Four regional Victorian cities investors should be targeting

With Australian capital cities boasting some of the highest real estate prices in the world, many would-be investors are looking for a more affordable options to enter the market.

We take a look a four of Victoria’s regional centres with the best prospects and what investors should know before they sign on the dotted line.

Regions offer a good starting point

It’s undoubtedly true that interest in investment activity in regional areas has picked up over the last decade.

One major reason is the price difference that makes it more affordable for many, such as rentvestors and people who receive an unexpected payment, such as an inheritance.

In Victoria, that difference is substantial. Melbourne’s median house price (recently overtaken by Perth) currently sits at $940,000, while in Geelong, it’s $757,000 and in Ballarat just $550,000. 

The other big plus has been growth. Cotality (formerly CoreLogic) shows that over the last two years, 50 regional significant urban areas (SUAs) have been averaging higher growth than either Sydney or Melbourne.

That difference is now easing but some regional markets still stack up as strong investment destinations.

Why choose Victorian property?

Victoria has been getting a bit of bad press lately but a closer look shows a more compelling case.

For one thing, the economy is travelling fine, with the state recording the second fastest growth in Australia for the second time in the last four years.

The outlook for demand is also robust. Population is growing with the state attracting the highest number of overseas migrants and reclaiming its title as the favourite destination for interstate migrants.

To further the case, add to that a growth in new investors entering the market and Victoria easily recording the highest number of first time buyers.

Which markets are best placed to outperform?

If you were to look at data a year ago, then the two best regional centres would have been Shepparton and Mildura.

Shepparton has a median price of just $455,000 for houses and a highly attractive average yield of 5.8 per cent. Mildura’s all dwelling median price comes in at just $480,000 delivering an average yield of 5.2 per cent.

These moderately sized centres (population 60,000 - 70,000) became top rating for price and rental growth as interest rates spiked upwards, and areas with modest house prices came to the fore.

More recent data shows that trend dissipating.

That experience is quite typical, and why we recommend investors with smaller budgets target regional centres with a range of macro factors to drive growth over the medium to long term.

Geelong

Population                                   282,000

Median dwelling price                  $715,574

Sales volume last 12 months       +16.5 per cent

Greater Geelong is one of Australia's fastest-growing urban areas thanks to a population boosted by internal and overseas migration.

In Geelong, manufacturing is making a comeback, with 34,000 new workers expected over the next five years. Healthcare, retail and construction jobs have grown by more than 30 per cent.

My associate expert, Michael Kimbel, knows Geelong intimately and told me, “There’s a wide variety of lifestyle areas in greater Geelong, including urban precincts, suburban family areas and beachside suburbs.

“For out of town investors, matching the fundamentals with an appreciation of which lifestyle types are most in demand is the key to finding the best investment opportunities.”

Ballarat

Population                                   125,000

Median dwelling price                  $544,722

Sales volume last 12 months       +25.0 per cent

Like Geelong, Ballarat shares all of the factors for strong regional growth.

It offers great bang for buck for investors with budgets starting at $500,000 who are prepared to wait out the swings and falls typical in most regional centres.

This central highlands city is also increasingly popular with young families looking for an affordable, lifestyle-friendly home.

While the A-grade Ballarat homes have been holding their value (mostly), we have seen dips in the prices of many B-grade and C-grade properties.

Too many were bought by investors advised by out-of-town, data driven (or just inexperienced) agencies three to four years ago, with falls in value of around 10 per cent common.

The best areas for investors are those with proximity to the Ballarat CBD and train station, like Bakery Hill and Soldiers Hill.

These precincts have some lovely tree lined streets and plenty of period three-bed homes supported by robust land values.

But like many regional centres, the embedded land value of properties within a suburb can change from street to street and sometimes vary sharply within the same street.

Bendigo

Population                                   130,000

Median dwelling price                  $570,167

Sales volume last 12 months       +25.0 per cent

In Bendigo, there are a lot of opportunities for investors looking for great value for money – but plenty of camouflaged financial sink holes as well.

Like all of our chosen Victorian regional centres, the population is growing fast thanks to job growth, driven in this case by healthcare and the university education sector.

Over the last five years, there has been sustained demand from tree change buyers, who tend to be a little older, and people who work from home but travel to Melbourne one day a week.

To find the best opportunities, investors should head towards suburbs close to the Bendigo CBD and steer clear of the newer estates.

You will need to bring a budget of $600,000 - $650,000.

Albury-Wodonga

Population                                   101,000

Median dwelling price                  $589,973

Sales volume last 12 months       +16.5 per cent

This regional centre is benefitting from an increase in infrastructure by state governments, along with its rising role as a transport and logistics hub.

Property Mavens’ Albury associate, Anjay Zazulak, said, “We’re definitely seeing an increase in out-of-town buyers agents in this region.”

“Sight unseen, they’re piling their clients into North Albury and Lavington (on the NSW side of the border) in particular, around the $500,000 - $650,000 bracket.”

“Now these are great areas, but I am seeing too many people and out of town buyers agents overpaying.

“I was recently speaking with an agent who told me he put a home on the market, listing it with an optimistic range of $560,000 to $590,000.

“It was bought by an out-of-town investor for $620,000 and it needed some work.”

“There are other suburbs in Albury Wodonga that are just as good and with all the right factors working for them but they’re not subject to this kind of hype-driven buying.”

With regional centres, investors need to be more focused on the long term and achieving solid rental yields compared to capital cities.

But for investors with smaller budgets, there are some great opportunities to build wealth in top rated regional centres.