Proximity to the CBD is always at the forefront of the mind of a property investor. It’s one of, if not the biggest factor in the value of many properties.
But what if investors could think outside the box, drop worrying about proximity to the city centre of their capital city and consider investing in regional areas?
It may well pay handsome dividends because the top 20 locations in Australia for long-term capital growth are all regional locations.
This probably comes as a surprise as it’s generally thought that capital cities perform the best.
Sometimes however, the figures on the comparison can be misleading because a general figure showing growth in regional Victoria take into account a lot of poor-performing small towns which drag down the regional average.
If you isolate the best performing regional towns, they often out-perform the best capital city suburbs.
So much so that the top 20 regional locations have growth rates between 10.2% to 20.7% per year. Not surprisingly, most of these are mining towns or towns that have recently been boosted by resource sector activity.
The best performed location for long-term growth is actually not a resource town, it’s Humpty Doo on the outskirts of Darwin that has benefitted from that city’s outward sprawl.
The iron ore towns of Newman, South Hedland, Tennant Creek are prominent, recording growth rates between 15% and 18% over the last ten years.
In his article on Property Observer, Terry Ryder highlights the success of some regional towns but warns against getting too carried away.
“Let’s be clear. I don’t advocate investing in mining towns or mining regional centres. They are just too volatile and too high risk,” he says.
“A few short years ago the iconic coal-mining town of Moranbah in Queensland had a long-term capital growth average above 30% per year. Back then its median price was $750,000. Today it’s $250,000 and the capital growth average for the past 10 years is now minus 0.2%.”
“In other words, all that capital growth since 2005 has been wiped out and values are now lower than they were 10 years ago.”
“Port Hedland once had a median house price above $1.2 million and a capital growth rate close to 30% per year. Today the median is around $800,000 and the capital growth rate has dropped to 11.6%.”
“That’s still good enough to rank No.10 in Australia and it means that if you bought there 10 years ago you’re still well in front. But if you bought there three years ago, you’re feeling a tad sick.”
Investing in property in mining towns is obviously leaving yourself open to volatile resource markets, but the figures don’t lie, and despite recent sharp declines in commodity prices it’s mining towns and resource regional centres that still have the highest long-term capital growth rates in Australia.
It could be well worth your while keeping regional areas on your long-term property investment radar.