Data from CoreLogic last week revealed property values in Australia's 25 largest non-capital city markets spiked 13.0% in the last 12 months, compared to a 6.4% gain in the capitals.
However, Adviseable Property Buyer Kate Hill said the impressive results may lead first-time investors to believe every regional location was a sure-fire winner.
“We have been investing in major regional locations for years and, conversely, have been giving other rural and remote locations a wide berth for a long time, too, including right now,” Ms Hill said.
“Clearly, pent up demand and a number of other factors, including record low interest rates, are motivating more investors to buy into markets near and far, but the fundamentals must stack up over the long-term as a strategic investment location.”
COVID has spurred the working from home phenomenon, with large amounts of workers moving out of metropolitan areas to locations with a more desirable work-life balance.
Related: Should you make a regional move post-COVID?
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Ms Hill said some investors may be considering these short-term migration patterns as justification for buying regional, but she wasn't convinced this shift was permanent.
“But, in a year or two, they may be left with an investment property in a location where many of the new residents have already reversed their decision-making and gone back to the city," she said.
“Plus, they may have bought into an area where the local economy was always reliant on one-industry, such as tourism or mining, which is not akin to significant nor sustainable capital growth over the years ahead.”
There are many regional locations that offer opportunities for investors such as Ballarat, Bendigo, and Geelong, but according to Ms Hill these were already strong locations pre-COVID.
She urged prospective investors to consider the investment fundamentals of a location before deciding to buy real estate there.
“Some of the key fundamentals include having a diverse and vibrant local economy, solid jobs growth, and a variety of industries such as health, construction, retail, and education to adequately service its local population,” she said.
“In regional areas, the local economy must also be self-sufficient, which means most local residents should live and work there as well as spend their money there.”
Related: Top 10 affordable Australian regional areas in 2021
Australia needs to "urbanise the burbs"
With the increased popularity of regional locations and affordability concerns in the inner cities, a leading urban planner believes there is a need to break the conventional suburban housing estate mould in new communities.
Partner at urban planning consultancy Hatch RobertsDay Mike Day said households want the feel of metro areas in their local suburban locations.
"The recent property boom is driving more residents to the outer suburbs as prices become inflated," Mr Day said.
"Many want the urban experience and lifestyle: from the inner-city layout of small parks, mini main streets, and public transport at their doorstep to the bustling cafe and restaurant culture and an integrated community feel.”
The National Housing Finance and Investment Corporation (NHFIC) forecasts Australia will need 781,000 new dwellings by 2025.
Mr Day said it was an absolute necessity to get these newly constructed communities right, fostering a diverse range of housing with more compact and attainable homes centered around mixed-use community hubs.
“We should look to the blueprints of our cherished inner neighbourhoods in Sydney, Melbourne and Brisbane and apply the fundamentals of what makes these areas so desired to new housing estates," he said.
"Pre-1970s, the neighbourhood structure was sound, and this is what we need to emulate in our new suburbs.”
Photo by Alistair hand on Unsplash
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