Fortunes have been made and lost by property investors in regional NSW, so is now the right time to take a chance on the outback? John Hilton finds out
Broken Hill does not exactly have the same ring to it as Bellevue Hill. The former is a mining hub located in far-western NSW, while the latter is an eastern suburb of Sydney, situated just 5km east of the CBD. But for investors, opting for dirty mines over harbour views may be a wise decision in the present climate.
Firstly, regional NSW is generally cheaper and often produces greater rental returns than cities like Sydney.
Take Broken Hill. The latest RP Data research suggests that the median house price is a highly affordable $117,250 and the current gross rental yield is a strong 9%.
Despite warnings to the contrary, the resources boom is continuing, and new mining ventures are still going ahead. Broken Hill is also increasingly diversifying its economy. Residential real estate expert Terry Ryder says that the tourism, the media and the arts scene are experiencing growth in this area.
However, the key drivers of growth for mining towns will always be the mines themselves. And if they close down, jobs and economic growth can go along with it, says NextHotSpot. com.au director Andrew Peterson.
“Because mining towns are small, they are prone to huge swings,” says Peterson. “You don’t see that in a massive centre like Sydney.” Peterson believes that Sydney’s proximity to jobs and transport – particularly the railway lines – means it generally should be a steady spot.
“People want to be close to the action. The really expensive suburbs like Vaucluse or Bellevue Hill or Mosmon are pretty close to the city,” he says.
7,000 reasons to move to the region
The NSW government has recently announced it will offer $7,000 to city renters who buy property in rural areas, as part of an update to their regional relocation grant scheme.
But Peterson says that the slow take-up of similar government grants aimed at Sydney residents is evidence that more must be done to attract people to the region.
Whether it’s in the city or region, he cites infrastructure, education and medical facilities as more effective drivers of population growth. And some of those drivers are what mining towns are lacking, or at least perceived to be lacking.
Peterson claims that because mining towns are seen as blokey and boozy they generally don’t appeal to mothers who desire other attributes such as quality education, hospitals and restaurants.
“If you don’t get families going there, you don’t get a mature market,” explains Peterson.
“You might get price spikes. If you can see this coming you might want to get in and get out, which I would call trading rather than investing.”
Chinese buying in Sydney
The rising Chinese demand for Sydney property has led McGrath Estate Agents CEO John McGrath to predict home prices could rise by as much as 10% over the following year.
According to the latest figures from the Foreign Investment Review Board, quoted by smh.com.au, Chinese buyers were responsible for $4.2bn in transactions for Australian real estate for fiscal year 2012, which is a 75% increase from 2010.
However, Peterson is more cautious about the impact of Chinese growth on Sydney property over the next 12 months.
“For Sydney, I don’t think it’s going to have too much of an impact on the lower end of the market, which has usually been better for investors. “Let’s face it, that’s what most can afford,” he says.
Peterson believes that regional NSW could actually be the future winner of this trend, through a possible demand for agriculture.
“The Chinese are becoming more aspirational. Now that they’re moving to the cities, they need to be fed,” Peterson says.
Spotlight on: Top regional performers
With an economy that’s diverse and expanding, it’s no surprise that four of the top 10 regional performers came from the Hunter, including Singleton Heights, Fishing Point, Soldiers Point and Hamilton East. Apart from having the world’s largest coal export port, the Hunter still benefits from world famous wineries, electricity generation and horse breeding, to name a few.
Hamilton East, just 3km west of Newcastle’s CBD, has median house values clocking a cool $820,500, and may profit further from the $95m university campus being built nearby on Hunter Street.
However, the central western town of Dunedoo topped the list for 12-month growth, with a whopping 44% increase. Details recently emerged of a proposed stimulus package for the area, after the NSW government pulled out of its agreement to develop and operate the local Cobbora Coal Mine, which will be leased or sold to a private developer
Suburb To Watch
Young
The Cherry Capital of Australia, otherwise known as Young, is a country town in the South West Slopes region of NSW. Despite hosting the National Cherry Festival in the summer months each year, when the influx of tourists means the population virtually doubles in size, Young deserves to be looked at for other reasons besides fruit picking.
“The aged-care facilities are second to none,” says Colin Durham, principal of LJ Hooker Young.
Indeed, the Young District Hospital has only been open since 2004 and includes the Mercy Care Centre, which specialises in geriatric management and rehabilitation. Since the bigger regional centres such as Wagga Wagga, Canberra and Orange are all a good two hours’ drive away, residents from nearby towns are increasingly choosing Young for their hospital, shopping and recreational needs.
The town also boasts wheat production, sheep, cattle, an abattoir that is about to reopen, and one of the biggest clusters of large piggeries in the state – not to mention the new Young Sports Stadium and a range of primary and secondary schools that have new affiliations with both the local TAFE College and Charles Sturt University.
The international oil refinery company Hydrodec has also made Young its home, as have a range of national and locally owned businesses in the thriving retail centre. To get around, there are community buses, trains and even private planes that can take you to Sydney or Melbourne. It all contributes to a strong and stable economy, no matter what part of the town you live in.
The median house price in Young is an affordable $240,000. For around that price, you could purchase a three-bedroom brick veneer house that might be about 20 years old. For something a bit more modern, expect to fork out anywhere between $300,000 and $350,000 for a four-bedroom, two-bathroom house. Currently, gross rental yields are a healthy 5%.
