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3 things to consider before investing in regional areas

Over the last few years, demand and values in regional Australia has exploded.

With strong capital growth and tight vacancy rates driving up rents, more and more investors have been looking to regional areas. While many regional areas have been strong performers, there are a number of things you should check before investing in these locations.

 

Local economy

Across the country, there are very big differences in regional locations. Some small towns have only a few hundred people, while the larger towns have over 100,000 and are basically regional cities.

When you’re looking to invest, it’s important to understand what the key drivers of the local economy are in those areas. A great example is a mining town. Many mining towns have very strong economies driven by a local mine site. While the commodity sector is strong these towns do well, but things can quickly turn around when prices fall.

On the flipside, some of the larger towns have multiple economic drivers and include infrastructure such as hospitals and universities that contribute heavily to employment. The more diversified the economy, the stronger the location and the more likely it is to sustain capital growth.

 

Vacancy risk

In recent times, talking about vacancy rates is not something many investors are likely considering. But over a long period of time, many regional areas have suffered from a lack of quality tenants, which can lead to your property being vacant for a long time.

This is common in seasonal locations and holiday areas. While there might be strong demand during the summer months for a beachside location, during winter, you might not be able to find tenants.

A lot of smaller towns also have problems with social issues which can make it difficult to find tenants that will look after your property.

 

Finance

Lenders understand that regional areas, while appealing, also present some risk if the value of the property falls due to any number of factors.

For that reason, many will require you to pay a larger deposit than what you could typically find for a city location. This is common with lifestyle properties and things like hobby farms that only suit a certain demographic of buyers.

Lenders will normally have a list of postcodes in which they are happy to lend for purchases, so if you’re thinking of buying in a certain area, it’s worth speaking with us ahead of time to ascertain the lender’s appetite.

 

 

If you would like to chat to us about purchasing in a regional area,  or have any other finance and/or property question, the best place to start is to contact us for advice.   We are only an email or phone call away, on 02 8004 2222 or  book an appointment.

Although we are located in Crows Nest, we service clients from St Leonards, Artarmon, Wollstonecraft, Cammeray, Northbridge, Naremburn, Neutral Bay, Greenwich, North Sydney, Waverton to Willoughby and all areas of Greater Sydney.

PS  This article is prepared based on general information. It does not take into account individual financial or property objectives or needs and is not financial product or investment advice.