I know some commentators are recommending investors buy regional properties. I guess they see them as a countercyclical opportunity, but I would caution prospective investors to steer clear of regional Australia.
BY MICHAEL YARDNEY
I’ve explained my thoughts in a recent blog and new figures from RP Data confirm that property markets across regional Australia are weak as many areas struggle to find solutions to the loss of tourism and fewer sea changers.
?Over the last 12 months house values in areas outside of our capital cities have fallen by 1.8 per cent but in many of the major regional centres the falls have been much greater, according to RP Data.
?The good news is that New South Wales has had the best performing regional housing market. RP Data figures show that values across the state’s regional towns and cities are currently at an historic high and have increased by 0.9 per cent over the year.
?The NSW Hunter and Illawarra regions, close to Sydney, are standout performers, RP Data says, with values rising by 2.2 per cent in the Hunter during the past 12 months and up by 3.6 per cent in the Illawarra. Both areas are supported by a strong mining sector and their close links to Sydney.
?By contrast, regional markets in Queensland and Western Australia have performed poorly. In Queensland, regional housing markets fell 5.1 per cent over the year and regional properties in Western Australia were down 6.8 per cent.
?You’d have to have been living under a rock not to know how poorly the Gold Coast property markets have been performing, with house values in the region down 11.6 per cent from their peak in January 2008, before the onset of the global financial crisis.
?The Sunshine Coast has also recorded a significant fall with house values down 8.1 per cent from their peak in February last year.
?According to RP Data many areas are hampered by weak tourism, a slowing in sea change migration and a lack of economic diversity. The short-term prospects for many of these markets aren’t strong, with consumers cautious and unwilling to spend big on property and once-prospective retirees focusing on rebuilding their retirement nest eggs.
??Generally, says RP Data, most of these regions will need to see a rebound in tourism, significant improvements in consumer confidence and an increasing propensity for consumers to spend in order to see an improvement in the market.
??“The potential for this to occur seems unlikely over the short-term and these markets probably won’t start to improve until regional economies show some improvement and regional migration flows once again become apparent,” says RP Data.
??I understand there are always exceptions. Some better performing regional areas are outperforming a number of poorly performing capital city locations, but for me, capital cities are the place to be. There’s a wider demographic of owner occupiers and investors, as well as a bigger economic base to provide jobs. And after all… that’s why more people want to live there and always will.
Tell us your thoughts on regional versus capital city property. Do you think it’s better to stick to one or the other, and why
?
Michael Yardney is the director of Metropole Property Investment Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. Subscribe to his e-magazine at www.propertyupdate.com.au. For more information about Michael visit www.metropole.com.au.
Does NSW regional being at an historic high make it a good place to invest now?
There seems to still be a number of non seasonal or tourism dependent towns/cities that have fallen from their peak, have been steady performers and currently offering an affordable entry into the market. For example University towns or where significant infrastructure or retail development is taking place.
Comment by John Leov — June 17, 2011 @ 5:06 pm
There is also very poor capital growth in the regional areas, hence long term wealth building will be hard. There are far better opportunities in the city out skirts providing great Yield.
Comment by Peter Z — July 13, 2012 @ 12:40 pm