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Is regional investing the next big shift?

Is regional investing the next big shift?

By Kieran Clair

The numbers are impressive for everyone who’s held property in our big capital cities over the past few years.

Sydney owners have huge smiles on their faces and Melbourne landlords are riding the gravy train. And while Perth has lost its lustre of late, it has multiple economic drivers and big-city facilities that make the long-term feel safe.

Louis Christopher, owner of SQM Research, says ABS figures show the national capital-city average house price rose by 4 per cent over the last 12 months, and 10 per cent over the previous 12 months.

“Many people who bought in 2008 would be looking at a doubling of their money, if they bought well,” he says.

“It did slow earlier this year… but since then we’ve noticed a tick-up in the Sydney market and we’re expecting the next set of numbers to record an acceleration come the next reporting period.”

So there it is – end of story, why would anyone even consider going regional? Just buy in the big towns, sit back, wait and enjoy the spoils.

“There are opportunities out in the regions, but there are also risks and one of the bigger risks is that when the market turns down it can be really bad as a property owner,” Christopher says.

“Generally what you find with [capital] cities is that there’s greater market depth. When the bad times come, there are still buyers. The difference with the regional towns is that when the bad times come often there’re just no buyers at all.”

But Simon Pressley, managing director of Propertyology, says “Slow down tiger!” because regional investors with the right analysis can look forward to very fruitful years. He says the key is to stop thinking of all regionals as single-horse towns.

“There are dozens of regional locations that really serve the role as mini capital city, with essential infrastructure, a stable population base and diverse economy.”

What to look for

Pressley recommends avoiding centres with less than 2000 residents that rely on a single industry, because performance will be fickle.

“There are going to be times when a city or town might have some good years… as soon as that industry has a downturn, well that whole town’s going to struggle. Moranbah is a classic example,” he says.

But Pressley doesn’t believe it’s all about population growth.

“The biggest driver of housing demand is affordability. The more people who can afford a commodity, the more competition it creates.

“History has taught us the best performing markets have been the more affordable ones.

“Because properties are long-term, 10- to 15-year decisions, over the course of time the expensive cities do not grow at anywhere near the same rate as others.”

Pressley’s call is you begin with affordability, but couple it with economic drivers. He says it’s not the asset that grows, it’s the economy and the community that flourishes. This means where you buy is more important than the type of asset you acquire.

“If you ask the typical person living in Sydney, odds are that they’re going to be living in an apartment. If I asked those living in Brisbane, where it’s not as dense, more are going to be living in a house.”

Christopher takes a different tack. He says there are certainly affordable options in the regions, but they’re affordable for the same reason capital city property is more expensive. It’s all about opportunity for growth.

Are capitals safer?

As for the relative safety of capitals, Pressley says there’s a big threat because of the amount of housing due to come out of the ground.

“There’s more supply currently unfolding in the biggest cities around Australia than we’ve ever seen. The actual rate of Australia’s population growth… has eased from what it was when we were supplying a lot less homes.”

Pressley says regionals require investors to have a change in mindset. Get over the fear and look at the hard data and history.

“We’re talking about cities that have been established for 150 years, and they’ve got hospitals, shopping centres, universities, well-established roads and good retail facilities – and it’s actually more affordable to live there as well.”

Christopher isn’t ruling out opportunities in regional towns and cities, he just believes benefits will flow to those over a much longer term.

“I’m a believer that we do need to look to our regional cities for long-term future growth, but that’s only going to happen if those sub-cities have got something to offer,” he says.

“I think in time these cities will grow but it’s a longer-term story here in Australia… As of now, as a strict property investor, there’s volatility and there is definitely additional risk [in regionals] in my opinion.”

 

Continue the conversation! Come to the Property Buyer Expo this weekend and see Kieran Clair (API magazine), Simon Pressley (Propertyology), Louis Christopher (SQM Research) and Walter Nanni (Cohen Handler) take the debate to another level.

Friday and Saturday, October 21st and 22nd, 1:00pm, Stage 3, Exhibition Hall 5, Sydney Olympic Park, Homebush.

For a free ticket to the expo, use promo code: PBE16KIECLA

Details at http://www.propertybuyerexpo.com.au/about-us-sydney/

Facebook – https://www.facebook.com/propertybuyerexpo/

Twitter – https://twitter.com/Prop_Buyer_Expo

About Kieran Clair

Kieran Clair is the Editor of Australian Property Investor. He had almost 23 years experience as a registered property valuer, freelance writer and commentator before joining API in 2013. After three years as an award-winning journalist with the magazine, he was appointed Editor in 2016.

Original author: Kieran Clair

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© http://www.apimagazine.com.au/

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