The dangers of investing in regional markets

Font size :

While many investors swear by the low entry costs and positive cash flow opportunities of regional towns, some experts warn that these areas are not all that they’re cracked up to be. 

While it’s true that regional towns generally have properties available at a lower entry price and provide a higher yield than city areas, there’s a good reason for this.

“It’s predominantly due to slower overall capital growth,” says Judith Taylor, buyer’s agent and principal of Select Property Finder in Newcastle.

“Because these areas don’t have the land scarcity of the larger towns and capital cities, the market can sit relatively flat for many years before there is an increase in growth.”

For those investors who have a long-term investment strategy and can afford to wait 10-plus years to see significant price growth, this may not be an issue.

But for any property owner seeking a quicker profit turnaround on their investment, Taylor warns that regional markets may not be the right fit.

“Care must be taken when considering buying property in a one industry town,” she adds. 

“Although the yields may be positive and seem attractive, if an unexpected external factor occurs that directly affects a sole industry or mining specific town, employees could lose their jobs and in the worst-case scenario, your valuable investment could become part of a ghost town.” 

Taylor says investors who are looking at property outside of their own hometown should double their efforts when it comes to research, to ensure they’re not misled.

“I recently did some research on a property at the low end of the market in a country town,” she said. 

“The yield was around 18%, which on the surface appeared extremely attractive. As it turns out there are no property managers in the area, meaning that landlords need to self manage. 

A self-managed property can be a riskier proposition ­– certain insurers won’t insure landlords who don’t use a professional property manager, for instance – so this type of investment can wind up being more difficult to manage.

“This is not necessarily an attractive option, especially if the town is located several hours away from where you live,” Taylor adds.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Sunday, Sep 24, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords