Investors leap on regions but caution urged

Rising property prices and strong yields in regional Australia have caught the attention of property investors who are increasingly looking past the capital cities.

Melbourne couple Jamie and Meagan Woods, with their son Samuel have bought an investment property in Geelong. Picture: Arsineh Houspian

Rising property prices, strong yields and capital gains potential in regional Australia have caught the attention of property investors who are increasingly looking past the capital cities.

The onset of the pandemic and the ensuing spike in property prices as people fled from the cities did two things: push up prices as homes were bought and sold, and put pressure on local rental markets causing vacancy rates to squeeze to record lows. While this may prove attractive to would-be investors, experts are warning people to do their research before buying in a property market they don’t know much about.

Real Estate Buyers Agents Association of Australia (REBAA) president Cate Bakos said it was largely first time and timid investors who were choosing to take a punt in a regional city.

“The regions outperforming the capitals has really stimulated, you know, a lot of interest in jumping on to that gravy train,” Ms Bakos said.

“I think you can compromise the successes of your asset if you’ve got the wrong set of glasses on. If you’re looking through the lens of something that would work for you, like a nice coastal holiday home, it won’t necessarily be the right investment.

“You've got to really be clear on why you’re going into a particular regional city or town and what you’re wanting out of it.” The number of investors deciding to get into the market has been slowly yet steadily rising in recent months, with the latest Australian Bureau of Statistics data for November showing a 86.9 per cent annual change on 2020’s very low levels of activity.

Property researcher CoreLogic’s latest rental review showed the annual gains in weekly rent prices in regional Australia (up 12.1 per cent) were significantly higher than the capital cities (up 8.4 per cent), in line with decade-long trends.

Head of research at investor buyers agency Propertyology, Simon Pressley, said those looking for a job need to seek professional advice or be looking for cities with long-term economic growth opportunities and diversified economies.

He recommends Toowoomba in Queensland, the NSW regional centres of Dubbo, Wagga Wagga and Orange, Bendigo in Victoria, Tasmania’s Launceston and the lifestyle towns of Mt Barker in Adelaide and West Australia’s Geraldton.

“Whether it’s capital growth or growth in rents, the best performing are always among the 200 regional cities, not amongst the eight capitals,” Mr Pressley said.

“A fundamental criteria for investing wisely is that the town or city that you invest in has a diverse economy.”

Melbourne couple Jamie and Meagan Woods, aged 42 and 39, had no interest in investing in property, instead choosing to place their money in the stock market. But their stance has changed over the past two years as he learned more about the property market and the ability to leverage their equity.

The couple settled on a three-bedroom investment property in Geelong after considering other homes in Bendigo and Ballarat.

“I’m a small-business owner and I looked at the purchase from that perspective, there were no emotions,” Mr Woods said.

“We thought we’d get a house with a bit of land but we realised bigger isn’t always better, location is more important. It came down to our $500,000 budget and the growth of the market.”