Housing in the major capital cities is moving beyond the reach of first home buyers. And at the other end of the life cycle, older people are finding that their greatest financial asset to fund retirement is often the family home. These phenomena are creating some interesting push and pull factors driving Australia’s regional cities.
What is a regional city? It’s a centre with a population of 150,000 to 550,000 people and includes places such as Newcastle, Wollongong, the Gold Coast Geelong, Ballarat, Bendigo, Canberra, and even Hobart.
These regional cities have diversified economies and, over the past 10 years have by and large dispensed with their manufacturing industries. As such, they have become a focal point for density and investment in the broader range of retail, commercial and entertainment facilities.
There are two types of regional cities and it’s important to understand the difference between them. The first type are known as peri-urban cities, and they are typically within the commuting labour shed of a major capital city. Examples of peri-urban cities are Wollongong, which provides a labour force for South West Sydney, and Ballarat, which is hooked on to the west of Melbourne.
Other places, such as Newcastle and Bendigo, have strongly diversified economies which are free-standing. They do not rely on capital cities. The largest of these cities with populations over 400,000 begin to take on a complete life of their own, growing their own critical mass.
So, for example, the Gold Coast has an airport which handles 5.5 million domestic and international visitors a year.
If we want to understand how these regional cities will work in the future, we need to look at the price of arbitrage. In other words, the cost for a person to live on the Gold Coast, for example, and consult to the rest of Australia, versus the cost of basing themselves inside a capital city and conducting their work from here. The answer is that it is significantly less expensive to live, work and commute in and out of these types of centres if your type of employment allows.
For those of us in our 50s who may want one last career, moving to a regional city and selling the family home can give us the nest egg to make it possible. And if we are looking to retire, then there are places such as Newcastle, which offers beaches, fantastic health facilities, and home prices that are 25 to 40% lower than nearby Sydney.
Over the next 10 years, it will be worthwhile adding some of these strong regional centres to your property investment portfolio.
We do believe there are towns which have the potential to grow into these hubs. For example, Gisborne and Kyneton, which are only 15-20 minutes from Melbourne airport, are wildly underdone. They’re on freeways, there’s infrastructure and trains, and scads of vacant land. With current populations under 20,000, there’s huge potential for these places to grow and become peri-urban regional cities in the future.
About the author:
Brian Haratsis is MacroPlan’s Founder and Executive Chairman. Brian is an economist and future strategist with over 30 years experience as an advisor to governments and major corporate clients throughout Australia and New Zealand. For more information or to discuss your property research requirements, please contact Amy Williams on 02 9221 5211 or firstname.lastname@example.org.