Buyer's Agents | Property Investors | Home Buyers | Adviseable

Adviseable Regional Australian Property

How Regional is TOO Regional?

Now you may have seen and heard me talk about new data showing regional property prices outpacing growth in capital cities. I want to issue a bit of a word of warning here because stats like this may trip up some novice property investors. The latest figures from CoreLogic found that dwelling values in regional Australia increased by 13 per cent over the past year compared to 6.4 per cent for capital cities. I think that these exceptional results may send the wrong signal, particularly to first-time property investors, that every regional location is a sure-fire investment winner.

Now many of our clients have been investing in major regional locations for years and, on the flip side, have been giving other more rural and remote locations a wide berth for a long time, too, including right now – I’ve made that mistake myself personally when I didn’t have an expert to mentor or warn me. I bought in a rural town that was heavily reliant on the mining industry, and I was completely blinded by this amazing and inflated cash flow, and then prices and rents plummeted when that one industry sector was struggling. As I’ve said before, pent up demand, and a number of other factors including record low interest rates, are motivating more investors to buy into the property market, BUT the fundamentals must stack up over the long-term for any strategic investment location.

Beware The Short-Term Trends

Adviseable loan to vaue ratio
Adviseable loan to vaue ratio

We’ve all heard that while there has been an increase in the numbers of people moving away from cities to regional areas, only time will really tell whether this trend will become permanent. Some think it will be, others think that it can’t last on this scale. And so … some property investors might be considering these short-term migration patterns, as well as the current robust price growth, as justification for buying into regional areas.   But if you’re not careful, in a year or two, you could be left with an investment property in a location where many of the new residents have already reversed their decision-making and gone back to the city. OR you’re in a location that just doesn’t stack up with regard to the basic investment fundamentals and you’ll learn a very expensive lesson. If you, like I did many years ago, bought into an area where the local economy is always reliant on one-industry, such as tourism, agriculture, or mining, then this is not akin to significant nor sustainable capital growth over the years ahead. You’re going to ride a roller coaster with many many ups and downs. Some major regional locations such as Ballarat, Toowoomba, Newcastle or Geelong had strong property markets long before the pandemic, whereas others have been struggling for years due to their remote locations, single-industry or non vibrant economies and low population growth.

Population growth alone does not a solid investment location make !!

These factors are why property investors must always consider the investment fundamentals of a location before deciding to buy real estate there. Just some of the key fundamentals include a location having a diverse and vibrant local economy, solid jobs growth, and a variety of healthy industries such as health, construction, retail, and education to adequately service its local population. In regional areas, the local economy must also be self-sufficient, which means local residents should live and work there as well as spend their money there. If you’re considering buying an investment property you must complete thorough due diligence on the future prospects of a place – rather than making decisions based on potentially short-term fluctuations. So Just because a place has had a few months of price growth and property prices seem affordable compared with the city, that doesn’t make it a sound investment location.

You might find that by purchasing in an inferior regional or remote location, the so-called ‘cheap’ buy-in price becomes a very expensive ‘experience fee’ with the benefit of hindsight. Don’t make the same mistake that I did.

Scroll to Top