Pam Walkley Escape the city limits
Regional areas that tick the right boxes provide an affordable way into the market
If you can’t afford a home in a capital city, have you considered buying in a regional location? And if you want to invest in property but city prices are beyond your means, how about looking at regional areas where there are strong fundamentals to support rental markets?
Regional areas can provide great lifestyles, particularly for those who work in the local area or telecommute for at least part of the week. But regional buyers, especially investors, first need to make sure the area they choose stacks up.
Questions you should ask include:
1. Does the area have a strong economy with several sources of employment? Growth in median household income outpacing inflation is a good indicator. New businesses being established in the area – and not too many closing down – is a good sign.
2. Is the population increasing? Are there long-term projections for at least steady growth?
3. Is the area economically diverse? It’s risky to invest in a town that relies on one industry. Look for towns close to prominent regional centres with large established populations.
4. Does the area have a pipeline of commercial and infrastructure projects? A big development especially can be a major drawcard.
5. Is the area a tourist hotspot? If so, steer clear as these can be unstable and seasonal and easily fall out of favour.
If affordability is your key reason for going bush, a report from PRDnationwide, “Ready, Set, Go Regional – Top 12 Affordable Hotspots 2019”, is worth a look (see prd.com.au).
To be included, areas had to have median prices below the maximum affordable property sale price (average state loan plus 20% deposit). But they also had to meet four other criteria, meaning that chosen areas stack up on far more than just affordability.
All areas had to have: at least 20 transactions in 2017 and 2018 showing price growth; on-par or higher rental yields and on-par or lower vacancy rates than their capital cities; significant projects in the pipeline; and on-par or lower unemployment than the state average.
Based on these factors, PRD deemed 12 regional locations on the eastern seaboard as affordable areas with solid fundamentals for sustainable future growth (see panel).
Tasmania’s Northern Midlands, a large, diverse area taking in the major towns of Longford, Perth and Evandale, scored the cheapest median house price for areas within reach of a big city. In December 2018 this was $298,000, according to PRD. Longterm house price growth (2009-18) has been 2% a year. And it has a strong rental market with a 0.4% vacancy rate at December 2018 and rental yields of 4.1% for houses and 5.5% for units (based on the 7301 postcode, near Launceston). PRD estimates there are $90.5 million worth of projects under way or due to start this year.
Port Macquarie/Hastings, on the mid north coast of NSW, has the highest median price of the areas selected ($554,000), reflecting its attractive climate and lifestyle. House price growth has averaged 4.8% a year for 10 years and the area is also positive for investors, with rental yield of 4.7% for units and 4.2% for houses (based on the 2444 postcode) and a vacancy rate of 1.8%. And there’s $422.6 million worth of projects in the immediate pipeline.
Ballarat is the third largest inland city in Australia by population. House prices have grown 5.3% a year between 2009-18, with a median price of $365,682, says the PRD report. Rental yields are 4.7% (units) and 3.8% (houses) and the vacancy rate is 0.9%. And PRD has identified about $806 million of projects under way or planned for this year.
Queensland’s Central Highlands is the real cheapie with a median house price of $190,000. Towns include Arcadia Valley, Blackwater, Capella, Dingo, Emerald and Rolleston. The region is rich in minerals and agriculture and claims the largest sapphireproducing fields in the southern hemisphere.
While 10-year house prices have fallen 4% a year (2009-18) there was a sharp reversal in 2017-18 when they increased by 17.6%, says PRD. Rental yields are 5.1% (units) and 4.7% (houses) and the vacancy rate is 1.9%. And there is $156 million worth of projects under way.