriculture, tourism and manufacturing. The population is 76,607.
In the 15 years to 2016, the area has seen an average annual price growth of 7.4% for houses, 6.1% for units and 7.4% for vacant land. House and unit stock grew 7.1% and 13.8% respectively in the year to 2016.
An estimated $365.4 million of new projects will start this year ($234.5 million residential and $83.6 million commercial), signalling economic growth.
6 SHOALHAVEN NSW
Shoalhaven City Council, about 192km south of Sydney, has a population of 99,299. It’s known for its national parks, coastal waters and lakes.
House prices have grown 5.9% a year over the 15 years to 2016, with unit prices growing 5.4% and vacant land 9.2%.
Shoalhaven City Council has recorded annual growth levels well above the 15-year average in the three years to 2016: houses 9.9%, units 9% and land 19%. In 2017, $542.1 million of new development is expected to start, with infrastructure valued at $313 million the main focus.
7 WAGGA WAGGA NSW
Wagga Wagga, about 459km south-west of Sydney, is the state’s largest inland city with a population of 65,537. It’s host to about 5443 local businesses, with gross regional product estimated at $3.6 billion.
Over the 15 years to 2016, the area has seen annual price growth of 6.3% for houses, 5.8% for units and 6.1% for vacant land. Yields, which have remained above 4% since 2009, have been a drawcard for astute investors.
Wagga Wagga is set to see $329.2 million of new projects this year, including a medical school valued at about $50 million.
8 BALLARAT VIC
Ballarat, about 115km from Melbourne, has a population of 99,841, making it the third largest inland city in Australia. House prices have increased an average of 6.5% a year in the 15 years to 2016. Unit prices and land prices respectively grew 4.6% and 6.5% .
Unlike many other country areas, Ballarat has continued to see positive growth for every year from 2002 to 2016, indicating that the market is strong and stable. About $211.7 million in new developments is starting this year.
9 BENDIGO VIC
Bendigo, about 150km from Melbourne, with a population of about 92,888, is the fourth largest city in the state.
House, unit and land prices have grown 6.8%, 5.1% and 8.7% a year respectively for the 15 years to 2016.
In the two years to 2016, annual growth rates for vacant land have been particularly strong at 11.8% (2014-15) and 13.1% (2015-16), due mainly to an increase in demand for land subdivision. This year will see about $55.8 million of residential development, $55.8 million of infrastructure investment, including the Bendigo airport redevelopment (stage 2), and commercial and industrial development valued at $36.3 million.
10 SHEPPARTON VIC
Shepparton, about 188km from Melbourne, has a population of about 67,072. It’s host to over 6100 businesses and 30,000 local employment opportunities. House, unit and vacant land prices have increased 5%, 3.2% and 5.6% a year respectively in the 15 years to 2016. Rental yields compare favourably with Melbourne’s 3.2% for houses and 4.3% for units. New development worth $226.2 million is expected this year, most in infrastructure and focused on a rebuild of the Shepparton hospital.
Yields of 4%-plus since 2009 have been a drawcard for astute investors