Property market update: Perth, May 2022
Perth continued to outperform its bigger capital counterparts in May, as the city closed up the autumn season with a sol...
High median sales prices, congested traffic conditions, increased costs of living...ah the perks of living in the city! But hold on. Surely there’s an alternative?
Blogger: Adam Drummond, Fitzpatricks Real Estate
Whilst most city dwellers will lament the thought of moving to the country because it sounds as though they would end up in a nightmare version of McLeod’s Daughters, some are still doing initial research and are surprised by some of the benefits that come with regional locations.
It was only in the last few years that an initiative was launched to attract those frustrated with city conditions to the fresh air of the country, called Evocities. On top of that the State government offered an incentive of $7,000 in 2011 to last four years for anyone who packed up in a metropolitan area, sold their property and moved to a regional centre, known as the Regional Relocation Grant.
So if cities are over congested and regional centres are calling out for a population boost, what are these benefits I have alluded to? And what about investing in bricks and mortar in a place like Wagga Wagga, the largest inland city in New South Wales?
Let’s start with the lower cost of living. Public transport is hardly used because most car trips are less than 8 minutes in any direction and that’s in “peak hour”. Fill your car up for $70-$100 and you will use that tank of fuel in most cases for at least three weeks (a lot more if you’re a diesel lover.) Rates are on average $1,350 per annum and cover your council works and bin service.
If you wanted to test the waters and rent for a while before committing to a home purchase, you can do so for about $280 per week for an average freestanding villa or $400 per week for an average four bedroom plus ensuite house – (the median weekly rent across the board in Wagga Wagga is just $220 per week.)
Decide to go the whole hog and purchase a property? The current median house price is $300,000.
But hang on, what about jobs? What are people paid in Wagga Wagga? The median annual income from the 2011 Census was just under $60,000, so the perception that you end up on the minimum wage when you move to the country is not quite right.
Most astute investors will argue that the reason you question buying properties in the bush, is that capital gains are not as significant as in the cities or on the coast. True. However there is also the security of much less dramatic capital losses in down times. On top of that, are the attractive “pay-for-themselves” returns. It is not uncommon to have a 7% gross return on the lower end of the market with a rental yield of $280 per week from a purchase price of $210,000 when the timing is right. More commonly investors enjoy 5.5% to 6.5% gross returns on residential investments and between 7% and 10% net returns for commercial purchases.
Not bad whilst interest rates are at all-time lows.
Population growth is tipped to be a steady 1.9% per annum on average for the next eighteen years according to Wagga Wagga City Council’s population forecast site. This may be even higher if certain commercial developments come to fruition in the next few years.
And why does Wagga Wagga enjoy such economic security without being a mining town?
Wagga boasts a diverse range of industry presence. In defence we have the RAAF Base and Kapooka Army training sites. In education we have tertiary institutions such as TAFE NSW Regional campus and Charles Sturt University as well as a multitude of primary and secondary schools to choose from in Private, Catholic or Public systems. Then we have a strong agricultural backing too with livestock and wheat being our primary exports.
However, one of Wagga’s biggest advantages comes from being geographically the centre between our two largest cities, Sydney and Melbourne and just two and a half hours drive from our Nation’s capital, Canberra. From a logistical and transport perspective, this is one of the main reasons we have been chosen for the new Riverina Intermodal Freight and Logistics Hub. It will be a great access point for all rail freight between states and capital cities from Brisbane to Adelaide.
So what is the current real estate market doing in Wagga Wagga at the present? We have just experienced a slow period for the last four years, brought on primarily by the bubble bursting on the increased First Home Buyer incentives of 2008 to 2009 which had an uncharacteristic impact on the residential real estate market. From 2009 to 2012, property values had an average annual decline of roughly 3.4% or a 10% loss over three consecutive years.
In 2013, we have seen average days on market decreasing at a steady pace down to an average of just 55 days as opposed to 115 days in 2010.
This is due to increased stability in our local job market, low interest rates and consumer confidence. Our building industry has also seen modest improvements as government incentives have been introduced and interest rates have been lowered.
Whilst prices do remain steady at the present, we expect a minor shift in an upward direction for values over the next 12-18 months due to an estimated $640 million being confirmed for development in private, public, residential and commercial sectors, which will provide jobs and population growth to the region as well as another major development worth approximately $400 million which is close to having a Development Application lodged with our local council.
So whilst we may not have the “action” and tourist attractions of our coastal and metropolitan neighbours, we have a great quality of life, an abundance of resources and a town much bigger than the one in McLeod’s Daughters.
About Adam Drummond
Adam Drummond is considered one of the most reliable real estate commentators in Wagga Wagga having featured regularly on ABC Riverina local radio, on Prime TV and WIN TV news, and is one of six Directors at local real estate agency Fitzpatricks Real Estate. Adam is well known for his unique Hollywood inspired property videos that have had over 16,000 views on YouTube. His own blog site www.adamdrummond.com.au features all of his talents as Realtor, Actor, writer and calculated risk-taker. For more information on the Evocities or Government Relocation Grants, you can email [email protected] or follow him on Twitter @AdamDrummond.