Coastal Regional Markets And Satellite Cities Perform Best
The East Coast’s best performing regional markets over the past year were satellite cities close to the capitals and desirable coastal lifestyle markets, according to a new CoreLogic analysis.
The report looked at price movements across 25 of Australia’s largest regional areas over the 12 months to January 2020.
The Gold Coast in Queensland was the top market along the East Coast, powered by strong population and employment growth. In NSW, the Capital Region, which incorporates parts of the South Coast as well as the Canberra satellites towns of Queanbeyan and Goulburn did best. In Victoria, Ballarat was the state’s top area.
There are no spectacular growth stats in the report but remember, the regionals tend to lag behind the cities and it’s been less than a year since the capitals turned back to growth. Many regional areas were also hit hard by the drought and this has dragged down the national growth index.
Australian regional home values rose a collective 1.4% compared to 7.3% across the capitals. A clear trend is greater strength in houses over apartments, with 15 regions out of 25 recording house price rises and just 8 recording apartment price rises.
Top 3 Regional Markets
NSW - Regional House Prices
- Capital Region +3.5%
- Mid North Coast +2.9%
- Newcastle & Lake Macquarie +1.9%
QLD - Regional House Prices
- Gold Coast +5.2%
- Cairns +4.2%
- Sunshine Coast +3.4%
VIC - Regional House Prices
- Ballarat +0.1%
- Latrobe-Gippsland & Hume -1.2%
- Geelong -1.3%
The East Coast has many of Australia’s best regional markets with pristine beaches, great facilities, strong transport links and natural beauty.
They are great places to live and a couple of interesting trends we’re seeing is more people leaving the big cities and young people buying their first homes in regional areas.
Nearly half of the 6,500 First Home Loan Deposit Guarantees reserved by eligible purchasers are reportedly going to areas outside Sydney, Melbourne and Brisbane. That means smaller capital cities and regional towns.
The big advantage for regional first home buyers is the price caps for their guarantees are generally closer to local median home values.
For example, the NSW price cap for Newcastle and Lake Macquarie and the Illawarra is $700,000. This is higher than the median house price of $570,000 for Newcastle and Lake Macquarie and $685,000 for the Illawarra. Compare this to Sydney, which has the same price cap but a median of just over $1 million.
Here’s another thing regional markets have going for them right now. Rental yields. They’re at a record low in Sydney and near-record low in Melbourne, which makes the case for investors to consider regional markets.
Regional rental yields in the East Coast states are generally well above the average interest rate being paid on new investor loans at 3.51% (P & I) or 3.79% (IO), according to CoreLogic's latest Quarterly Economic Review. This means the costs of a new investment property are much easier to manage.
In NSW, the gross yield of regional properties is 4.6% on a median value of $454,984, compared to Sydney at a 3% yield on a median of $853,816.
In Victoria, the gross yield of regional properties is 4.6% on a median value of $373,401, compared to Melbourne at a 3.3% yield and a median of $672,996.
In Queensland, the gross yield of regional properties is 5.3% on a median value of $373,282, compared to Brisbane at a 4.5% yield and a median of $500,033.
See you next week. JM
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This article originally appeared in The Real Estate Conversation (March 16, 2020)