As we farewell 2018 and move into the new year, you may well be considering investing in the Victorian real estate market, or even selling your current investment property.
With this in mind read our guide to the hottest regional markets in Victoria for property investment in 2019, so you can make an informed decision and maximise your ROI.
Regional markets: a glimmer of hope in 2019?
The key is to look beyond the media headlines about a housing meltdown as some markets - noticeably Sydney and Melbourne - have peaked and are due for a correction. In fact 2018 saw Melbourne dwelling values decline -7.0% over the calendar year, with Sydney down -8.9% over the same timeframe.
The good news is that there are plenty of opportunities elsewhere. 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 as they buck the big city bust, by offering attractive lifestyles, higher rental yields and more affordable property.
Let’s take a look at what regional Victoria has to offer in the year ahead.
Best regions in Victoria to invest in property
So where in regional Victoria are the best places to buy investment property?
According to property analysts CoreLogic, 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’.
They identify Victoria and Tasmania as two states with some of the strongest regional markets over 2018, and home to seven of the top ten best performing regional markets.
"If you are looking for the best regional markets in Victoria, make sure you research Ballarat, Geelong and Bendigo - which all recorded solid positive growth in dwelling values over 2018"
If you are looking for the best regional markets in Victoria, make sure you research Ballarat (+8.3%), Geelong (+8.2%) and Bendigo (+4.5%) - which all recorded solid positive growth in dwelling values over 2018.
Similarly, rents in Geelong are also on the up. Over the 12 months to September 2018, the advertised rental rate for houses in Geelong increased by +2.9%, while unit rents increased by +3.3%.
Fastest growing regional areas in Victoria
According to CoreLogic, the Geelong region recorded the largest annual increase in median values for both houses (+16.6%) and units (+11.9%).
Another area to watch is the Latrobe-Gippsland region, which saw a +6% rise in the number of sales over the year to August 2018, with median house and unit values up +6.9% and +6.4% respectively.
Analysts Hotspotting's latest Price Predictor Index tips Golden Square in Bendigo, where the median house price is just $325,000, as well as Sebastopol in Ballarat where affordability is also the big drawcard, with a median house price of $275,000. Both centres also offer a more relaxed lifestyle than Melbourne, as well as better rental yields.
What should buyers and investors be wary of in regional Victoria?
Like any market, you need to do your homework to identify the best regional growth suburbs and towns. You need to look for basic fundamentals and research if there are identifiable growth drivers that will stimulate the local economy and drive demand for property.
"You need to look for basic fundamentals and research if there are identifiable growth drivers that will stimulate the local economy and drive demand for property"
This could be major infrastructure projects that create employment and help improve the lifestyle of the general area or region. Another one to watch for is residential construction activity, which is a sure sign of an upswing.
How can we expect the Victorian regional property market to change in 2019?
QBE’s Australian Housing Outlook 2018-2021 forecasts the following for the most promising regional markets across Victoria:
- The Ballarat market will remain positive and median house prices are forecast to rise a cumulative +6.9% to reach $385,000 by June 2021.
- Geelong’s median house price is forecast to grow +2.6% in 2018/19, before it cools to reach a median price of $550,000 by 2021.
- Bendigo’s median house market is expected to remain relatively flat until June 2021, with the median house price expected to increase by +2.9% to reach $360,000.
Is the Victorian market cooling?
The Victorian market is too diverse and complex to analyse as a whole, so answering this question is not that easy. Instead, you need to focus on specific postcodes, suburbs or small towns to get a clear picture of what is happening on the local level.
"... focus on specific postcodes, suburbs or small towns to get a clear picture of what is happening on the local level."
An example is the Melbourne market, where QBE forecasts the median house price in inner city suburbs to drop a massive -24.0% over the next year. In contrast, the city's outer ring suburbs are projected to rise a healthy +6.2% over the same timeframe.
This data illustrates the point perfectly, though overall the Melbourne market is set to cool in 2019.
How to identify an area with high growth potential
Looking for the secret ingredient that will help identify areas in regional Victoria with high growth potential?
Property analysts Hotspotting recommends identifying suburbs and towns with several consecutive quarters of rising sales activity. This medium term trend typically leads to a jump in home values.
You can also make use of other key indicators and property data to inform your overall property investment strategy for a good idea how a local market is performing. These include:
- Property values, where rising house prices could indicate a positive long term trend
- Clearance rates, where high percentages indicate a ‘hot’ market
- Days on market (DOM), or how long a property takes to sell, can help you identify a booming/cooling market - depending on the timeframe and local market
- Rental yields, which details how much income/rent a property could fetch over a timeframe, as a proportion of its value.
- Vacancy rates, with high rates a sign there is reduced tenant demand or a glut of rental properties on the market.
At the end of the day, you also need to look at the big economic picture - including what prevailing interest rates are, and if a new government and their policies will impact the housing market.
All this information can help you identify which areas in regional Victoria are set to grow, stagnate or fall in value.
Thinking of selling? The why not use our OpenEstimates tool to see how much your property is worth - it only takes 30 seconds!