Why you should consider investing in regional property in 2020
Published 9:00 am 17 Sep 2020
Capital city property prices have been hit hard by Australia’s economic downturn, falling on average by two percent in the June quarter. But regional centres are faring much better, and have the potential to yield great returns over the coming months and years. DG Institute Founder and CEO Dominique Grubisa explains more.
Take a look at property price trends in Australian capital cities like Sydney and Melbourne and it’s easy to lose heart with the whole property market.
Hard hit by a second wave of COVID-19, Melbourne sale prices dropped an average of 3.5 percent in the latest quarter, with a fall of 1.2 percent recorded in the last month alone. Figures from property sector analyst CoreLogic show that Sydney has not fared much better, with prices dropping 2.1 in the most recent quarter.
Regional centres buck the trend
With the JobKeeper scheme being scaled back this month and banks now calling an end to COVID-period ‘mortgage holidays’, many experts are predicting further major price falls. If a new wave of urban coronavirus infections occurs, city prices may enter a slump from which they will take many years to recover.
But some areas of the country are defying both the onslaught of the coronavirus and the property price plunge. CoreLogic figures show regional property prices dipped just 0.2 percent in the latest quarter, with prices in some regions making significant gains. Properties in regional NSW defied the overall property market downturn, jumping up an impressive 1.2 percent in the most recent quarter, while regional Tasmania and South Australia also experienced price growth.
Factors behind growth
CoreLogic’s Head of Research, Tim Lawless, says there are several factors that explain the resilience of regional property during 2020. “Unlike their capital city counterparts, which usually receive 85 percent of net overseas migration, most regional markets have avoided the drop in demand caused by the pause in migration,” he explains in a recent report. “Regional markets may also be appealing for their relatively low density and lower price points.”
Interestingly, Lawless suggests changes to our working patterns brought about by the need for social distancing could have a positive impact on regional areas moving forward. “The normalisation of remote work through the pandemic could make proximity to major cities less of a factor in home purchasing decisions,” he says.
However, Lawless makes the point that while the regions would seem to be offering a safe investment harbour during COVID, it’s important to also consider the risks. While regional centres are less likely to be hit by things like pandemics, there are other challenges related to their smaller scale. “Regional economic conditions can be more volatile, especially those areas that are heavily dependent on a single industry for economic prosperity,” he says. “And some areas may not show the same level of amenity and access to essential services as a capital city or major centre.”
Hot spots for investment
So, where are the biggest hot spots for regional investments? The latest CoreLogic data shows price movements in regional NSW have been positive throughout the pandemic, jumping 0.4 percent in the past month, 1.2 percent in the last quarter and an impressive 5 percent in the past 12 months.
However, NSW is not alone in this respect with regional Tasmania up nearly 10 percent year on year, and has remained in positive territory throughout the COVID period. Regional South Australia is up nearly 1 percent for the last quarter and 3.7 percent for the year.
The latest figures from property website Domain echo the CoreLogic figures, showing quarter on quarter rises in home values in regional NSW, South Australia, Tasmania and even regional Victoria.
Plan now for future prosperity
So, is it a good time to invest in regional areas? Like so much in these uncertain times, it’s impossible to predict where regional property prices will go in the future. There is also enormous variation between various locations. But with their low entry prices, attractiveness to city dwellers seeking a tree change, and recent strong price growth, regional houses and units could prove profitable for smart investors.
If you’re interested in regional property investment, DG Institute’s Real Estate Rescue Beginners Online course can provide you with information on locating and purchasing distressed properties, and making a full-time living from property flipping.
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