Will Regionals Outperform?

I thought this article was interesting.

The world loves Sydney. Australians aren’t that fussed

 

Thanks for putting that article up.
Explains a lot!

 

This is the future of property cycles. Forget previous cycles. They wont be repeated unless the lending environment that facilitated them returns.

This is why you should expect both larger regionals and less expensive cities to outperform Sydney and Melbourne and Brisbane over the next decade ..

There's also the matter of demographic shifts. Older Australians treechanging and seachanging, and younger Australians priced out of Sydney and Melbourne and tired of commute times and congestion...

But its mainly about affordability, and affordability is all about serviceability.

Eventually when enough borrowers have been migrated to P&I and paid off enough debt and their wages and rents have inflated enough, some capacity will be restored to Sydney and Melbourne serviceability... but that's a good 10 years + away under the current regulatory regime.

That's always got the potential to change if the regulations are reversed or Australia has a wage explosion, but both those things are unlikely.... so probability suggests that property cycles of the pre APRA era will not repeat in either their trajectory or location.


#It'stheborrowingcapacity,stupid.

 

Still remember reading the market statistics in a property mag when most Sydney suburbs were negative for 12 month growth and Walgett was 35%.

It does happen.

Willy

 

haha yeah when I used to read those property mags it was all about regional hot spots. then when the capitals started booming they had nothing to write about!
it amazes me how many on here don' think regionals have their own boom cycles.
the regionals boom cycle tends to be very short and sharp though.

 

Yes ,stagnant for years and then rapid rise over a fairly short period as the Sydney boom ripples out and the regions play catch up. Already started rippling out nicely, might take a while to get to Walgett though.
Only difference this time is APRA which could even work in favour of regional with reduced borrowing capacity and investors seeking yield.

Willy

 

@euro73
Can you hleo. Me out.

I look at regionals and i dint see yhe yields.

I cant find investor grade properties. I see $200k properties wiyh $240pw rental but thats it.

Show. Me an example of ehat you see as a good regional investment

 

Besides investing in new thumbs or fingers or spellcheck software, you need to look at Dual Occ see attached

Below are links to the two most recently completed properties. Both purchased at 550K in late 2017.

Both tenanted within days of completion. Feel free to call the tenancy managers ( Gail @ Raine and Horne) and confirm for yourself.

Next batch will be 565-570K as land costs are increasing . But that's still well below the bank re-valuations of 620K + meaning there's good equity in these deals as well. So strong cash flow and good equity - right from Day 1 .

Use the cash flow to pay down PPOR debt . If you dont have PPOR debt, use P&I lending from day 1 and simply pay these off over 20 years or less. If the rents double in 20 years you'll be left with a 68K income ( minus costs and taxes) . Hold 2 of them outright and that's basically your 100K net retirement (or thereabouts) income sorted in 20 years or less. You can actually hold 3 of these and be well under the NSW land tax threshold as well. And all of that can be achieved even with zero growth @Anthony Brew although it appears growth is well and truly happening... just like I said it would and you said it wouldn't. Follow the borrowing capacity mate. Might learn ya something...

#cashcowskilldebt

#instantequity

#itsnotrocketscience

#thatsmytrackrecordwhatsyours?

#sticktowhatyouknownotwhatyouthinkyouknow


5A Young Street, Orange NSW 2800 - Apartment For Rent - $225 | Domain

5 Young Street, Orange NSW 2800 - House For Rent - $440 | Domain


7 Andres Street, Orange, NSW 2800 - View Sold History & Research Property Values - realestate.com.au

7a Andres Street, Orange NSW 2800 - Apartment For Rent - $220 | Domain

 

Correct!

I have bought and done well from some regional areas. It has been my experience that investors will often move to regionals once they no longer see value in the capitals.

That's exactly what my parents did. Sold their house in Wollongong & moved to a retirement unit in Port Macquarie. It's a problem now, that Mum is alone and in a nursing home. She's alone with no family or friends and is miserable. All the funds from the sale of their home was gobbled up by the Retirement Home. When they transferred her to the nursing home, she got a measly $20k refunded for the unit they bought over 20 years ago.

