(Pictured – Cairns Esplanade, Queensland)
When considering investing in a foreign real estate market, it is easy to get swept along with wider trends. For example, when thinking of real estate investment in Australia, many people’s minds automatically jump to the three leading city markets of Sydney, Melbourne, and Brisbane. These are the three most internationally well known Australian cities, so it makes sense that many investment searches begin here.
While all three of these markets offer quality opportunities for the savvy investor, more regional hubs are sometimes overlooked at first glance. This article will explore some of those more regional opportunities, and outline the advantages to including them in your investment strategy.
Firstly, one needs to understand the importance of these regional hubs. Australia is a nation with a relatively small population, living across a very large area. With a population of only 24.5 million people, spread over the world’s sixth largest country by landmass, it is often hard for Europeans to really comprehend just how spread out people are in this country. For the sake of comparison, Germany has well over three times the population (82.1million), yet is approximately 22 times smaller in landmass than Australia. The combination of a smaller population spread across an extremely large country means that regional hubs across the country are vital, yet often overlooked centres for commerce, community, and real estate opportunities.
To begin an investigation of regional investment opportunities, Deutsche Property Pty Ltd recommends making use of these monthly property reports, which include a ‘Property Clock’, showing current market trends across both major cities and regional Australian hubs.*
In a recent October 2017 review, the Property Clock gave a concise snapshot as to where various regional Australian areas are in their property growth cycle. Many regional hubs, including Mackay, Cairns, Townsville, and Rockhampton were rated as either ‘Approaching Bottom of Market’ or ‘Bottom of Market’. While this may be discouraging news for those who bought at the peak of the market, for the savvy investor, it represents the opportunity to capitalise on the most enduring investment adage of all time – buy low, sell high.
But what guarantee is there that you will be able to ‘sell high’? While all investments carry some degree of risk, investment in the Australian property market is, overall investment in a steadily growing, generally stable market.
A report by the Reserve Bank of Australia concludes in part that ‘The past decade saw a stabilisation of debt-to-income levels, but also a prolonged period of strong population growth – underpinned by high immigration – and smaller household sizes that led to increases in underlying demand exceeding the supply of new dwellings.’
So massive spikes in property values are unlikely, but there is a demand for new developments that has been consistently undersupplied. Fortunately for foreign investors, new dwellings are one of the main categories the Australian government allows foreign ownership of.
Smaller regional markets are also more likely than major areas to be significantly impacted by the addition of just one or two major developments. For example, previously small towns that have been chosen for new mining developments see rapid growth in both housing and general commerce sectors.
With these regional markets being spread so far and wide, there are always ‘Bottom of Market’ opportunities on the cusp of becoming ‘Start of Recovery’ and ‘Rising Market’ opportunities. The key is in knowing where to look for these opportunities, being connected enough to the local market to anticipate forthcoming major shifts, and in having the investment fortitude to ride the market waves with ease.
* European investment experts JLL, also offers a similar tool, the ‘European Office Property Clock’, from which it is possible to quickly ascertain where various European markets such as Paris, Frankfurt, Zurich, Dublin, and London are up to in their growth cycle.