Regional boom: How to look beyond ‘hot markets’ for long-term gains

While investors traditionally chase hotspots for easy capital gains, Tran urged them to instead focus on underlying drivers of market growth and seek relative value to scale their portfolios.

According to Tran, before buying, investors should ensure they understand the data and “peel back the fundamentals”, evaluating whether markets could sustain long-term investment.

“Are there drivers that are going to continue with infrastructure, population growth, and owner-occupier demand after the investors leave? I think that’s something that we want to look into,” he said.

In addition to supply and demand pressure, he said that during their market analysis, investors should also observe primary factors of economic stability, infrastructure spending, economic diversity, and population growth.

Similarly, Tran urged buyers to take relative value into their market analysis, which is often forgotten, as most base their decisions on the well-known “hot markets” at the time.

“It’s very simplistic to say ‘a market’s gone up 50 per cent or something in the last three years, it’s done its dash – we move on to the next area because we want to ride the full growth cycle’,” he said.

Across the country, Tran noted that Geelong’s Corio suburb recorded 20 per cent growth over the past three years, lifting its median price to around $600,000, while over the past decade, values have surged by 140 per cent.

“If you went off that metric of going, ‘it’s had some strong growth already in the last few years’, you wouldn’t look at Corio – but because of its relative value at $600,000, still very much good value,” Tran said.

“‘Look at the value of it today relative to incomes in the area, relative to what’s happening in terms of infrastructure spend and population movement, as opposed to just using that arbitrary number of 50 per cent growth in the last three years.”

In southern Queensland, Tran said the city of Toowoomba was one of the strongest regions in the country, quietly achieving annual growth of 20 per cent.

“I bought personally in Toowoomba, and I’ll use Toowoomba as a very good example soon about not exiting a market too early,” he said.

Tran said Toowoomba was a good option because of factors such as its proximity to Brisbane, infrastructure, and decent yields for investors.

Growth in the region has been persistent, as it had already soared in the lead-up to COVID-19, by increasing about 50 per cent, and continued to boom over the last few years.

“We actually bought for a client in 2023 for about $550,000 in the suburb of Cranley, and now comparable properties are around $900,000,” Tran said.

“It’s grown another, like, even 70 per cent in some aspects. So you want to look at, currently, what future growth it’s got, relative to everything else.”

For investors wanting to purchase a house but seeking a region with a population of at least 80,000 people, Tran suggested areas like La Trobe, two hours south-east of Melbourne.

“You’ve got suburbs like Morwell, and you’ve got some better suburbs like Traralgan, buying houses there in the last year for $550,000,” he said.

He said investors should know that the economy wasn’t as strong in the region as Melbourne’s, with slightly higher unemployment rates, while some of the houses were like “weatherboard on stumps”.

“You’ve got to be mindful that they’re like ’70s builds, they need work. So it takes another type of investor to be able to be okay with that,” he said.

For Tran, Ballarat was also a viable option for investors, having a relatively strong economy compared to La Trobe, and being just an hour and a half away from Melbourne CBD.

In suburbs like Sebastopol and Wendouree, Tran said investors could buy a $550,000 house, but warned such homes would require extra renovations.

“You need to be okay with that. And the yields are weaker, probably 3.5 per cent. So, these are just things that you need to be conscious about going into that,” he concluded.

Listen to the full episode here.

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