Economist says still opportunities in regions

Regional property markets still hold “major opportunities” for investors despite rising interest rates and slower price growth, according to a leading economist.

PRD chief economist Dr Diaswati Mardiasmo said that regional markets had become increasingly popular with first-time investors in the second half of 2021.

PRD’s Australian Economic and Property Report 2022, authored by Dr Mardiasmo, identified better affordability, higher rental yields and a lower vacancy rate as some of the factors attracting investors to regional markets over their capital city counterparts.

These factors had led to many city-based buyers investing in the regions while continuing to rent in the city, Dr Mardiasmo said – a trend commonly known as ‘rentvesting’.

“If you compare your affordability, and you’re looking at what can you afford, and what will that mean, in terms of repayments and in terms of deposit that you have to put up, having a band of say that $550,000 to $800,000 [in the regions] in this current climate is definitely more preferable than having a $1 million to $2 million band to be able to get into the [capital city] market,” Dr Mardiasmo said.

Vacancy rates of less than one per cent meant it was far easier to find a tenant in regional areas, she added.

“Most regional areas are trending below the one per cent [vacancy] mark at the moment, whereas your capital city is anywhere between 1.5 per cent to 2 per cent.”

“In terms of the chances of your property being rented, and being rented quickly, you have more of a chance in regional areas, in a situation where your entry price is lower.”

Dr Mardiasmo predicted that regional property market conditions would remain favourable to landlords for some time, with rental supply levels unlikely to improve in the short to medium term.

“Supply in regional areas, does not happen as quickly in metro or capital city. That simply is to do with geography – freight issues, transportation, getting building construction materials supplied to regional areas,” she said.

“There’s also some red tape in a lot of local regional account councils as well when it comes to developments and making sure that the development is in line with what the regional councils are hoping to do. And so sometimes there’s quite a bit of a delay when it comes to building applications and approvals.”

Dr Mardiasmo’s prediction of strong conditions for regional investors came despite values in some areas slowing during 2021, indicating markets were either approaching their peak or entering a downswing.

She identified property values in regional Victoria as being close to peaking, while values in regional NSW were in the middle of a downswing.

Prices in regional Tasmania and Queensland were at their peak, according to the report.

– BY REALESTATEVIEW.COM.AU