A number of Victoria’s regional property markets have been quietly, but consistently, recording strong performances. Perhaps the time has come for investors to take note?
An air of ongoing surprise continues to flavour commentary on the growth of Melbourne’s property market. While it may still be early days in the market’s recovery, and while that pesky apartment oversupply problem lingers, the indicators are looking positive for Victoria’s capital city.
However, Melbourne’s sunny outlook can’t help but lead those interested towards questions about the outlook for other property markets in the state. Australian Property Monitors senior economist Andrew Wilson says markets in regional Victoria are largely solid and strong, especially Ballarat and Bendigo.
“They have been recording consistent growth for a while, even during the quieter times around 2011. Overall, there are some winner markets and some loser markets, like Shepparton. But most are robust and resilient, with signs of growth. Ballarat is a particular target for investors, and Bendigo is to a lesser degree,” he says.
Ballarat
Known for its history, culture and well-preserved Victorian era heritage, Ballarat is the commercial capital of the Central Highlands. Primarily a service economy, Ballarat has a thriving manufacturing sector and is also a significant tourist destination.
Wilson says that Ballarat, which is about 105km from Melbourne, has growing popularity as a commuter city. “It has high rental yields, low vacancy rates, and there is value at entry level – all of which make it popular with buyers.”
These observations are backed up by the latest Herron Todd White report. It says the Ballarat region provides a good range of options for those wanting to buy in the $200,000 price bracket within one and a half hours of the Melbourne CBD and the coast.
Both units and houses in the $150,000 to $200,000 price bracket are available for purchase within 3km of the Ballarat CBD, according to the report. Further, it notes that several suburbs provide entry-level housing close to shops and transport. These areas offer solid investment properties with potential for future renovation and good rental returns.
Bendigo
The historic gold-mining city of Bendigo is now Victoria’s largest finance centre outside of Melbourne. One of the state’s major regional cities, Bendigo has a growing service economy. It also boasts substantial tourism, commerce, education, and engineering primary sectors.
Bendigo is a bit more expensive than Ballarat but is a similarly robust market, Wilson says. “There is a larger economic base, and a more diversified local economy. The local government is committed to decent economic policies, which are reflected in the strength of the property market.”
Unemployment below the national average, strong population growth, and optimism about the local economy mean the Bendigo market is performing well, according to the Herron Todd White report. Well-located and priced properties, particularly in the CBD fringe areas, are enjoying short selling periods and strong interest.
However, the report notes the ongoing development of new estates has led to an increased supply of rental properties on the market. This has resulted in a degree of downward pressure on rents, particularly in the newer estates.
Geelong
Wilson recommends the port city of Geelong as another positive market for investors interested in regional Victoria. It is much like Ballarat, but cheaper, he says. “It is a commuter market, has a low entry point, and is also a gateway to the Bellarine Peninsula. These features make it very attractive, and it is recording price growth similar to that of Ballarat and Bendigo.”
Down the line, there may be some issues with the closure of the Ford Australia factory (in 2016), which will result in job losses for hundreds of workers. However, Wilson says both local and federal governments are likely to step in to offset those job losses with local initiatives.
Spotlight on: best rental yields outside of Melbourne
Victoria’s best regional area for rental yields is Dimboola, which is a rural residential area in the Wimmera region.
Rock-bottom house prices coupled with comparatively high rents mean houses are earning rental yields of 10%. A lack of long-term capital growth drivers means Dimboola might not be the strongest investor market.
However, there are a number of other interesting prospects in the region.
Ararat, a small centre about 100km west of Ballarat, is one such area. Ararat’s average annual growth sits at a healthy 7.2%, and its reasonably priced houses are returning a rental yield of 7%.
Another good option could be the historic mining centre of Stawell. Also in the Wimmera region, it is one of the only towns in Victoria to retain an active gold-mining industry. With attractive annual growth of 7.3%, Stawell offers relatively inexpensive house prices and rental yields of 6%.
Suburb To Watch
Warracknabeal
Attractive prices underpinned by a strong local economy, good climate and excellent facilities make the wheat belt town of Warracknabeal an appealing option for investors.
North West Real Estate’s John Hadley says people buy in the area largely because of price. “You can get a very comfortable home for about $150,000, and investors like the area because we can get them a return of between 8% and 9.5%.”
Situated on the banks of the Yarriambiack Creek, Warracknabeal is the seat of the Yarriambiack local government office.
The area has two primary schools, a secondary college, and a special development school. It also has a unique facility in Woodbine, which runs supported accommodation and day programs for people with disabilities.
Ongoing exploratory drilling means the local economy could get a mining boost in future years. Meanwhile, the hospital will soon get a major upgrade that will benefit the whole district.
Hadley says a typical house is a three-bedroom weatherboard home on a quarter-acre block. “There are a good number of older homes built in the late 1890s through to the early 1900s. But there are very few units, so when we list a unit for sale there is a lot of enquiry.”
Prices tend to double every 10 years, Hadley says. “Capital growth is a bit slower than in larger centres, but we offer higher returns and lower purchase prices.”
