Accelerating Demands for Regional Real Estate

There have been high demands for regional real estate as land in metro regions become more scarce and more expensive.  Regional localities and smaller cities continue to gain appeal, and the ability to work from home will only boost their attraction, particularly in lifestyle hubs.

Prior to COVID-19, the ABS had forecasted the nation’s population to grow, by up to 18.7 million people by 2056. Based on current patterns, Sydney, Melbourne, Perth, and Brisbane would have an average population growth of anywhere between 2 and 3.6 million people in each city. Current trends already show that many people have begun moving out of urban areas, and into the regions, to escape the crowding. However, there are many other reasons people are choosing to purchase in these locations.

Living in regional areas also offers people a lower cost of living, more time with family and less financial stress. That is a huge incentive to move out of the city, which has resulted in a huge urban sprawl towards regional locations with good access to infrastructure and amenities. Metro residents are also recognizing that they are able to sell up in the cities and purchase a much larger piece of real estate in regional towns, especially those who are in search of coastal locations.

The widespread shift to remote working resulting from the pandemic has accelerated this trend. Many people are now opting for larger spaces, increased affordability, and a better lifestyle. Job satisfaction levels amongst office employees are currently at record highs, thanks primarily to the elimination of the need to commute. Employers across all industries, including government agencies, are recognising this population shift and decentralizing from the central business districts. Some have gone as far as relocating offices or downsizing spaces to reduce rent costs. GovHub, for example, is a new state-government-built office for public servants that is offering 2000 new roles for government works in Ballarat, in regional Victoria.

This does not only benefit Owner Occupiers though. Many investors who have seen the shift or have partnered with experts have been able to forecast this and adapt strategies in anticipation, capitalizing in high growth locations and getting great positive cash flow returns.

Investment Benefits

The popularity of regional towns is translating to extremely low vacancy rates. The limited supply is a boom for property investors. It is safe to say, if you own a home in a regional area near one of Australia’s largest cities, your property is currently in high demand.

For investors who rely on property rentals for revenue, this is a great time to invest in regional properties. The fact is, high demand means renters are willing to pay higher rates and leave bigger deposits.

“Eleven regional areas across NSW, Victoria and Queensland recorded rental vacancy rates of less than 1 per cent in July, SQM Research data showed, as people left the capital cities for less populated areas during the coronavirus pandemic.”

In fact, tenants have been in open competition for access to rentals in Australia’s regional towns. Consequently, rental yields are also considerably higher in those areas. If you’re renting property in the regions, you can expect better rates than in the city. As a general rule, city-based yields throughout Australia currently average 3.4%, whereas rentals in regional towns are yielding 4.9% on average.

Thanks to an accelerating population migration out of urban areas, regional markets are ideal for generating wealth. That’s because regional property values are typically very stable and regional economies are less susceptible to economic shocks. Thanks to the expansion of multiple industries out of urban centers and into the regions, as well a steady population growth and infrastructure development, there is a very strong foundation for long-term, consistent growth.

Max Yeung

Max Yeung

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