John McGrath – The rise of remote investing
More investors are looking to property markets outside their own neighbourhoods and there are a number of factors driving this, including advances in technology and the rise of regional living during the pandemic.
Data from MCG Quantity Surveyors shows the average distance between where landlords live and invest is 857km, up from 559km in the year to Nov 2021 and up from 294km in the pre-pandemic period to Jan 2020.
To put this into perspective, the distance between Sydney CBD and the Blue Mountains is less than 100km. So, an average of 857km indicates more people are investing in regional areas and interstate locations.
Here’s what is driving this trend:
- The pandemic and the ability to work from home led to a massive migration from the capital cities – especially Sydney and Melbourne – to regional Australia. This pushed up both rental values and capital values in the most popular regional centres, creating attractive rising markets for investors
- Capital growth in regional areas during the pandemic was higher than growth in the cities. Regional areas are growing from a much lower price base, so investors may feel there is more room for further growth in the regions over the long term
- The significant increase in interest rates over the past year, along with stricter new loan assessment criteria, may have encouraged investors to look at more affordable markets
- More investors can afford to buy a house in a regional area due to the lower price points. Houses typically appreciate faster than apartments in Australia
- Real estate technology evolved significantly during the pandemic. People adapted quickly to video inspections, online bidding and signing contracts electronically. Buying remotely is now easy, which may be encouraging investors to think beyond their local area for the best possible opportunities
The popularity of Airbnb and holiday letting as a form of property investment is likely encouraging investors to buy in tourism hotspots on the coast or in warm weather locations, as well as regions offering particular recreational interests, such as snow skiing, wine tasting and hiking
During the pandemic, areas within 90 minutes of Brisbane, Sydney and Melbourne were the most popular with people leaving the cities, as they allowed easy access to family back in the city as well as other business and cultural activities.
Areas like the Central Coast and the Hunter region near Sydney, plus Geelong in Victoria and Toowoomba and the Sunshine Coast in Queensland were some of the most in-demand areas.
The greatest demand was initially from owner-occupiers, but investors were always going to follow.
Many investors can no longer afford to buy in the inner city and are looking to put their investment dollars into safe assets in areas with strong growth prospects.
The quality of developments in some regional areas has increased significantly off the back of a wealthier, more sophisticated market arriving.
The Central Coast, as an example, is now designing and building high-quality apartment buildings of the same standard as Sydney.
The traditional idea of regional towns being sleepy little areas with low population growth is over.
Many of Australia’s most popular regional towns have developed over the past two decades to the point of becoming small cities in their own right with thriving local economies.
Vast new road infrastructure has improved accessibility between key regional areas and the cities as well.
Most importantly, the pandemic highlighted the amazing lifestyle options that our regions offer, from beach hot spots and serene treechange areas to wine regions, mountain towns, and the snowfields.