Regional house prices underperform capital cities

People often ask me why I only recommend investing in our 4 big capital cities.

The answer is simple…

My fundamental principle is to invest for capital growth and look for investments that are stable (not volatile.)

The “big smoke” is where the capital growth is because these markets have multiple pillars underpinning their local economies. That’s where the jobs are and that’s why the majority of the new immigrants move to our 4 big capital cities.

ANZ Bank recently released findings confirming capital city markets outperformed regional areas. They said:

Australian regional (i.e. non-capital city) house price growth has underperformed that of the capital cities since the beginning of 2013.

In fact, Australian ‘non-capital city’ house prices have posted negligible growth since the beginning of 2010, reflecting varying agricultural conditions, weak inbound tourism and a softer outlook for mining-regions in the last year.

Regional house prices in New South Wales have posted the strongest growth in the year to August 2013, with Albury, Queanbeyan, Northern Tablelands and Newcastle posting the greatest house price growth in the state. See the graph below[sam id=34 codes=’true’]

Regional house price growth in Queensland was the next strongest, despite softening in recent months, partly reflecting improved house price growth in regions exposed to the tourism sector (i.e. Cairns, Gold Coast).

In contrast, regional house price growth in Victoria, South Australia, Western Australia and Tasmania in the year to October was soft, with house prices lower over the period in all four states.

Regional house price growth in South Australia and Tasmania have reflected challenging economic conditions while Western Australian regional prices have reflected a weaker economic outlook for the Western Australian economy in the past year.

Soft house price growth in regional Victoria has reflected variation between solid price gains in major regional centres (i.e. Bendigo, Warrnambool, Ballarat, Geelong) and soft house price growth in smaller regions (i.e. South Gippsland, West Ovens- Murray).

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Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Regional house prices underperform capital cities' have 5 comments

  1. November 9, 2013 @ 12:15 pm Theo de Jager

    Dear Michael,

    The biggest fall in Cairns was in apartments, especially after the cut-off date of the ANZ review, namely in September and October, mostly due to severely increased insurance premiums that pushed up the BC charges to beyond where most people wanted to go. Before Sept and oct there hzs already been a steady fall in apartment prices in Cairns over several months.

    Recently agents have been trying to talk the market higher.

    Best regards

    Theo de Jager
    091113

    Reply

    • November 9, 2013 @ 12:27 pm Michael Yardney

      Thanks for the comment Theo
      I was in Cairns and Port Douglas this week on vacation. It’s a lovely spot and sure there is some new development, but the population growth is minimal and there is so much land around in Cairns, which means there is no scarcity to push up property values

      Reply

  2. November 11, 2013 @ 9:24 am Simon

    Hello Michael

    I am curious on your thoughts on the ripple effect on property prices in regional areas of NSW.

    I have been investing in property for the last fifteen years and over the years have brought in both the Sydney market and regional NSW (including three units in Coff’s Harbour between 2001-2008) my focus has always been on capital growth and profit taking (some may say speculating).

    I have continued to monitor the Coff’s market over the years and think there has not been a better time since 2001-3 to invest.

    Below is the reason I have chosen to re-entered this market
    Recently I brought a residential unit for $1955 per m2 in the same block where I had purchased for $1770 m2 in 2003 and sold in 2008 for $2915 m2; both units have the exact same floor plan and condition.

    The unit is showing a rental return of 6.9%.

    As a former estimator I am used to looking at m2 $ rates, when I see that you can buy property at less than what the m2 building cost would be it would seem irrelevant if there is more available land provided that the city’s population is growing.

    What are your thoughts on the potential for capital growth for the Coffs Harbour residential unit market as I noted on your graph it has only moved 1% in the past year?

    Did you also notice on the graph that the further from Sydney you get the less increase in property price; do you think this may be a case of the market catching up with itself?

    Regards
    Simon

    Reply

    • November 11, 2013 @ 10:59 am Michael Yardney

      Simon

      There is no doubt that some better performing regional centers have been outperforming some poorly performing suburbs, but overall for stability in proeprty values and strong capital growth, the inner and middle ring suburbs of our capital cities are likely to out perform.
      You ask will the ripple effect pull up regional prices – yes it will – a rising tide lifts all ships, but as Warren Buffet put it “When the tide goes out you can see who’s swimming naked”
      Coff’s Harbour is a lovely spot, but I don’t need extra hassles or risks in my life so I prefer the greater certainty of capital cities.

      Reply

  3. August 18, 2014 @ 1:04 am Regional property markets underperform | Real Estate Talk | Your Trusted Voice For Property Investing. Anywhere, Anytime.

    […] shown how regional properties under performed capital city markets last year, […]

    Reply


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