As Australian capital cities continue to feel the effects of a cooling property market, many investors are looking for alternative places to put their money.
It goes without saying that real estate investing doesn't have to be concentrated to capital cities, and more and more, investors are looking to perimeter and rural suburbs for their value and unique growth opportunities.
For investors in Victoria looking for options outside of Melbourne, Geelong and surrounding towns such as Torquay and Lorne offer unique investment opportunities and have seen impressive growth within the last year.
As you may know, this region is known as the Surf Coast and these seaside towns serve as the gateway to one of Australia's most famous natural attractions, The Great Ocean Road.
If you take a look at the natural surroundings of this region it's no wonder that this area has a lot going for it in terms of investment value. Each town has its own character, such as Geelong's iconic Art Deco boardwalk, Lorne's rich art community and Torquay, home to the Australian National Surfing Museum.
One of the best aspects of this region is that it lies 1-2 hours from Melbourne's city centre, so although residents can enjoy a serene weekend on the coast, many choose to work in the city during the week.
Owners of property in Geelong, Torquay and Lorne, really do get the best of both worlds, smaller towns with quirky charm, as well as the employment options provided by easy access to metropolitan areas.
So let's take a look at the property market in Geelong and the Surf Coast, how it performed last year, and what investors can expect in the years to come.
What did the property market in Geelong, Torquay and Lorne look like in 2018?
It's not news to investors that 2018 wasn't a good year for investors. Australia's property market as a whole took a slide that looks to continue for the foreseeable future. Capital cities felt it most, with Sydney and Melbourne taking the biggest hits. Experts boil the causes down to a few main factors:
- Restriction on lending measures, especially interest only loans
- Less foreign investors in the market
- Less buyer interest in an already oversaturated market
- Clearance rates falling to their lowest levels in 20 years
- Unit oversupply in most Australian cities
According to QBE's Australian Housing Outlook, Melbourne's housing market fell -1.6% in 2018, and could fall another -2.5% before 2021. SQM's latest report has even more dire figures, with a -6% decline by the end of 2019, depending on how the Reserve Bank manages interest rates.
Compared to Melbourne's housing prices, Geelong has certainly surpassed expectations. With the loss of the car manufacturing industry in the region in 2016, many experts assumed that demand in the area would fall, leading in a subsequent drop in median house prices that would have been further agitated by thawing markets nationwide.
"...despite slowing, the market still recorded growth in the last quarter of the year, and a staggering 19 suburb records were smashed before the year's end."
Contrary to predictions, however, the region has held firm with booming service sector employments, population growth and new developments.
Geelong house prices only started to slow half-way through the year and recorded an impressive 9.6% growth overall (compared to a 1.6% decline for Melbourne) according to the same QBE statistics. However, despite slowing, the market still recorded growth in the last quarter of the year, and a staggering 19 suburb records were smashed before the year's end.
Suburbs in the greater Surf Coast region also held strong, with five coastal towns recording suburb records in 2018. Many suburbs recorded sales above $1 million for the first time. Lorne recorded a median house price increase of 5.83% over the last twelve months, while Torquay rose 10.9% according to Corelogic data.
These figures seem impressive but are dwarfed by the growth of neighbouring suburb Fairhaven, which clocked in a median house price increase 32.4%.
How can we expect the Geelong, Torquay and Lorne real estate market to change in 2019?
The general outlook for Geelong, Torquay and Lorne is very positive. These areas are currently benefiting from population growth and the development of a large number of new dwellings, as well as local investment - such as the new Lara Maximum Security Prison which will begin construction later this year, bringing jobs to the region.
One of the main driving factors behind the area's strong growth is a shortage of supply.
Corelogic data shows that in 2018 there were 1554 properties on the market in the Geelong region, which is significantly less than 2017 when there were 1711 properties, and 2016 when there were 2171. This shows a strong trend that will no doubt continue to push property values upwards.
Despite Melbourne's house market in decline, it is still comparatively expensive to much of the Geelong and Surf Coast regions which still shine as affordable investment options. The Surf Coast attracts many buyers from Melbourne, who also own properties in the city, but use the location as a rental, Airbnb, weekend getaway or future retirement destination.
"The general outlook for Geelong, Torquay and Lorne is very positive."
Geelong attracts some of the same demographic, but also continually attracts first home buyers who benefit from the more affordable alternative as well as stamp duty concessions.
These factors should continue to drive strong growth in the Geelong and Surf Coast region. According to QBE's Australian Housing Outlook, Geelong's median house price is expected to increase 2.6% this year, however, competition with Melbourne's outer suburbs may see growth flatten slightly.
Still, the median house price is expected to reach $550,000 in the year between 2020 and 2021 for the greater Geelong region.
Suburbs on the Surf Coast such as Torquay and Lorne can expect a similar pattern. Although the area has experienced solid growth within the last year, toughening market conditions will likely cause a slowing in the region, but despite this, most experts believe it will be a soft landing rather than any significant drop in value.
Best areas to invest in Geelong, Torquay and Lorne in 2019
Geelong and suburbs in the Surf Coast region are safe bets for investors in 2019. Investors looking to get ahead should look out for property near infrastructure projects and transport connections.
Coastal properties in Lorne and Torquay will also benefit from relativity to the beach and water views. Location is a big factor for these destinations and should be considered when searching for investment properties in Torquay, Lorne, Bells Beach as well as lakeside areas like Colac.
According to SQM Research's latest report, the suburbs to look out for in 2019 are:
- Bell Park
- Geelong West
- Bells Beach
What should buyers and investors be wary of in Geelong, Torquay and Lorne?
One thing investors should look out for is competition with Melbourne's outer west suburbs, which are also providing alternative investment opportunities to the city. Areas of North Western Geelong, such as Moorabool, Corio and Norlane may contest with perimeter suburbs of Melbourne for buyers' attention.
"One thing investors should look out for is competition with Melbourne's outer west suburbs..."
Investors are better off looking for unique areas that set themselves apart from Melbourne but still offer adequate transport routes to the city CBD.
How to identify an area with high growth potential
There are a few main factors that make an area stick out as a place with high growth potential, and learning to spot these factors can make a big difference for the success of your investment.
Consider these four factors for a better return on your investment:
- Large infrastructure projects currently underway or planned. A good example is the new Lara Maximum Security Prison in outer Geelong, however other examples could be hospitals, schools and transport centres.
- High rental yields that have stayed steady or have increased; this is a good indication that there is demand for rental accommodation.
- High vacancy rates and a shortage of properties on the market. This is a good indication that the area is in high demand.
- A population that is growing, and/or has signs of gentrification, like renovations and new or unique retailers moving into the area.