Property Market Update: Are Regional Areas about to BOOM?!

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Regional Property Market - Could Real Estate in Regional Areas Increase in Demand?

For most of human history, people have lived in low-density rural locations.

However…

In 2007, for first time in history, the UN said more people lived in urban areas.

In 2015, around three million people were moving to cities every week!

That figure alone led analysts to estimate that two-thirds of the world’s population would live in cities in the next 15–30 years.

That meant urban land would have to expand by 463,000 square miles by 2030. That’s a tad under 10% of the world’s surface!

That’s equivalent to 20,000 football fields being paved over every day.

It’s hard to conceive that a trend like that could be broken.

But COVID-19 has started the conversation at least.

Back in May, the Real Estate Institute of New South Wales said they now expected regional areas to do well as a result of the pandemic.

A few days ago, a new national report postured a ‘golden circle’ around Sydney to be the nation’s future ‘hotspot’.

A buyer advocacy agency put the report together. So not entirely unbiased.

Still — national and world events have historically led to demographic changes in the design of buildings and habits of humans.

So, it’s worth drilling into a bit deeper.

After 9/11, for example, height limits of strategic buildings were reassessed in city centres, and uncertainty and fear around travel escalated.

That was the mid-point of the last big real estate cycle.

The same point we’re at now.

As history repeats, it’s not surprising that there are similarities.

Right now, however, the debate is whether people are getting used to working remotely.

Therefore, more will decide to live where they want to, and still be able to work.

Land in regional areas has a unique attraction…especially for city dwellers.

It’s cheap!

The Property Market in Regional Areas

But, before you get excited about the spruiked prospect of investing in a rural hotspot — let me give you a warning.

Population growth on its own does not equate to price growth.

And rural locations (even those with population growth) have historically performed pretty poorly.

Take South East Queensland.

It has had the highest average annual gain in population over recent years.

11,600 people on last count (for the year 2017–18).

To give some context, that’s the highest number in the last 10 years.


Profit Watch

Source: ABS

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And who can blame them?

QLD has a great climate, long sandy beaches, and some beautiful regional locations.

That led to a lot of spruiking from property advisors that Brisbane was going to explode!

However, despite the above population statistics, Brisbane has performed pretty poorly over the last 15 years.

In fact, in the 10 years to the recent downturn in 2018, the median price for houses in Brisbane only increased 1.9% per annum.

And if you think that is bad, unit medians have barely moved at all.

That’s because of record numbers migrating to SE QLD, only around 5–10% of those are heading into Brisbane (it varies each year).

QLD is the nation’s most decentralised state — and has been throughout its history.

Approximately 48% of QLD’s population live in the city.

But the lion’s share of population growth is going to the Gold Coast, Sunshine Coast, Moreton Bay, Cairns, Ipswich, and the Scenic Rim…

That means less competition from cashed-up buyers wanting to situate in *just* the centre of the capital.

But have the regional areas boomed as a result?

Well…not really.

You have to be a little wary when seeing a rising median house price based on just population growth.

Let me give an example.

The regional area in QLD attracting the most population growth is Ipswich.

And there have been some news stories suggesting that Ipswich is undergoing a lot of capital growth in its median value as a result.

But from a look at the stats, much of this is an illusion.

The older stock is selling very cheaply — and has been for a long time.

Whereas, the newer stock is attracting higher prices (because of the ‘brand-new’ premium it demands).

Therefore, the median price (which is simply the middle number of all sales) has been artificially inflated by the higher priced new property sales.

And the agents selling in the area know this.

They were reporting as such in 2019…

This from Steve Athanates of NGU Ipswich real estate agency:

The lower prices have shown little-to-no growth. To illustrate the cheap end, the lowest priced house I sold this month was $282,000. That really is still ‘cheap’ cheap.

And the newer properties?

As Glen Bell from First National Real Estate in Ipswich explains:

‘…new builds are selling for $800,000, $900,000 — when you have houses selling for $1 million, which we have now, of course that distorts the overall median price’.

The problem is that regional areas generally have a lot of surplus land.

That means there’s new land being released onto the market by developers in ‘staged releases’ to keep prices elevated.

It doesn’t translate into growth in land prices — as I said above, for that to occur you need a few other ingredients.

For increases in property values to occur, the population growth must migrate into a landlocked area.

What I mean by this, is a suburb that has already been built out.

To accommodate more people, developers must start subdividing blocks. And if you see that happening, it’s bullish for land prices.

But it’s rare in a regional location.

That doesn’t mean that you have to be pinned to a capital city to get gains, however.

There are plenty of areas you can buy cheaper than the capitals, and advantage from an initial wave population growth and land price increases.

Especially larger metropolitan centres within a quick commute to the city.

I’m not going to disclose those exact locations here.

Sincerely,

Catherine CashmoreSignature

Catherine Cashmore,
For Profit Watch

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