NSW Opportunity cost between NSW regionals v other capital cities

Discussion in 'Where to Buy' started by Serveman, 12th Jul, 2017.

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  1. Serveman

    Serveman Well-Known Member

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    Lately there has been some commentary on the future of real estate values looking forward in the next 10 years and the opinion has been that Sydney will widen the gap over the other capitals.
    At present the strength of the Sydney market has been so strong that it had spilled over into the Central Coast, Wollongong, Newcastle and Blue Mountains. People can still commute back to Sydney for work hence its a more affordable option. To get a detached house for under 500k however you may now only get weatherboard houses in places like San Remo and the outer suburbs of Newcastle or Mt Victoria needing some work perhaps so it's risen a fair bit too.
    On the other hand for a little less than 450k you can buy a very nice modern house in Bathurst and Orange which has not yet experienced the growth that areas closer to Sydney have, or you could try the outer South Eastern suburbs of Melbourne or the North Western suburbs (E.g Sunbury), the mid ring suburbs of Adelaide ( Flagstaff Hill, Athelstone as eg) or buy in Hobart.
    My question is do you think Orange and Bathurst being areas in NSW (3 hour drive from Syd) still has the ability to out perform places mentioned in Victoria, SA and TAS in the next 10 years or do you think their distance from Sydney, and their economies are not diverse enough to attract population and job prospects needed to achieve the capital growth and rental stability. Incidentally Orange was doing well until Electrolux and Glencoe shut down and wound down respectively and at the time vacancy levels went up to 5 percent and property values experienced zero growth and stock levels increased. Now in 2017 Orange is attracting many young professionals in the Medical industry and its got its food and wine industry happening, hence rental vacancies have risen and prices have started to climb (2.8 percent 2016)
     
  2. teetotal

    teetotal Well-Known Member

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    If talking 10years and comparing like for like product, Regionals most likely would get lesser absolute value gain than some of those mentioned above.
    Percentage gains may or may not be higher.

    These are single/dual industry towns we are talking about compared to Metro cities with multiple industries and strategic growth plans. Government budgets always pump significantly higher money into the metro cities.
    Because "somehow" even they know where the growth will be.
    For each of those towns, one needs to look into where the jobs are and if those jobs are sustainable.
    - Will it take 1 or 2 companies to shut down operations or a full economic recession before the market plummets.
     
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  3. BuyersAgent

    BuyersAgent Well-Known Member Business Member

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    Watch vacancy rates and emerging industry/infrastructure closely and you can do fine in regionals. Flat spots in between cycles can be longer but well timed purchases can yield great CG rates in the 3-5 yrs timeframe and if the cash flow is solid it can be a great way to balance out a low cash flow city portfolio. I wouldn't usually advise owning all your IP's in one small town for risk management however for obvious reasons.
     
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  4. Archaon

    Archaon Well-Known Member

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    @euro73 is doing well out of Bathurst and Orange presently, with the Inland Freight Rail planned to be upgraded through the region it could do well.
     
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  5. Serveman

    Serveman Well-Known Member

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    I know you are referring to Bathurst and Orange with your sentiments about only having one or two industries ( Which makes sense). Would you also apply this to Newcastle and Wollongong or do you think they are large enough now to have enough drivers to manage a downturn in coal for instance. Currently Newcastle I believe may have a bigger population base than Hobart for instance and little over an hour from Hornsby. Prices are higher in Newcastle than Hobart but comparable to Melbourne suburbs such as Officer and Sunbury and some Adelaide Suburbs.
     
  6. teetotal

    teetotal Well-Known Member

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    Right, Wollongong and Newcastle are almost part of Greater Sydney. As you said they are closer to Sydney. Both within 1hr reach from the outermost suburbs of Sydney.
    Biggest benefit both got is direct motorway that connects them to Sydney. Its like Sydney already wants to spread towards those areas. So talking 10year time, the distance between them will reduce as they both spread out.

    Would they outperform some of those suburbs - Depends on which suburbs you are talking about in both the cities. Some may and some may not.
     
