- CoreLogic data shows regional dwelling values increased twice as much as capital cities
- To early to say if migration to regional areas will be a peamnenet trend
- Many regional areas rely on one industry, which does not guarantee sustainable capital growth
As reported yesterday, new CoreLogic data has shown that dwelling values in regional Australia increased by 13% over the past – more than double the rate of the capital cities.
Advisable Property Buyer Kate Hill, however, has warned prospective buyers that the results may send the wrong signal to property investor hoping to make a quick gain from the regional property market.
Ms Hill in particular argues that not every regional location is a winning investment.
“We have been investing in major regional locations for years and, conversely, have been giving other rural and remote locations a wide berth for a long time, too, including right now,” Ms Hill said.
“Clearly, pent up demand and a number of other factors, including record low interest rates, are motivating more investors to buy into markets near and far, but the fundamentals must stack up over the long-term as a strategic investment location.”
Ms Hill said time will tell if the trend of migration from the cities to regional areas become permanent.
“Some investors might be considering these short-term migration patterns, as well as the current robust price growth, as justification for buying into regional areas,” she said.
“But, in a year or two, they may 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.”
She in particular addresses concerns about buying in areas reliant on a single industry, such as tourism or mining, which doesn’t guarantee sustainable capital growth. Many areas have struggled for years due to their one-industry economies and remote locations.
On the other hand, the three largest regional cities in Victoria – Geelong, Ballarat and Bendigo – all had strong property markets prior to the pandemic.
Factors to consider
Ms Hill has offered factors novice property investors should consider before purchasing regional property.
“Some of the key fundamentals include having a diverse and vibrant local economy, solid jobs growth, and a variety of industries such as health, construction, retail, and education to adequately service its local population,” she said.
“In regional areas, the local economy must also be self-sufficient, which means local most residents should live and work there as well as spend their money there.”
In summary, Ms Hill – who has been a buyers agent for decades and is a qualified Property Investment Adviser – said any investment property purchase should be based on future prospects as opposed to jumping on short-term fluctuations.
“Just because a place has had a few months of price growth and property prices seem affordable, doesn’t make it a sound investment location,” said Ms Hill.
“By purchasing in an inferior regional or remote location, some investors might find out that the so-called ‘cheap’ buy-in price becomes a very expensive ‘experience fee’ with the benefit of hindsight.”