By Nicola McDougall, The Female Investor
New data showing regional property prices outpacing growth in capital cities may trip up some novice property investors, according to a leading buyers’ agent.
According to the latest CoreLogic Home Value Index, regional housing values were up 2.2 per cent in November, double the monthly rate recorded across the combined capital cities (1.1 per cent). Regional Tasmania (2.5 per cent month and 29.8 per cent year) and regional NSW (2.4 per cent month / 29.1 per cent year) have been the standouts from a capital growth perspective.
However, Adviseable Property Buyer Kate Hill said the stellar results may send the wrong signal to first-time property investors that every regional location is a sure-fire investment winner.
“We have been investing in major regional locations for years and, conversely, have been giving other rural and remote locations a wide berth for a long time, too, including right now,” Ms Hill said.
“Clearly, pent up demand and a number of other factors, including record low interest rates, are motivating more investors to buy into markets near and far, but the fundamentals must stack up over the long-term as a strategic investment location.”
Ms Hill said that while there had been an increase in the numbers of people moving away from cities to regional areas, only time would tell whether the trend would become permanent.
“Some investors might be considering these short-term migration patterns, as well as the current robust price growth, as justification for buying into regional areas,” she said.
“But, in a year or two, they may be left with an investment property in a location where many of the new residents have already reversed their decision-making and gone back to the city.
“Plus, they may have bought into an area where the local economy was always reliant on one-industry, such as tourism or mining, which is not akin to significant nor sustainable capital growth over the years ahead.”
Ms Hill said some major regional locations such as Ballarat, Bendigo and Geelong had strong property markets long before the pandemic, whereas others had been struggling for a years due to their remote locations and one-industry economies.
These factors are why novice property investors must always consider the investment fundamentals of a location before deciding to buy real estate there, she said.
“Some of the key fundamentals include having a diverse and vibrant local economy, solid jobs growth, and a variety of industries such as health, construction, retail, and education to adequately service its local population,” she said.
“In regional areas, the local economy must also be self-sufficient, which means local most residents should live and work there as well as spend their money there.”
Ms Hill, who has decades of experience as a buyers’ agent and is also a Qualified Property Investment Adviser, said anyone considering buying an investment property must complete thorough due diligence on the future prospects of a place – rather than making decisions on potentially short-term fluctuations.
“Just because a place has had a few months of price growth and property prices seem affordable, doesn’t make it a sound investment location,” she said.
“By purchasing in an inferior regional or remote location, some investors might find out that the so-called ‘cheap’ buy-in price becomes a very expensive ‘experience fee’ with the benefit of hindsight.”
