Why regional areas are becoming more attractive

Transcript:

Kevin:  I’m pleased to welcome to the show a man who I’ve followed for many, many years, who speaks all around Australia as somewhat of an authority on what’s happening with the property market, John Lindeman from 7steps2success.com.au. We’ll tell you more about that site a little bit later.

John, welcome to the show. Thank you very much for your time.

John:  It’s a pleasure, Kevin, and welcome, everybody.

Kevin:  John, I want to talk to you specifically about what’s happening with regional markets around Australia compared to the capital city markets. We know that Sydney and Melbourne now are largely becoming very unaffordable and very hard to buy in.

Is that actually promoting some opportunities more so in some of those regional areas, John?

John:  It is. I think regional markets are very much underrated. In Australia, we have some huge regional markets, like the Gold Coast, which has over 600,000 people. The Sunshine Coast nearly 300,000, and Newcastle has about 430,000 people.

These are huge markets and they do have a lot of potential, but the problem with them is that because of the general population drift that we’ve seen to capital cities – as migrants come to Australia, they like to live in the big capital cities – that you have to have a specific reason why you want to invest in a regional area, and that is that there’s going to be higher growth than you would otherwise expect because in general, capital cities outperform regional areas, so you have to find these sorts of areas where demand is rising.

In the case of Sydney and Melbourne, as you said, they’ve become very unaffordable. The first thing I’ve noticed is that a lot of buyers are being pushed into regional markets outside Sydney and Melbourne. It’s what we call a ripple effect.

And that’s already taken place in Sydney. Prices have moved up in Wollongong, the Central Coast, and Newcastle, and they’re starting to go up further north and south of Sydney. The same thing in Melbourne, where you find that growth is now occurring in the Mornington Peninsula, Geelong, and it’s extending into Ballarat and Bendigo.

Kevin:  I guess one of the dangers of looking at some of these regional markets is that if you go into a market that is really dominated by one or two industries, it becomes quite difficult to understand where the future lies for some of those regional areas, John.

John:  These are all very large metropolitan areas. They’re not capital cities, but nevertheless they are bigger than centers and there are a lot of different dynamics occurring in these markets. The main thing, of course, is the fact that they’re more affordable and so people – and investors as well – tend to move into these markets because they’re cheaper.

Kevin:  What are some of the triggers you look for if you are looking around at one of the regional markets to decide where you should be investing? What do you look for, John?

John:  I look for something that’s changing, in other words, that’s going to change the nature of demand in the market. That can usually be in, say, mining towns and ports where you have a boom in construction. It might be a port expansion or a new mine opening, but it can also be things like infrastructure such as roads and railways. Really, what we’re seeing at the moment is some major infrastructure projects that are occurring and going to occur around Australia, and I think they will have massive effects on housing markets where they’re located.

Kevin:  What do you see as some of the dangers, John? What should you be aware of?

John:  I think the danger with these infrastructure development projects, especially the transport ones, is that they may not actually occur. I think a good example of that is the Inland Rail Project, which was mentioned in the recent Budget.

This has been on the drawing boards for about 20 years, but now the government has brought forward plans for its construction – a high-performance freight rail corridor between Melbourne and Brisbane, which will also connect South East Queensland by rail with Adelaide and Perth.

This is going to have massive flow-on benefits for local industries and regional communities. It’ll create thousands of jobs, and it’s going to dramatically affect housing markets along the route. The risk is, of course, that it hasn’t yet got underway and governments have a way of delaying or changing these projects after the announcements are made.

If it goes ahead as planned, you could probably see massive increases in rent demand for towns along the way, the major towns such as Parkes, Narrabri, and Maury, near Brisbane. Oakey is another center where there’s going to be massive work done. And that will lead to median house price rises as well. These are all very affordable areas right now, but you have to be sure that the construction is actually going to go ahead as planned.

Kevin:  For anyone looking to invest in these regional markets, if they were to come to you for advice, John, would you suggest that they need to travel to these areas, and if so, at what stage in their discovery should they be going there – in the very early stages or once they’ve done their sums?

John:  I think in the construction stage, it’s very much looking at rental demand – if that’s rising – like in the towns I’ve just mentioned. If you can see that the number of rental vacancies has fallen dramatically because of construction work that’s being undertaken, then that’s the first sign that growth is likely to occur.

But in other areas and in other projects – and another good example is the Gold Coast Light Rail; that’s going to profoundly affect housing markets all the way down through the Gold Coast to the New South Wales border – the best way to ascertain the likely effects of that is to go and have a look.

If you live in Brisbane, take a trip down, look at the construction, how it’s proceeding, talk to real estate agents about the likely demand it’s having on housing, especially tourism and retiree markets. Doing a bit of on-the-ground research, I think, is well worthwhile in these sorts of projects.

Kevin:  John, I know that you’re always looking around and always looking at what’s happening with the markets. If I were to ask you to give me your top three regional markets around Australia, would you be able to do that?

John:  I think the main area in Australia that has huge growth potential is northern New South Wales, and that’s largely because of highway duplication, which is only three years away from completion. That’s having a profound effect already on rent demand in the major towns along the way, such as Ballina, Lismore, Grafton, and Coffs Harbour.

These towns – according to us in our research – are going to see massive price rises occur once that highway is completed. I think they’re the best areas in the whole of Australia that you can look for for investment over the next few years.

Kevin:  Always good talking to you, John.

John Linderman’s website again is 7steps2success.com.au. You’ll find out where John is speaking. You can also communicate directly with him and get a lot of great tips from that site as well.

John, thank you very much for your time.

John:  Thank you, Kevin. It’s been a pleasure, and I wish everyone the best of luck with their investment journey.