Population growth typically indicates a stronger demand for housing and, therefore, higher price growth. However, Propertyology's analysis of regional housing markets showed that this is not always the case, especially with regional markets with smaller populations.
The study found that many small towns witnessed gains in median house prices that are as robust as those recorded in capital cities over a 20-year period. In fact, higher returns on investment were reported in those with populations below 50,000 compared to some capital cities.
For instance, Alice Springs in the Northern Territory recorded an average capital growth of 6.1%. This two-decade growth is higher than Darwin's 5.7% average gain in house values during the same period. Alice Spring has a population of 26,500, which is less than 20% of Darwin's.
Another example is Bellingen, a small town with a population of 13,000 in New South Wales. Over the past two decades, Bellingen registered an average growth of 7.6%, higher than Sydney's 7%.
"These facts are just a few examples to highlight the gross inaccuracies with people's perceptions about Australian locations with smallish population sizes – the lifestyle, the real estate opportunities, the risks," said Simon Pressley, head of research at Propertyology.
Stability in regional areas
There is a common misconception about regional locations being somehow riskier than capital cities, Pressley said. However, the study found that regional towns, especially those with diverse economies, often have superior history of property-price gains compared to capital cities.
For instance, Esperance in Western Australia has recorded price gains in 17 out of the last 20 calendar years, whereas Perth only witnessed growth in 14 years.
"While big-city investors struggle with eye-watering mortgages and massive holes in their annual cash flow, myriad smaller locations provide investors with cash in their pockets each year along with the capital growth," Pressley said.
Amongst the capital cities, Perth and Sydney reported the highest number of annual declines in the 20-year period at six and five years, respectively. The table below shows the towns with the least number of yearly slumps recorded during the period:
Regional Area/Town |
Population |
Number of Years in Decline |
Average Capital Growth |
|
Alice Springs (NT) |
26,500 |
2 |
6.1% |
|
Barossa (SA) |
24.800 |
3 |
6.0% |
|
Warwick (QA) |
12,300 |
2 |
5.6% |
|
Launceston (TAS) |
67,500 |
3 |
7.5% |
|
Kyabram (VIC) |
7,300 |
1 |
5.1% |
|
Strathbogie (VIC) |
10,700 |
2 |
7.4% |
|
Wangaratta (VIC) |
29,000 |
3 |
6.2% |
|
Esperance (WA) |
14,300 |
3 |
4.8% |
|
Dubbo (NSW) |
53,000 |
3 |
6.3% |
|
Goulburn (NSW) |
30,000 |
2 |
8.1% |
|
Lismore (NSW) |
44,000 |
3 |
6.5% |
|
Orange |
42,000 |
1 |
6.4% |
|
Wagga Wagga |
64,900 |
1 |
5.9% |
Pressley said locations with more affordable housing actually reduce the property investment risk.
"Locations with a significantly more affordable buy-in price mean that property investors require smaller deposits," he said, "This means that buyers are able to enter property markets sooner and can expand their portfolios more quickly."
The increasing number of Australians relocating to regional locations is also a good indication of where the outside-the-capital-city markets are going.
"With Australia's eight capital cities included, there are 185 individual towns that have a population of 10,000 or more. Any investor who focuses on their hometown is giving themselves a one in 185 chance of making the best decision," Pressley said.
A recent guide by Your Investment Property outlined the top five considerations property investors should have before entering a regional market. Read the guide here.
