Many property investors tend to stay away from regional cities, but Propertyology’s Simon Pressley – who spends everyday analysing relevant data to identify prime real estate markets – believes that there are a lot of good investment opportunities in certain parts of regional Australia.
Investing in capital cities does not always guarantee good returns, according to Simon. In fact, most of the time, it only means that a property is more expensive compared to real estate in other regions.
“We’re big fans of regional Australia, but that doesn’t mean that every region is a safe investment. We can say the same about capital cities as well,” he said. “Every capital city has had periods of decline before, and will again in the future … Investors need to take the blinkers off [because] Australia’s a really, really big country and there [are] lots of gold to be found in certain parts of regional Australia.”
He shares his insights about regional cities in Australia, as well as his top tips for people looking to invest outside capital cities:
How would you describe most people’s perception of a regional city?
Simon Pressley: Throughout Australia, there [are] 30 to 40 really strong regional cities that [perform] the role of a mini capital city. So, what we look for is not a one-industry town, which is probably the perception when a lot of people hear the word ‘region’ – they’re automatically picturing a dust bowl or a mining town … But that’s only representative of a really, really small segment of the swath of Australia’s towns and cities.
What should investors look for when investing in regional cities?
Simon Pressley: We look for regional cities that have a very diverse economy … we don’t want a one-industry town. In the same way, capital cities have multiple different industries that drive the economy, regional cities do that as well.
You want to have really good quality infrastructure. It’s not relevant to us whether Simon Pressley or Phil Tarrant has lived there, would want to live there, because we’re not buying to live in anyway, and we’ve all got our own subjective taste. What’s important is to appeal to the masses. So if someone did want to live there, or did get transferred there with work, what’s going to keep them there? What’s going to make an enjoyable lifestyle? We want good-quality retail facilities. They need good-quality healthcare. As children go from primary school to high school and they choose a career path, can they do tertiary studies there? Or have they got no choice other than to relocate to a bigger city? That’s what we call a central infrastructure.
It [also] needs to be accessible to other really big cities. We’re a fast-moving world now … There’s a lot of regional centres throughout Australia now that are expanding airports, different airlines are flying direct to locations.
You think an area’s economic profile is more important than the history of its property market?
Simon Pressley: It’s really, really important to view each city through the eyes of an economic profile – what are the main industries that support the economy of regional city X? And what is the outlook in the broad sense for those particular industries? Is it positive or negative? If it’s positive, then what we do is we dig further into who are the major employers or who’s proposing to expand their workforce in that particular city.
Let’s say there’s a company that’s going to do something that’s going to create an extra 200 jobs. Well, where are those 200 people going to live? Are they living there now or are they going to migrate into that location?
Should money be a concern when investing in regional Australia?
Simon Pressley: How affordable is housing is something that, to us, is non-negotiable. Our buyers’ agents have never spent a dollar more than $500,000 on an investment property ever, and we’ve bought hundreds of them. So we look for locations where housing is very affordable. Clearly, the rental yields are better because the housing is more affordable.
You got to have a real critical look at the supply pipeline … not just the current vacancy rate. You could have a location that today has got a fairly low vacancy rate, but unbeknown to the DIY [do-it-yourself] property investor, there could be hundreds or thousands of new dwellings that have just been approved within a short period of time by the local government that are going to hit the market in the next couple of years. Then you quickly go into an oversupply situation.
What would be the biggest challenges for people investing in regional cities for the first time?
Simon Pressley: There’s a lot to take in.
Phil Tarrant: There is a lot of information there … so it’s really [about] synthesising what information you need to worry about and think about in order to make that decision … Using a buyers’ agent [gives me] a big advantage in the market against people who don’t have that support … They’re able to price properties more effectively, they’re able to understand whether or not a property’s a good property or a bad property, whether the location is a good location or a bad location, based on all these different dynamics.
How can buyers’ agents be of help to property investors exploring regional cities?
Simon Pressley: Our buyer’s agents benefit from the ongoing daily research that we do – they pick individual towns and cities for our clients. They’re buying properties every day, so there’s a lot of skills and different tactics that you use, firstly, to find that one property. And then, secondly, when you’ve found an asset that ticks all the boxes that we’re looking for, there’s all sorts of things that they do to explore an opportunity in regards to getting the lowest possible price for that property.
[There’s] a lot of skills they’ve acquired over many, many years … They’ve got relationships, in some cases, that will count, so they might get preferential treatment from the Ray Whites of the world who are selling a property.
Tune in to Simon Pressley’s episode on The Smart Property Investment Show to know more about the inside track on current market conditions as well as a forecast for what’s to come.