New research by national advisory firm Propertyology has revealed there are 14 wine-producing regions where property price growth looks set to keep outperforming the Sydney market.
Head of research at Propertyology, Simon Pressley, said investors who’d already removed their regional biases and actually studied the data had been well rewarded.
“I’ve run the numbers and these regions smashed Sydney on both price growth and rental return – and indications are it’s set to continue,” Mr Pressley said.
“Over the last 20-years, the 6.9 per cent average annual rate of capital growth for a Sydney house was inferior to the municipalities of Cessnock, Goulburn, Launceston, Macedon Ranges, Mornington Peninsula, Mudgee, Shoalhaven, Yankalilla and Yarra Ranges. The 6.4 per cent average annual capital growth for Orange is similarly impressive.
“The property markets of these wine regions are also significantly less volatile than Sydney. While Sydney produced five calendar years of median house price declines during the last two decades, 12 out of these 14 wine regions saw price declines in only one to four years.”
Mr Pressley said the numbers were particularly strong in recent years when comparing these regionals to capital cities.
“Twenty per cent or more growth in residential property prices over the last three years occurred in regional locations such as Orange, Cessnock, Launceston, Macedon Ranges, and Mornington Peninsula, while Griffith and Mildura were only marginally less than 20 per cent,” Mr Pressley said.
“Conversely, seven out of Australia’s eight capital cities were well below 20 per cent over the three-years ending 2019.
“Hobart’s 30 per cent growth was streets ahead of second place – Canberra at 14.7 per cent – while the cumulative growth across the three years in Adelaide, Brisbane and Sydney was in single figures, and Perth and Darwin property prices declined.”
Strong rental markets
Mr Pressley said tenant demand had remained consistently strong across the wine regions, too.
“Here’s a pleasant surprise for the stereotypical sceptics of regional Australia who have misguided perceptions about it being too difficult to get a tenant.
“As at December 2019, the vacancy rates for each of these 14 locations is below three per cent and several of them are ridiculously tight (circa one per cent).
“On the other hand, Sydney’s 3.6 percent vacancy rate (an all-time record high) equates to 26,415 dwellings, which is sufficient to accommodate the entire population of Griffith and Orange combined.
“Oh, and then there’s the salivating rental yields which, quite frankly, blow the big city returns out of the park.”
Mr Pressley said wine regions developed multi-faceted economies that continued to attract and retain a diverse range of residents needing accommodation.
“The economy in most of these communities blend general agriculture with viticulture, manufacturing (especially food-related), and some amazing tourism experiences.
“The demographics of these vibrant vino wonders include a mix of multi-generational farmers, some affluent white-collar professionals who have elected to escape stressful city life, creative artistic types, and some retired baby boomers who can finally rid themselves of the rat race.”
Affordability and controlled housing supply were other drivers helping boost markets in the regions, he said.
“In most cases, home ownership rates are above the national average. While it’s easy to appreciate why local residents describe their lifestyle as idyllic, the cost of housing often is still quite affordable.
“One can buy a quality three or four-bedroom house on a quarter-acre block that’s in a desirable and centrally located street for circa $400,000 in great regional cities like Orange, Launceston, Cessnock, and Griffith.
“Unlike Australia’s big congested cities, many of these regional locations have a lower portion of their workforce in the construction industry so housing supply volumes are more consistent.
“There’s no such thing as high-rise apartments or passenger rail, and urban sprawl often isn’t a big issue. Consequently, local property markets don’t suffer from the volatility caused by significant peaks and troughs in dwelling construction volumes.”