Metropolitan or regional real estate- which makes for better property investment?- Pete Wargent

I’m often asked why I prefer markets like inner- and middle-ring Sydney real estate and properties in and around London to regional property markets, such small towns or those located 100-500+km from the cities where rental yields might be a little higher.

The answer, in one word, is: risk.

If you pick a hot regional market or mining town to invest in you might do well in the short-term.

Property is not a short-term investment, however, and you should aim to own property in markets with a diversified range of industries and forms of employment.

There is absolutely no point in picking a market which is hot for 6 months while a mine is being constructed if prices then ease again immediately thereafter.

Property is a long-term investment and you need to own quality, desirable properties where the population and demand is growing rapidly but the supply of land for release is constrained.

If you speculate in cheap regional markets at today’s elevated levels of leverage, you are introducing a significant risk – in my opinion.

 

Towns with few industries

When I was growing up, Stoke-on-Trent in the middle of England was known as the home of pottery in the UK, although Britain’s manufacturing industry has died a long, slow death in truth.

Before that, however, Stoke was a genuine boomtown setting all kinds of records for coal production, with the famous Chatterley Colliery becoming the first in Britain to mine more than 1 million tonnes of the black stuff.

As late as 1992 the awesome Trentham Superpit was still churning out the last of its 2.5 million tonnes of coal. The coal industry once employed more than 20,000 men in the town.

In 1994, the last of the pits was closed down and today all that remains today is the ugly slag-heaps which you can still see on the skyline. The steel industry in the town, sadly, went the same way.

Today, despite a rapidly growing wider UK population over the decades, the BBC reports that houses in Stoke are selling for one pound.

Meanwhile in London prices are reportedly some 17% above their previous peak.

I can’t tell you what will happen to regional markets in Australia over the next few decades, but it appears doubtful that the desirable suburbs in capital city markets will ever become significantly cheaper given the massive population growth being experienced.

[sam id=29 codes=’false’]

[post_ender]



Want more of this type of information?


Pete Wargent

About

Pete Wargent is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. He’s achieved financial freedom at the age of 33 - as detailed in his book ‘Get a Financial Grip – A Simple Plan for Financial Freedom’. Pete now manages his investment portfolio, travels and works as a consultant in the finance industry from time to time. Visit his blog


'Metropolitan or regional real estate- which makes for better property investment?- Pete Wargent' have 2 comments

  1. May 31, 2013 @ 7:24 pm Ben Turner

    There are a handful of regional towns in Australia that are worth investing in if you know what you are doing (timing the market etc). For the average guy on the street, stick to metro.

    Reply

  2. August 18, 2014 @ 1:05 am Regional property markets underperform | Real Estate Talk | Your Trusted Voice For Property Investing. Anywhere, Anytime.

    […] Pete Wargent gives a detailed explanation about the arguments around Metropolitan or regional properties – which make a better investment […]

    Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

0
0

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!