CHEAPER prices, higher yields, low vacancy rates and good growth prospects are driving more residential investors to buy in regional locations.
They are showing strong interest in regional towns like Port Pirie, 220 kilometres north of Adelaide, the New England region of NSW, the Victorian regional hub of Ballarat, Cairns in far north Queensland and even parts of Tasmania, according to figures compiled by tax depreciation specialists BMT.
BMT analysed tax depreciation schedules requested over the past two financial years to see which locations showed the strongest growth.
These schedules are prepared for property investors as a guide on what they can claim in their annual tax returns, so provide a good indication of preferred investment locations.
They showed that individual rural and regional locations significantly outpaced the statewide average activity growth found in South Australia, NSW and Victoria, where growth in depreciation schedules averaged about 20 per cent.
"With many capital cities experiencing considerable capital gains over the past few years, some investors appear to be seeking out alternate market segments in order to enter the market faster and at a lower price, while still realising a solid return," said BMT managing director Brad Beer.
Some of the big gains such as in Port Pirie and Riverland were made off smaller numbers, but in regional hubs like Logan City (between Brisbane and the Gold Coast), Ovens in north-east Victoria (including Wangaratta and Wodonga), Ballarat and Cairns, growth was double or more the State average and off much bigger numbers.
Ross Moller, principal at LJ Hooker Cairns Edge Hill, said investors were buying into Cairns from Darwin, Sydney, Melbourne and Adelaide.
"They're getting a much better return on the purchase price. Gross yields are between 6 and 7 per cent. In some cases they are buying units below replacement cost, with vacancy rates at about 2 per cent," Mr Moller said.
"There's a lot of investors looking to buy through their self-managed super funds," he added.
Mr Moller said Cairns had been revitalised, with the weaker Australian dollar assisting the local tourism market and new projects under way.
"(Singapore's) Aspial Corporation has a development application to build 400 units here while Silk Air have announced they will start flying into Cairns from June next year," he said.
In Ballarat, excellent returns and a low entry point have attracted investors, said veteran agent Ron Morrison of Ballarat Real Estate.
"We are seeing a high volume of people investing in Ballarat because of the marvellous returns. You can buy a brick veneer house for $250,000 and lease it out for $250 to $270 a week.
"We're getting a lot of WA investors with high income to spend. Ballarat is a good, solid city. We don't have the enormous gyration in prices you see in the capital cities," Mr Morrison said.
