As Sydney slows, does regional NSW hold any value for investors?

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Most investor attention in NSW has been aimed at Sydney in recent years, and rightly so. The harbour city has enjoyed a stratospheric run of capital growth.
But as prices move out of reach of many and more and more signs mount that the boom may be running out of steam, does that mean investors should be turning away from NSW as a whole, or are there other pockets of value to be found?
According to the Australian Bureau of Statistics, at the 2011 Census, Sydney’s population was around 4.3 million people, meaning the rest of NSW is home to just under another 3 million people. Matt Knight, head of buyer’s agency Precium, believes there are viable investment opportunities across the state.
“The biggest myth in real estate is that you won’t get capital growth outside of cities,” Knight said.
“What I tell my clients is that you won’t get the same consistent capital growth. It will come in quick spurts and then there will be longer periods where it flattens out,” he said.
“The coast is always popular, but there are other areas where it’s possible to find locations that combine capital growth and positive cash flow.”
For those looking to a regional area of the state, Knight said his advice is usually to focus on the larger regional centres; however, there is no guarantee that will bring success.
“The majority of the time I’d recommend largest town possible, when you get to the smaller towns that are dominated by one or two industries that’s when you start seeing risk increase,” he said.
“Even the larger towns can come with some risk, especially ones that are dependent on something like mining or a particular type of agriculture. There’s a few places in northern NSW that have gone from boom to bust with the coal mining industry.”
While that ability to go from boom to bust may scare some investors off, Knight said with a bit of foresight that can be avoided.
“You do need to do your research and due diligence.
“Things like knowing whether the population is increasing or decreasing are really important. For me there’s a whole range of metrics I use when I’m looking at a regional area.”
That sentiment is one supported by Alan Fox, director of the Central Coast based buyer’s agency Propertunity, who said in some ways investing in regional areas is no different than buying in the bigger markets.
“To me it’s not a big risk, I’ve been investing up here for 25 years and I haven’t had an issue,” Fox said.
“If you subject your purchases to the right selection criteria, making sure you’re not overpaying and buying in areas with good vacancy rates, those sorts of things, then you should be ok,” he said.
Fox said the Central Coast has been benefitting from Sydney’s performance in recent years, which has led to an increase in investor activity – many of whom seem to have done their research.
“The area seems to pick up from a bit of ripple effect from Sydney and the Central Coast as a whole has been performing strongly, prices have probably been pulled up by 20% or so,” he said.
“The areas that are being targeted and the ones that are really doing well are the ones in close proximity to transport, for example areas that are near train lines or with good access to the M1 Motorway.”
While prices in the region may have increased recently, Fox said the fact that a four-bedroom house can be had for $400,000 may be another reason that investors have the region on their radar.
“You can spend $400,000 on a four-bedroom brick and tile house and not get the same growth you’ll get on an 80-year old terrace, $1 million terrace in Dulwich Hill, but you’re going to get a better rental return and you can buy two or three properties up here for the price of one in Sydney.”
That difference in affordability is also put forward by Knight as another positive for regional investing, and is something that he credits as helping get his career started.
“Affordability is huge. When I started out it was the end of the last Sydney boom and there was no way I could afford to buy in Sydney, where as I could afford to in regional areas,” he said.
“It was a great way to actually get started and also gain some really valuable investing experience.”
Knight said it’s not uncommon for him to work with people who take advantage of that by looking to buy multiple properties, but the affordability can deliver other benefits.
“Another thing about regional areas is you’re not so limited by property type. In a capital city you might only be able to afford an apartment, whereas in a regional area you’re able to buy a house on freehold block of land and then there’s more possibilities for renovations or adding a granny flat to increase the value or cash flow.”
“You also get the chance to diversify your locations, and I believe if you can spread your portfolio out and diversify then you’re reducing your risk.”

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