After the death of my FIL, MIL sold the family home & downsized to a much smaller place, but stayed nearby as that is where all her friends were.

 

My view is that regional towns within proximity to Sydney, Brisbane and Melbourne will outperform city's over the next 5 - 8 years. Look for coastal regionals that have infrastructure (hospitals, some shopping etc). Good luck!

 

Sooo... Geelong?

 

Thanks for this article. Super interesting!

 

Regional markets will outperform capital cities in 5 years, says expert - Smart Property Investment

Another article re: Regional Aust markets

 

I'm looking for my first IP and considering Geelong and Ballarat for affordability. I'd also consider regional NSW but I know less about the market as a Melbournian. I'm concerned that if the Sydney and Melbourne markets do start sliding as predicted in the next 2 years then all the demand currently fuelling the regional booms may pour back in to the capitals. Does anyone have any input on this?

I understand that Geelong may be a better investment than Ballarat from this perspective, as it has a more fully developed local economy, but I'm concerned that the average price is already too high in Geelong for any significant capital growth in the medium term. There are still great deals in Ballarat but I think the market would flatline pretty quickly if prices dropped 10% in Melbourne.

Would love to hear some thoughts on this, my budget is approx 500k

 

I don't believe so. Not if the last Sydney boom and subsequent ripple effect are anything to go by.
It may be too late for Newcastle / central coast etc but they are the first places to feel the effect, there's a lot more to regional NSW. Sydney had been dead for a couple of years when the inland areas boomed last time. I would say that the ripple hasn't yet started to influence inland NSW this time.

Also, the general population follow the herd. If the returns have been best in Sydney, that's where the money goes.(has gone) If Sydney is dead and regionals are booming,money will keep going regional.. There aren't many true contrarians in this world. Hence the name.

I remember my RE agent mate picking up a Sydney investor from an inland regional NSW airport. He bought 4 properties at asking price, only got out of the car to get a coffee and was back on the plane to Sydney two hours later.

Contrary to popular belief, the ripple doesn't stop at Hornsby.

Willy

 

Big ripples in Bathurst and Orange right now...

 

Hang on, Sydney past it's peak, Newcastle and Central Coast booming, big ripples at Orange and Bathurst.......maybe this regional ripple effect does actually exist!

Willy

 

I agree with you. Geelong does have some advantages over Ballarat in terms of infrastructure, proximity to Melbourne. Also, agree with you on the fact that there are still deals in Ballarat if you know the market really well. Prices are starting to move up a bit recently, especially around the central areas. You could prob. grab 2 IPs for your budget of $500K in Ballarat, while I believe that wouldn't be possible in Geelong, if you are looking for a house with a decent land component.

As you might have read in another Ballarat thread, employment and infrastructure aspects of Ballarat has improved a lot recently with both Vic Government and private sectors are actively putting $$ in to the local economy.

 

I have read that in the other thread, but I still feel there is a significant difference between it and Geelong. In a nutshell I feel that very few people, especially young people actually want to live in Ballarat, they are just stuck there until they can afford something in Melbourne. But more people do actually choose to live in Geelong, there are fewer "victims of circumstance", and hence it's a much safer investment in the medium term. But I could be wrong about that of course.

Could you suggest some areas of Ballarat where I might get 2 quality properties for $500k? That certainly does make it more attractive

 

If we compare Geelong and Ballarat in general without getting down to specific suburbs, many PCers would agree on your view as well. At one point in the past, I did a thorough due diligence here as well as from other available resources I could find back then on both cities. @Beelzebub, a local PCer, mentioned me once that there is no way Geelong will become part of Melbourne in our lifetime, as I was naively expecting that to happen in future. So I guess each city would sustain their own economy and thrive to exist.

To avoid derailing the topics of this thread from general "Will Regionals Outperform?" to "Good areas in Ballarat", please PM me for specifics or create a separate thread.