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Little More Than Imaginary Lines On Maps

Little More Than Imaginary Lines On Maps
March 4, 2022 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

Don Bradman, Bob Hawke, Emma McKeon, Michael Voss, Qantas, Bendigo, Margot Robbie and Launceston all have two things in common: they have produced many years of great performance and they all hail from regional Australia.

Whether referring to athletes, corporations or property markets, jurisdictional boundaries are not parameters for performance. They are just imaginary lines on a map.

This short report contains a bundle of proof that ‘capital city’ is just a term, not an accelerator pedal or a shield. The term has nothing at all to do with capital growth, risk or reward.

 

Gold Medal Examples

Let’s start with the truly outstanding Victorian regional city of Bendigo. In addition to being famous for its Gold Rush heritage and amazing lifestyle, it is a consistently strong performing regional property market.

With an average annual capital growth rate of 7.4 percent across the last 20-years, Bendigo outperformed each of Australia’s five largest capital cities. Pause… read that sentence again.

For the record, the best-performed property market in all of Australia over the last 2 decades was also a regional location – the New South Wales township of Byron.

Being home to a population of just 37,000 people (Australia’s 73rd largest city) is proof that size does not determine performance. In Byron’s case, it averaged 10.6 percent capital growth over the last 20-years.

The generalisations and ridiculous assumptions which people use when categorising ‘capital cities’ into one box and ‘regional locations’ into another is a sad indictment of their lack of general knowledge about their own country, let alone Australian property markets.

Those who are genuinely interested in enhancing their knowledge might appreciate knowing that 24 of the Top 28 cities and towns with Australia’s highest median house price are regional.

Unfortunately, often influenced by naïve ‘generalists’ disguised as ‘experts’, the drivel that finds its way on to everyone’s device each day does little more than dumb down everyone’s intellectual development.

 

Imaginary lines are not bullet-proof shields

Capital cities and regions both have risks.

The degree of risk is not defined by jurisdictional boundaries or population mass.

One only needs to look at Australia’s fourth largest city, Perth. It has a population of more than 2million people yet the median value of houses and apartment prices declined over the 10-years ending 2020.

Darwin is another capital city that had a reverse growth performance over the same 10-years.

And 100,000’s of apartment values in greater-Adelaide, greater-Brisbane, inner-city Melbourne and Sydney’s Olympic Park had not grown in value during the same decade.

 

‘Real risk’ or ‘rambling rubbish’?

Then there’s that old chestnut of ignorance used by same who say “…stick to locations that are within a 2-hour drive of a capital city”.

Seriously? The horse-and-cart era ended a century ago.

Or “…coastal locations perform better than inland”. As if water somehow makes houses grow.

For example, the NSW (inland) regional locations of Mudgee (7.8 percent), Orange (7.5 percent), Kempsey (7.4 percent), and Bathurst (7.2 percent) have all produced consistently good performances and an average annual capital growth over the last 2-decades which is superior to the state’s (coastal) capital city, Sydney (7.0 percent).

That’s a fact, not a misprint.

The same regional locations have more attractive rental yields and lower vacancy rates than Sydney, making their respective cash flow risks lower to property investors.

Once again, perceptions and facts are very different.

How to identify performance potential

Giving one’s finances a chance to perform at full potential requires the discipline to block out the drivel, to ignore those imaginary lines, and to properly consider all available options.

Australia is made up of circa 400 towns and cities.

200 townships have a population of 10,000 people or more – that’s more substance than dots on a map.

At the right time, I personally would (confidently) invest my own money and professional reputation in as many as 80 of those 200 locations.

As for the regions, Australia’s 8 biggest regional cities include Newcastle, Geelong, Townsville, Cairns, Toowoomba, Wollongong, Sunshine Coast and Gold Coast.

Another 33 medium-size regional cities play the role of a ‘mini capital city’ to a wider regional community.

These regional stars include Albury-Wodonga, Armidale, Ballina, Bendigo, Bundaberg, Coffs Harbour, Dubbo, Geraldton, Launceston, Mackay, Maitland, Mildura, Orange, Shepparton, Wagga and more.

The “1 of 2 boxes” definition is for box-heads.

Every capital city is very different to each other, let alone the wide range of characteristics which define each individual regional location.

One can’t compare Port Macquarie to Port Hedland, or Ballarat to Broken Hill, or the global food and booze phenomenon of Launceston with Longreach.

This is why questions like “…is now a good time to invest in the regions?” will always be ridiculous. Which of the 200 are you referring to?

By sheer mathematical odds alone, the best-performed property markets in every single year will almost certainly be among the 200 regions of substance, than the 8 capital cities. And historical evidence supports those odds.

 

More facts to finish on

The best-performed capital city property market over the last 20-years was Hobart with 9.3 percent average annual growth. Hobart’s gold medal performance again highlights that population size is irrelevant (Sydney has 22-times more people).

Lots of property investors wouldn’t have any qualms with lumping $1 million into one basket for a standard 2-bedroom Sydney apartment.

Yet the 4.8 percent average annual capital growth rate for Sydney apartments over the last 2-decades is only half that of detached houses in umpteen regions. And the rental yield comparisons are also miles apart.

Just as being tall or thin does not guarantee great athletic performance, a capital city population has bugger-all to do with property market performance. Absolutely bugger all.

A sample of regional cities that performed better than Australia’s 5 largest cities across the last 20-years includes Launceston TAS and Noosa QLD (both 9%), Cessnock NSW (8.8%), Coffs Harbour NSW (8.6%), Warragul VIC (8.3%), Lismore NSW (8.1%), Goulburn NSW (8%), Gympie QLD (7.9%), Ballarat VIC (7.6%) and Bendigo VIC (7.4%).

Folks, that junk that you’re reading just fuels false perceptions.

In every single year of the 20-years of official ABS records, more Australians relocate away from capital cities to live in a regional location than doing the reverse.

145,000 (net) Australians did exactly that over the last 5-years alone.

As sure as the sun coming up in the morning, the germ will accelerate this long-term trend. Here’s why.

As for employment opportunities, once again that question is no more or less relevant to individual region cities than each of the capital cities.

Over any given period in time, individual regions and individual capital cities will each have periods when their performance ranges from stellar to suffering.

A *legitimate* property market expert knows these things.

Ignore imaginary lines and dots on maps. The important thing is the combination of the resources, the attitudes and the actions of the people living inside those jurisdictions. They all have greatness within them.

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.

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