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Surge in property values to continue, but it's wise to stick to the suburbs


The real estate boom that lifted house values by 23 per cent in regional areas last financial year may be a false dawn.

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The performance of regional real estate easily outstripped the capitals cities where the combined increase last financial year was 15.9 per cent. 

And Westpac has forecast that real estate will rise 18 per cent for this calendar year, but will peak in mid-2022. It’s tipping an 8 per cent rise in Brisbane in 2022 (5 per cent nationally) and a fall of 5 per cent in 2023.

Queensland investment company Custodian said the rise in regional prices, which had been brought about by buyers escaping the COVID-impacted capitals, should make people wary and they should think twice about parking their money outside of suburban markets.

Custodian managing director James Fitzgerald said if people wanted to live in a regional area then they should “go for it”, but the places that were booming now may not be the ones growing in the future.

He said long-term returns were a necessary guide for investors and one or two years of price growth was not a reliable indicator.

“No doubt COVID-19 has changed the way we look at working from home. While I think flexible working conditions will last beyond the pandemic, we will need to live in proximity to our place of work,” Fitzgerald said.

“Those jobs are going to be located in and around cities – that’s always been the difference between the regions and cities from an investment perspective.”

“When picking a location for investment it’s important not to just latch onto somewhere that is experiencing growth now.

“Look at how prices have gone historically in that region and whether or not it usually takes a long time to sell.

“It’s property in the outer city – that sweet spot where land size, demand and infrastructure investment collide – that is your best bet for achieving solid capital growth in the long term and maximising your rental returns.”

Areas closer to a capital city where where growth was driven by continued population and employment growth were more reliable.

“The outer city has more rapid population growth and greater infrastructure investment than the inner city or regional areas,” he said.

“In regional areas there is still plenty of land available, so pouring money into country bricks and mortar won’t necessarily be a guaranteed investment winner.”

“If you have your heart set on investing in a regional location, ensure it has strong population growth, good infrastructure spending and is not too far from a capital city.

“It’s easy to get swept up in the hype and tales of massive returns in a matter of months but much of what we’re seeing today could soon change. Sound property investment takes solid research, careful consideration, patience and a long-term perspective.”

Westpac said it expects regulators to step in to the market in 2022 to slow lending growth.

“However, we have not changed our general view on the dynamics of the housing market over the 2021–2023 period,” the bank said.

“It will be marked by surging prices through to the first half of 2022; followed by a flattening in the second half in response to macro prudential tightening; with prices entering a mild correction in 2023 as the RBA begins its rate hike cycle.”

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