The secrets to successfully investing in regional South Australia's booming market
Regional South Australia's property market has been among the very best when it comes to delivering capital growth over the past few years but investors should be aware of some key criteria to watch.
Adelaide has recorded record property prices but investors that have focused on regional South Australia have not been left behind.
The state’s regional markets have also hit an all-time high for property prices and capital growth rates. But is the growth short lived with a bust on the horizon?
According to CoreLogic’s latest regional report, the 12-month growth to April 2024 for the Yorke Peninsula was the strongest performing regional market at 15.2 per cent, knocking the Barossa off top spot at 14.2 per cent for the same period. This was closely followed by Eyre Peninsula at 10.6 per cent.
Investors need to be aware that not all regional markets are equal. With Barossa and Yorke Peninsula only about an hour or two from Adelaide, Eyre Peninsula is closer to seven hours from the capital.
We see many interstate investors rely solely on the following key metrics, often to their detriment; price point, vacancy rates and rental yields.
But often those investors are not even visiting the location before buying off the internet or via video link.
Many locations that meet these criteria alone have been boom and bust markets.
While these are important to consider, there are a range of other factors that investors should be researching to ensure the growth and values are sustainable, especially in regional areas that are more susceptible to extreme market downturn.
There is little point in making 10 per cent on your investment, to have a 15 per cent correction in values the following year and wiping out your gains.
The other nine investment criteria to watch
Investors often overlook nine other critical criteria that they should research when selecting a regional location.
The additional criteria applied in avoiding a property market that can go from boom to bust are below, to help you get your next regional purchase right.
1. Job creation
The area needs employment growth to sustain wages for housing to grow.
2. Diversity of employment
Don’t invest in a single industry town because that creates risk if that sector underperforms, as is often the case in mining towns.
3. SEIFA rating (government rating of advantage and disadvantage)
This is important for investors in understanding the socioeconomic mix in the area, the level of employment/unemployment and disposable cash families have for housing needs, as well as the demographic make up of a location. This is all considered within a SEIFA rating.
4. Insurance costs
Some locations, particularly in the regions, have higher insurance costs due to being prone to environmental issues like cyclones or floods.
5. Environmental effects in the area
Consider the devastating impacts flooding has had on Lismore, as an example.
6. Access to an airport
If the area is too far from an airport it will struggle to grow economically.
7. Infrastructure investment planned or recently completed
Many regional areas have an underwhelming infrastructure spend and this needs to be considered as it supports the economy and employment outlook.
8. Projected population movement
The government provides projected population growth numbers for most locations and all too often we see regional areas that have negative population forecasts. This heightens risk of the economy and market shrinking in the future.
9. Days on market
If properties take too long to sell that indicates demand is soft or there is an oversupply of property for sale. Markets need strong buyer demand to continue to sustain growth.
If a regional location doesn’t meet the above criteria, it could be at high risk of being a boom-and-bust market and investors should be cautious in those locations.
