Many investors and would-be residential real estate investors are baffled at the current marketplace with prices in many major metropolitan areas at around $1 million or more. Everyone is trying to identify where there might be a ‘safe bet’ property investment or whether there is even such a thing as a ‘hot spot’ anymore.
Rising Markets in Australia’s Largest Cities Pave Way for Regions to Shine
Rising prices in Australia’s largest cities are making it harder to acquire a property and moreover, harder to manage mortgage repayments and other on-going out-of-pocket costs.
While inner-city properties are often considered a ‘safe bet’ for investment in terms of securing tenants and both rental and capital growth – constantly rising prices are simply putting properties like this out of reach for many.
Many Sydney investors have been looking at Brisbane and Melbourne and while these cities are slightly more affordable, prices in these markets are climbing too and are often still too expensive for many trying to get a foot in the investment door.
Victorian Regional Investment Offers Affordability and Growth
If the end goal for an investor is to secure a property that will deliver a good return and capital growth over the medium to long-term with a manageable mortgage, then there are plenty of great opportunities in regional locations at an affordable entry level price.
When considering a regional area, there are few better than Regional Victoria. There is a lot of future growth potential to unlock in areas such as Bendigo, Ballarat and Geelong. They are great locations for investors to enter the market at a low cost with solid growth forecasts and positive local economic conditions.
Furthermore, regional towns are often bolstered by major government infrastructure projects which strengthen their local economies and drive employment and population growth.
A major drawcard for investors is that these regional areas are extremely affordable. The median house price is very favourable when compared to Melbourne’s median house price of $822,000. The median house price in Bendigo is $327,000, Ballarat $335,000 and Geelong $475,000.
And don’t be mistaken – house prices in these areas are rising. While Melbourne has shown as overall increase in house prices during 2017 of 10.3% when compared to 12 months ago, Geelong and Ballarat have shown, respectively, increases of 8.7% and 5% during the same period.
In addition to this, median rents and yields stack up well compared to Melbourne’s average of $400 per week on a 2.5% yield. Geelong produces a weekly rental of $333 per week reflecting a 3.6% yield and Bendigo delivers an average rental of $288 per week and a 4.5% yield.
Employment Growth and Government Infrastructure Spending
Employment across these regions compares very well. Victoria has an unemployment rate of 6% but Bendigo is just 4.1%, Ballarat a low 4.3% and Geelong is just under the State’s average at 5.7%. Online job advertisements recently reported a 19.1% annual growth in Bendigo as an example, compared to a 1.6% increase in Melbourne during the same period.
A key indicator for investors is population growth and once again these regional locations tick the boxes. According to Australian Bureau of Statistics (ABS) figures examining population growth over the five years from 2011-2016, Victoria’s population growth rate was 22.1% and the Ballarat Local Governement Area (LGA) showed population growth of 19.3%, closely followed by the Geelong LGA at 18.4% and Bendigo LGA at 18.2%.
The fundamentals are already there and are set to be exponentially increased because of major government-led infrastructure projects.
The 2017-18 budget includes a $60.1 million investment in new projects and maintaining and renewing existing infrastructure in Bendigo. Major projects include Greater Bendigo Indoor Aquatic and Wellbeing Centre, the Bendigo Stadium Expansion Project, Bendigo Airport Redevelopment, Garden for the Future, RSL Soldiers Memorial Institute Revitalisation Project and Bendigo Tennis Centre Redevelopment.
In Geelong there is more than $1.2 billion worth of major construction and redevelopment underway with a further $1.9 billion either planned or yet to commence. Major projects underway include the $750 million Keystone Business Park, $220 million duplication of the Princes Highway and Geelong Hospital redevelopment.
It is a similar story in Ballarat. The Victorian State Government is moving 600 jobs to Ballarat to be based in the newly refurbished ‘Gov Hub’ building in the existing Ballarat Civic Centre. The gold mine city also has a long list of major projects including Ballarat Fernery, Ballarat Link Road, Ballarat Major Events Precinct, Ballarat Station Precinct, Ballarat West Employment Zone, Black Hill Mountain Bike Trails, Cardigan Village Community Centre and City Oval Lawn Bowls Upgrade.
But Which Region Should You Choose?
In this dynamic market with rising prices and tightening lending conditions, investors need to put their research hats on and get back to the brass tacks of searching for opportunities to unlock growth and better returns. The hot market in the last few years has seen some investors make risky moves, buying almost any property and anticipating a fast return in a few years’ time.
Investors need to do their homework and research different regional locations to make sure that all the fundamentals stack up and, most importantly, that the investment opportunity meets their own individual criteria and objectives.
The focus should always be to map out your plans and goals and then find a property that suits your plan. We don’t all need to own a property in Melbourne or Sydney to make our dreams come true. Regional Victoria can get you well on your way for a fraction of the price.