Despite Australia’s property market showing signs of easing, as well as speculation that the regional movement trend is over, smaller capitals and undersupplied regional cities will continue and strengthen – albeit at a slower rate.
That is according to Arjun Paliwal, founder and head of research of data-driven buyer’s agency InvestorKit, who also identified the five markets where the regional boom is set to continue and will see stronger capital growth over the coming years.
“Many suggest a national property downturn is looming across the country, but it’s important to remember that Australia is a market of many local markets,” Paliwal said. “While our capital cities like Sydney and Melbourne will continue to decline due to being more sensitive to finance and monetary changes such as the interest rate hikes, many of Australia’s regional cities will continue to see strong performance until at least 2023 – and potentially even longer, with how undersupplied they are. There are still plenty of regional areas with strong growth potential, due to common factors, including an undersupply in both properties for sale and rent, booming local job markets, a strong outlook of infrastructure development in the pipeline, accessible lifestyle, and affordability.”
Paliwal said the following areas will continue to experience the regional boom over the next few years:
Tamworth had a 53% capital growth over the last decade, indicating further opportunities for gains down the track. Sales volumes are 30% higher year-on-year and sales days on market have fallen 54% when compared with the same time last year. Its largest positive sign is how heavily undersupplied properties for sale are in comparison to pre-pandemic listing levels.
“When you combine low stock, faster selling and more buying, this indicates a rising price trend,” Paliwal said. “Tamworth’s extremely low vacancy rate sitting well below 1% will see rents rise, so we can expect Tamworth property to be on an upward trend.”
Tamworth is also undergoing an infrastructure boom – this when paired with the extremely low unemployment levels at 4.3% indicates highly positive growth prospects for the local economy and job market, he said.
Bundaberg offers an attractive lifestyle of coastal living at affordable prices, with family homes averaging from $580,000-$750,000. An added attraction is its commutability to the Sunshine Coast. Paliwal said Bargara, in particular, has outperformed most surrounding areas, with property prices in the coastline region rising some 32% over the past 12 months, compared to 30% in Bundaberg over the past 10 years.
Paliwal said the combination of an affordable lifestyle market, low inventory levels, a market that hasn’t seen a lot of movement for a while, and near-zero vacancy rates drive Bundaberg’s property prices and encourage renters to shift to the buying side. This will lead to rental price increases of $50-$100 over the next 12-24 months.
“While many are concerned about rising interest rates, the good news for investors is the increased rent prices will balance out the rising cash rate,” he said.
Toowoomba has great potential for investors due to its strong and diverse infrastructure pipeline plus its commutability to a fundamentally strong Brisbane market.
“Toowoomba offers its own CBD experience and is within commuting distance to Brisbane, yet offers greater affordability for buyers,” Paliwal said. “Its brief sale days on market has been a big success story with properties selling 51% faster than the same time last year. It is now one of the fastest selling regions in the country. The vacancy rates in Toowoomba are extremely low, with data suggesting it will see $50-$100 rental increases over the 12 months ahead. So, when you combine affordability, a diverse and strong infrastructure pipeline, rising rents to combat interest rates, and a strength in the local job market, it provides a very positive outlook for investors.”
Only an hour-commute away from Adelaide, Barossa Valley has the upside of commutability to a major city but with more living space and affordability than any other capital city could provide for the same distance. Not only is it well known for its wineries and emerging foodie culture, Barossa Valley is extremely diverse, with manufacturing, healthcare, agricultural, retail, and education among its top five industries.
“The current rental vacancy of Barossa Valley is extremely close to 0%, with agents seeing 10-plus applications for rentals within a short period of being on the market,” Paliwal said. “Like many of the other regions, Barossa Valley has an extremely healthy property market as it underperformed over its 10-year averages but is now catching up. Further, there are increasing levels of infrastructure, with the Twin Creek Wind Farm undergoing development stages and a new six-star hotel being approved for development. This will put Barossa Valley on the map for Australia and add to its global landscape. An affordable lifestyle market with a healthy local economy will be the talk of the decade ahead, in our opinion.”
Despite its massive boom over the past decade, Albury-Wodonga remains affordable with house prices ranging from $480,000 to $600,000 on the higher end, despite doubling over the past decade. The region is also seeing extremely tight rental conditions, a vibrant city with a strong and diverse job market, and a market that is expecting further rises in rents, which is favourable for investors.
Paliwal said the strong infrastructure pipeline in the region also makes it a standout investment.
“Albury-Wodonga will become a key hub as part of the long-term Inland Rail, a 1,700-km freight rail network that will connect Melbourne and Brisbane via regional Victoria, New South Wales, and Queensland,” he said. “This will have a favourable impact on local businesses and further help with the movement of their goods across the major cities.”
