Regional property markets underperform

It’s an old argument – where’s the best place to invest – capital cities or regional Australia?

If you’ve been following my blogs you’ll know I’ve always preferred the capital cities because the growth there has been driven by stronger, more stable economies and now there’s even more evidence that this is true.

Of course there were always some exceptions:

Sure some better performing regional areas outperformed some poor performing capital city markets, but in my mind the right properties in the right locations in our 4 big capital cities are the safest place to invest.

Now while both capital city and regional housing markets were closely correlated in the pre-GFC period, reflecting broadly aligned economic expectations and an extended period of housing market stability, capital city and regional housing markets have been less synchronised in the past five years as the following chart from the ANZ Bank shows:

In particular, building approvals and house prices have risen at a much stronger pace in the capital cities compared with regional areas in the past year.

And with the changing nature of Australia’s economy I can’t see any major change in this trend.

More information:

As I’ve said we’ve written about this before:

• Tim Lawless explains that there are more loss making properties in regional areas than capital cities.
• I’ve shown how regional properties under performed capital city markets last year, and
• Pete Wargent gives a detailed explanation about the arguments around Metropolitan or regional properties – which make a better investment