Investing in a regional property market is a wise choice. As rental growth in higher-priced capital cities slows, regional markets are experiencing significantly higher demand and tighter supply, as highlighted in a new report.

PropTrack’s latest rental report for the September 2024 quarter shows that people in capital cities were paying a median rent of $640 per week in September, an increase of 1.6% over the quarter and 6.8% year-on-year.[i] In contrast, regional rents grew even faster, reaching $540 per week in September, up 1.9% from June and 8% since September 2023.

For instance, in Perth, rental yields stand at 4.2%, while regional WA produces higher yields of 5.9%, according to CoreLogic[ii]. Similarly, Adelaide averages a rental yield of 3.7%, compared to 4.7% in regional areas beyond the South Australian capital. Even in Darwin, where the capital city yields are impressive at 6.8%, regional Northern Territory outperforms with yields of 7.6%.

However, it’s not simply a case of turning up to an open for inspection in a regional investment hotspot to guarantee Melbourne Cup-like returns akin to this year’s $81 “roughie” winner, Knight’s Choice. However, with careful research, decent returns are possible. Take Bathurst in central NSW, where apartment rents have climbed 5.6% over the past year, or Gladstone in Queensland, where house rents are up 6.3%, and weekly apartment rents have surged by 11.4% over the last 12 months.

To succeed when investing in a regional property, you need to consider what amenities tenants typically seek. Features such as home offices or study areas, fenced backyards for pets, and proximity to transport and schools are in high demand.

While regional properties often offer lower purchase prices and higher rental yields than capital cities, they may come with trade-offs, such as potentially slower long-term capital growth. At the same time, there can be a smaller tenant pool and more extended vacancy rates.

To achieve investment property success, selecting a regional area with a diversified economy is essential— not a one-trick pony dependent on agriculture, for instance—to minimise investment risk. Take Bathurst, for example, where the local economy is valued at $3 billion, according to the Bathurst Regional Council[iii]. Key industries such as healthcare, education and training, and construction employ more residents than agriculture, underlining Bathurst’s economic diversity. Local council websites are an invaluable source of data and insights for budding landlords looking to understand the economic landscape of any regional centre.

A regional property can also be a solid choice for a positively geared investment, providing strong yields in markets with balanced tenant demand and economic resilience. But before making a move, talk to your accountant about positively gearing a property.

Would you like to know more about buying a rental property in a regional area? Speak with your local Raine & Horne team for expert insights.

[i] ttps://www.realestate.com.au/news/rents-remain-high-but-theres-a-silver-lining-for-aussie-renters/

[ii] https://www.corelogic.com.au/news-research/news/2024/sydney-home-values-slip-in-october-as-market-cooldown-continues

[iii] https://economy.id.com.au/bathurst/employment-by-industry