Depending on a variety of factors, buying property in a metropolitan area, outer suburb, rural or semi-rural setting could prove to be a solid investment. So, whether you’re looking to buy an apartment in Brisbane, or a bush block in regional Australia – how do you give yourself the best chance at making a wise choice? Read on to find out.
Weigh up your options.
When it comes to investing in property, there isn’t a one-size-fits-all option. Should you go all-in and buy your dream home in an outer suburb? Perhaps buying an apartment or townhouse in the CBD is a better choice? Or should you become a ‘rentvestor’ by buying a home in a regional area, while renting in the city?
Looking outside of major metropolitan areas to smaller cities or in the outer suburbs – places that still have many of the same resources as a larger city – could be another option when looking to invest in property.
Melbourne-based ME Mobile Banker Craig Archer has helped many buyers find their perfect property. He advises that reviewing fundamental property data, such as rental yields and capital growth, is a good starting point when choosing where to buy an investment property. Don’t forget to check the vacancy rates too.
'If a key strategy is to obtain an investment return through rental income, then it’s important that the property isn’t going to be vacant for an extended period of time,' Craig explains.
Australia’s national vacancy rate hit an all-time low in early 2024, with regional and metropolitan areas experiencing similarly low figures. But this probably won’t be the case forever.
As a ME Mobile Banker based in Brisbane, Michelle Ingram sees many customers tossing up between buying in the city or the country. Many first home buyers are lured to regional areas by lower prices, but there’s a catch.
'House prices in regional areas may be lower; however, potential for capital growth may also be lower compared to the city,' she says.
Michelle points out that infrastructure is another element you’ll want to look at before buying regionally. While schools, hospitals and public transport are easily accessible in metropolitan areas, that’s not always the case in the country. Small towns may have fewer services and amenities in comparison to the city, and this could impact the value of your investment.
Regional real estate on the rise.
Raine & Horne Kyneton Sales Manager Jennifer Pearce has two decades of experience working in the property industry. Based in the leafy Macedon Ranges of Victoria, she explains that regional property buyers come from all walks of life.
'The regional market is very diverse and offers opportunities for everyone. The property stock can range from cottages or smartly renovated homes in country towns, to larger lifestyle properties on a few acres, through to large agricultural land holdings for farming or land banking for future use,' Jennifer says.
Knowing an area’s average rental yield is incredibly important before taking the leap into investing. According to a Core Logic report released in early 2024, regional rental yields have continued to rise, outpacing growth in capital city rents overall. Jennifer has seen this trend reflected in the Macedon Ranges rental market.
'Just like the city, rental demand is exceptionally high. Rents have been steadily increasing in recent years, offering great returns for investors,' Jennifer adds.
So, what’s driving this trend? With more of the workforce working remotely or running their own business from home, living in the country has continued to grow in appeal post the initial pandemic boom. State and federal governments also regularly provide incentives for investors to purchase regional properties, such as grants or discounted stamp duty.
Despite the increased interest in regional real estate, the good news is there’s still plenty of value to be found for first-time property buyers on a budget.
'Regional locations not only offer a more relaxed, community-engaged lifestyle that's great for families, but they also often offer much better value and more bang for your buying dollar than sought-after city locations,' Jennifer says. 'Investors are often amazed at the value on offer in the country.'
Assess the risks.
All investment comes with a degree of risk, but when it comes to property the stakes are even higher. There are some properties you may struggle to finance, especially houses in remote and regional mining towns.
Flood and bushfire risks are assessed by lenders, so you may need to allocate extra funds for adequate insurance.
Property zoning is another important factor that can influence your ability to get a home loan. When looking at regional property, you’ll need to ensure it’s zoned for residential (not agricultural) use.
'Bushfire and flooding are the most common environmental factors to consider when looking to purchase property in regional areas. People looking at properties in coastal regions may need to look at factors such as erosion. More and more, issues related to climate change need to be considered,' says Craig, who shares that most lenders have a list of postcodes for regions that they don’t lend to.
If you’re a busy, risk-averse investor who lives in the inner city, buying a low-maintenance property – like a unit, townhouse, or duplex – in a metropolitan area might make more sense than a freestanding home in a bushfire-prone area. But if you’re originally from the country and have dreams of retiring away from the city, a property in the country could prove to be a savvy investment you can enjoy in years to come.
What’s your Plan B?
Regardless of where you buy, planning for future scenarios is key to ensuring the best outcome. Your personal circumstances or priorities could change in the future, so having an exit plan is essential – regardless of whether you buy an apartment in Melbourne or a classic Queenslander in Townsville.
'An exit strategy is important in both the regions and the city; however, because regional areas don’t typically have the depth of metropolitan markets, changes and trends in the market can often have longer-term impacts,' Craig explains.
Every property owner wants to avoid selling in a negative market, so preparing to navigate market slumps and tough economic climates is key. Your strategy may involve picking up a second job, selling other investments (like shares) to cover your mortgage or temporarily turning your investment property into your primary residence if you struggle to rent it out.
'Having an exit strategy that considers possible downturns is important. Having a Plan B when things don’t work out could save you thousands of dollars,' Craig says.
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.