REGIONAL NSW is being targeted by property investors, who believe a number of areas will follow Sydney’s lead with growth during 2014.
The Homeloans Homebuyer Barometer, a survey of 600 investors, revealed 39 per cent of those considering a purchase within the next 12 months were looking at regional or rural areas.
“Regional areas are more affordable than Sydney, plus there’s good rental demand, strong yields and capital returns,” said Will Keall, Homeloans marketing executive. “Many investors are buying with the longer term view of retiring to these areas. In the interim, they benefit from the rental income.”
Regional markets will grow in 2014, according to Nathan Birch, buyer’s agent and founder of B Invested.
“People will notice they can buy a house for $100,000 in a regional area and it’s just a matter of time before values grow,” Mr Birch said.
Investor activity has picked up around Wollongong, the central coast and Newcastle, where infrastructure is improving.
“The Newcastle area ticks all the right boxes,” said Sam Saggers, CEO, Positive Real Estate. “Government strategy will see 160,000 new residences delivered over 30 years. The area’s reputation is changing from tough steel-producing city, to modern, sophisticated and dynamic marketplace.”
Two hot spots include Cooks Hill in Newcastle’s inner ring, and also Jesmond, next door to the University of Newcastle.
“Cooks Hill is like Paddington in Sydney, but without the price tag,” Mr Saggers said. “Jesmond is close to 30,000 students and demand and supply are always tight.”
Sydney prices are likely to grow again in 2014, making bargains harder to come by.
“By the time this cycle of growth has finished moving, Sydney yields will look rubbish,” Mr Birch said. “You will still find good yields in places like Tamworth, Kempsey, Orange, Wagga Wagga and Albury. These places have good infrastructure in place.”
The infrastructure of a town is an important indicator of whether it has growth potential.
“Look at places like Woolworths and Bunnings. Everyone needs a supermarket, but Bunnings is not going to go and set up shop without the demand to make it worthwhile,” Mr Birch said. “McDonalds won’t open just to sell two cheeseburgers a day … the demand has to be there.”
Population is a key factor in getting returns on investments.
“The population needs to be 10,000 plus,” Mr Birch said. “Don’t go to a little town with 500 people, because you won’t have any capital growth or tenant demand.”
North Sydney resident Brennan Latimer, 26, invested in a regional market after seeing much better value outside Sydney.
Researching the central northern town of Gunnedah, with a 12,000 population, he noticed there had been substantial investment from a Chinese mining company.
“They have discovered some of the richest coal deposits in the country,” Mr Latimer said. “On top of that, the area has traditionally had steady and stable growth and the economy is also boosted by agriculture.”
Mr Latimer bought a block of land, built two four-bedroom houses and subdivided the block, for a total outlay of $750,000. He has since had the properties valued for $450,000 each and has tenants ready to move into both.
“I will already be able to pull $150,000 in equity out of the deal,” Mr Latimer said. “The properties will rent for $480 a week each, which is over 7 per cent gross return.”
NSW investment gems
Tamworth; $325,000 median
Kempsey; $240,000 median
Port Macquarie; $402,000 median
Coffs Harbour; $375,000 median
Albury; $372,000 median
Gunnedah; $289,000 median
Wagga Wagga; $340,000 median
Orange; $330,000 median
Jesmond; $378,000 median
Dubbo; $280,000 median
Maitland; $283,000 median
Muswellbrook; $333,000 median