Looking to buy an investment property in NSW but not sure where to put your money?
With the Sydney market in free-fall, investing in NSW’s regional property market isn't such a bad option, as it's currently outperforming the big smoke. This is not to say that there is nothing to worry about - with Australian dwelling values down -4.8% through 2018, these are the weakest housing market conditions since the GFC era.
And while there may not be a silver lining to every cloud, regional markets are bucking the trend and outperforming their metro cousins.
Regional property: is it the next big thing?
Where? Small capital cities like Hobart - which recorded +2.0% growth over the three months to December ‘18 - and regional centres right across the country are bucking the big city bust, by offering:
- An affordable alternative to urban markets with better value for money and more attractive growth opportunities over the medium term.
- Accessible centres with diversified local economies and more job opportunities.
- Improved lifestyles, with a slower pace of life and larger backyards.
Now, let’s take a look at what regional NSW has to offer in the year ahead, so you can make an informed decision and maximise your ROI.
Fastest growing regional areas
According to CoreLogic’s Hedonic Home Value Index (December 2018) regional Australia, ‘...returned a stronger growth performance relative to the capital cities; likely due to better housing affordability, more sustainable long term growth trends and improving economic and demographic conditions’.
If you're looking for the best regional markets in NSW, they identified the Riverina (+3.9%) and Central West (+3.8%) sub-regions as standout performers in the state - based on the annual change in dwelling values.
"If you're looking for the best regional markets in NSW, they identified the Riverina and Central West sub-regions as standout performs in the state..."
Other regional centres with strong recent growth include:
- The Newcastle & Lake Macquarie region where the median house value increased by +9.0 % over this timeframe.
- The Richmond-Tweed region recorded the highest growth for units, where the median unit value increased by +9.3%.
Property analyst Hotspotting identified two regional areas in NSW to watch in 2019. This includes:
- Queanbeyan, which benefits from its close proximity to Canberra, and where the median house price of $530,000.
- Rutherford in the Hunter region is also benefiting from regional property performer Newcastle, and the ripple effect it has created, and where the median house price is $400,000.
What should buyers and investors be wary of in NSW?
One should be aware of the underlying fundamentals of any market before you invest. Some factors to consider include the diversity of the local economy, the amount of residential building activity and what infrastructure projects are planned or currently underway.
Factors to be wary of specifically in NSW include the impact of the resources sector and the drought on the local market, with both liable to result in weaker conditions and poor performance.
How can we expect the NSW regional property market to change in 2019?
Beyond local pockets of growth, 2019 is likely to see the downturn continue, and in some cases intensify for some markets.
The following areas are still set for growth, albeit at a slower rate than in 2017/18.
- Wollongong, a strong performer in our 2018 review, is forecast to see more modest gains, with QBE forecasting house price growth of +2% over the three years to June 2021. They predict a median house price of $750,000 by then.
- QBE predicts fast growing Newcastle's median house price to grow faster (+7%) to reach $635,000 by June 2021.
- In contrast, CoreLogic reports that the Southern Highlands/Shoalhaven region contracted -4.0% over 2018 - an area that was posting double digit growth in 2017.
Is the NSW market cooling?
It is difficult, if not impossible, to analyse an entire state’s property market - so bear this in mind when you read news headlines. From a property investors point of view, it is more valuable to analyse markets on a local level.
Sydney’s property market is definitely cooling, with QBE’s Australian Housing Outlook 2018-2021 predicting that the slump will impact all suburbs, including the inner, middle and outer ring of the city projected to drop -7.6% in 2019.
"...2018 saw Sydney dwelling values decline -8.9% over the calendar year..."
In fact, 2018 saw Sydney dwelling values decline -8.9% over the calendar year, with prices retreating -3.9% in the three months to December 2018.
As we have seen above - with the Southern Highlands and Shoalhaven - some regional markets are also feeling the pinch, with the Illawarra also down -6.2% over 2018.
How to identify an area with high growth potential
Identifying an area with high growth potential is not following a gut feeling - you actually need to know what signs to look for. Thankfully you have a wealth of tools, data and websites - including ours - to help you make an informed decision.
Signs that point to an area experiencing high growth can include any one or combination of these factors:
- Major infrastructure projects in the works or currently underway, which can help improve the local economy and/or the lifestyle of an area. Here new or upgraded transport links or any development will boost the local job market.
- Properties are spending a relatively short time on the market - called days on market - and/or are selling via auction, rather than listing for sale. Agents normally advise their clients this sale method in a booming/hot/rising market, so this is a good sign that there is significant demand for properties in an area.
- Where there is high demand for a relatively small number of properties - this tends to drive prices up.
- If the rental yield is rising in suburbs - this normally indicates strong demand for rental accommodation.
- Similarly, low vacancy rates as an indication of high demand for rental properties.
- High population growth is often an indicator of a strong local economy, which often goes hand in hand with rising property prices.
As with any real estate investment, it’s important to do your research before you buy a property in regional NSW. The timing of when you buy and sell can be just as crucial for your ROI as your property’s location.
"The timing of when you buy and sell can be just as crucial for your ROI as your property's location."
Are you a thinking about becoming a property investor? Why not download our investment strategy guide to kick off your journey.