Regional Towns Continue to Attract Property Investment
Regional Towns Continue to Attract Property Investment
Property prices in regional towns were expected to slump as the cities roared back post Covid. But the bush is winning again. Regional centres are beating the bigger cities on both price gains and rental growth. New figures for the three months to December 2023 confirm the trend. Regional centres have traditionally trailed the major cities with weaker price growth and an oversupply of rental space. Two key factors have been at play. First, prohibitive prices in the major cities have underpinned price rises in regional centres. Secondly, the practice of working from home (often in regional centres) remains resilient.
The exodus from offices in city CBDs is plain to see in the most recent commercial property data. Office property is now in a deep slump, with recession-like vacancy rates of more than 20 per cent in some districts. It seems a significant number of those empty desks in the city centre once belonged to workers who are now in so-called sweet spots. These are the towns where they can live affordably but commute to a day job in the city. Take the case of Tasmania where Angas Prime opened a representative office two years ago. After selling up in the city, a one time office worker who has bought in Launceston or Devonport can take a cheap flight to Melbourne for a couple of days a fortnight in the office whilst working from home the rest of the time with family enjoying quality living at a lower cost.
In the three months to the end of December 2023, dwelling values in regional Australia rose by 1.2 per cent while capital cities were running at 1 per cent over the same period. The outpacing of the city residential markets by regional centres is also clear in rental data, where regional rents rose 2.3 per cent over the same period whilst capital city rents rose by 2.1 per cent – though yields in regional property are often skewed by changes in highly volatile mining towns. The share of people
who are willing to live outside the major cities and commute has clearly changed. A legacy of Covid is likely to see remote working at least partially embedded in workplace policies. It’s unclear how work from home policies will evolve over time.
The question for property developers seeking commercial finance from a private lender like Angas Prime is whether they are looking at a structural change in the market? Many commentators think that the trend is structural and it’s going to keep happening until there is a convergence of prices between the regional areas and cities. That is likely going to take a while. One thing learnt from the Covid era was that people were willing to commute, sometimes for two and a half hours, if they are only going into the city when it’s necessary. Angas Securities has been advancing loans in regional centres from Townsville in Queensland, Wagga Wagga in New South Wales, Ballarat in Victoria and Pinjarra in Western Australia. Well located subdivisions have proven very popular amongst buyers, especially when sold at a competitive price.
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