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  7. Serveman

    Serveman Well-Known Member

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    Thanks for your reply. The suburbs I'm comparing are:
    Cardiff/ Macquarie Hills Newcastle v Sunbury Vic v Officer Vic v Flagstaff Hill SA v Rosetta TAS.

    What's your view on these match up's for 10 year term ? Cheers
     
  8. teetotal

    teetotal Well-Known Member

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    In order to come to a conclusion as to which suburb will outperform, will require a detailed analysis on each one.
    I personally haven't purchased or not have current plans to purchase in any of those suburbs.
    So it'll be unfair for me to just say this or that when i haven't researched these suburbs.

    I think either you'll need to do some research yourself or someone who had done some research previously on them may be able to help. I wish I could help with detailed analysis.
     
  9. Serveman

    Serveman Well-Known Member

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    No worries, cheers.
     
  10. Propertunity

    Propertunity Well-Known Member

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    Barely keeping pace with inflation :(
    2.8% is nothing when compared with 70-80% over the last 3 years in SYD and surrounding regionals picking up the ripple effect.
     
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  11. Serveman

    Serveman Well-Known Member

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    This is true but I'm concerned that these markets are now done and it's time for the regionals to catch up perhaps. I don't know whether Newcastle suburbs are already over valued.
     
  12. larrylarry

    larrylarry Well-Known Member

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    Look at fundamentals. If fundamentals are poor, you will be invested in something that won't give you the desired results. One or two industry regional city doesn't give me enough assurance.
     
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  13. Propertunity

    Propertunity Well-Known Member

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    You need to be satisfied in your own mind after researching & DD. Part of my DD is in the suburb comparison chart for CG last 15 yrs. It seems pretty obvious to me :)
    upload_2017-7-14_10-52-20.png
     
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  14. Archaon

    Archaon Well-Known Member

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    Couldn't the Mayfield/Tighes Hill numbers just be attributed to people being priced out of Sydney and record low interest rates coupled with demand?

    The regionals still have a steady growth over the years.
     
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  15. Propertunity

    Propertunity Well-Known Member

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    No. It's been happening for years and years.

    Yes but lower. I like higher = more money (which is the only reason I invest).
     
  16. Archaon

    Archaon Well-Known Member

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    So why then was Orange on par with Mayfield in 2008?

    Surely this could be attributed to the GFC, low interest rates, and the mining boom?

    For those that bought in before the boom they've done well.

    More money is good absolutely.
     
  17. DowntownBlock

    DowntownBlock Well-Known Member

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    Yes but looking forward now. You are paying Sydney prices for Mayfield fundamentals and getting Sydney-ish yields (like 2-3.5%).

    Yields are better in Orange and you aren't taking on that Sydney growth price risk.

    Are you really comfortable buying houses in Mayfield for 550K, and renting out for 350 now. a few years ago when most houses in Mayfield were under 400K, sure go nuts!

    That is where Orange is at now. Houses under 400K for $350week rent . . .

    What are your forecast expectations for Mayfield rents please? how long till these are positive at these boom prices?
     
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  18. Propertunity

    Propertunity Well-Known Member

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    It is dangerous looking at 1-2 years in isolation. That's why I prefer to look over 2 full cycles. There's lots of reasons (not displayed in a bar chart) which could be contributing factor/s.
     
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  19. larrylarry

    larrylarry Well-Known Member

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    Orange has estimated 40,000 population and Newcastle 350,000. If taking the long term view, I would pick Newy and I have. Again I look at the fundamentals of both markets. If you really focus on yield then go Albury, yields are better.
     
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  20. Propertunity

    Propertunity Well-Known Member

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    You chase rental yield if you want, but I'll chase growth.

    When prices increase in a boom, rents lag behind being locked in on 6-12 month leases. Add to that the fact that investors are over-represented by a factor of 2 (normally 30% but now approx 56%) and you have more properties on the rental market keeping a lid on rental increases. This is perfectly normal part of the cycle. Prices generally take a breather for a while while rents catch up (and often overshoot to 5-6%. This is when investors move back into the market and start forcing prices up again as they compete for yield, and so it continues).