2 affordable Qld suburbs set for success

Even with property prices climbing ever higher, there’s still some areas offering good value for investors.

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In an episode of The Property Nerds, InvestorKit director Arjun Paliwal has identified Townsville and Rockhampton as two Queensland suburbs where house prices are still below $500,000, and are on the cusp of significant growth.

With these burgeoning property markets first revealed within a recent InvesterKit report, Paliwal stated that he had focused on the sub-$500,000 price point as a result of the “between 30 to 40 per cent” reduction in borrowing capacities.

Noting investors are “choosing this price point because they’re forced into it from borrowing changes”, he said for anyone on their second or third property, “instead of having an abundance of choice (while) you’re thinking of your next ones, you’re going down to that price point”.

While the director acknowledged that $500,000 is not “cheap by any means”, Paliwal expressed that this price range is “quite affordable” when compared to the greater Australian property market.

“We wanted to show people that investing doesn’t need to be extremely expensive.

“Queensland just happened to have the most frequency of markets in this price range and the most frequency of high performing markets in this price range, which is what it’s about at the end of the day.”

With Townsville and Rockhampton well-placed for growth, Paliwal has offered up a number of reasons as to why.

Strength of local economy

An area’s “biggest driver to the market cycle” is the strength of their economy, according to the director, who relayed his opinion that Townsville’s local economy has “one of the biggest turnarounds” he has seen across “any Australian city in the country”.

He said Townsville’s unemployment rate was under 3 per cent a far cry from the double-digit percentage recorded back in 2016.

Paliwal detailed that Townsville’s infrastructure per capita spending sat at $89,000 a figure he noted was “not a small amount”.

While Rockhampton’s local economy is not improving to the same degree as Townsville, Paliwal nonetheless stated that the area’s infrastructure spend per capita reached $74,000, and the area’s unemployment substantially dropped from the “very high amounts” recorded across 2014 to 2016.

“If we look at the local economies of these areas, Townsville’s definitely a step up, but they’re both looking pretty healthy.”

Imminent rental rises

With Townsville and Rockhampton’s vacancy rates both registering below 1 per cent, Paliwal highlighted that “people may not realise how tight the supply and the sales aspects are”.

“When supply is this low for rental vacancies, it just means that rents are likely to increase.

“If we’re looking at projected trends, I’m expecting the rents to grow again for both of these areas at between 6 to 10 per cent over the next twelve months, which means that you’re likely to see above long-term average growth rates of rent.”

The director also stated that growth rates in Townsville and Rockhampton were “expected to be very strong”, and could see growth of 8 to 12 per cent.

“It wouldn’t be uncommon to see that in these markets, if not more, over the next twelve months.

“And I’d say there’s some legs left in them because of how little growth they’ve had over the last 10 years, how undersupplied they are, and where their economic profiles are.”

Optimistic future outlook

As a result of these market conditions, Paliwal was optimistic about the long-term potential for growth, and subsequent investment prospects within Townsville and Rockhampton, and said he doesn’t believe there are any factors that “are going to negatively shake them up from their trajectory”.

“Both have strengths in them, different types of strengths. Townsville’s economy is a little bit stronger, but both cities are performing well and are undersupplied across all these metrics,” he concluded.

Listen to the full conversation with Arjun Paliwal and Leigh Paliwal here.

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