In a surprising turn of events, many investors are purchasing houses in regional areas without ever setting foot inside them, signaling a significant shift in the real estate landscape. According to insights from both a real estate professional and an academic expert, this trend stems from the perception that regional properties offer excellent investment opportunities.
Recent data from PropTrack reveals that residential property prices in Australia’s regional markets have skyrocketed, experiencing an increase of nearly 60% over the past five years, culminating in a median price approaching $700,000. Although regional South Australia remains more affordable in comparison, with median prices just under $500,000, this still indicates a near doubling of property values within the same timeframe.
Professor Andrew Beer, who is the dean of the School of Management at the University of Adelaide, attributes this burgeoning trend to the onset of the COVID-19 pandemic. He explains, "The pandemic prompted a mass exodus from bustling cities to quieter regional areas, a movement that has continued even as restrictions have eased."
While some individuals are relocating for personal reasons, Professor Beer notes that a substantial number of buyers are acquiring properties purely as investments. He emphasizes, "The interest from investors seeking rental income has been a key factor in propelling house prices up across regional Australia, including areas like Mount Gambier. This trend is largely due to the potential for higher returns on investment."
To illustrate, consider the difference in rental yields: a property worth $1 million in Adelaide or Melbourne may command a rental price of about $700 per week. In contrast, a $500,000 property in Mount Gambier could generate approximately $550 per week in rent, making it a far more appealing option for many investors.
Additionally, there has been a marked transition from local to national investor participation in these markets, with many buyers opting to purchase properties online without ever visiting them in person. This shift has intensified the competition for available homes.
As demand for investment properties in regional areas surges, first-time homebuyers are increasingly finding themselves priced out of the market. Brenna McKay, a former resident of Mount Gambier, has recently bought her first home with her partner after returning to the regional city. She recalls, "At open inspections, there were typically one or two locals, but a large number of investors were also on the phone ready to make deals. One of the homes we were seriously considering was quickly snatched up by an investor. Competing with that can be quite challenging."
Although McKay and her partner ultimately managed to enter the housing market, she empathizes with those still searching. "If you’re trying to buy on your own, I can only imagine how tough that must be. Saving for a deposit is no small feat, and it doesn’t happen overnight."
The COVID-19 pandemic has undeniably transformed the property buying process. Tahlia Gabrielli from Ray White Mount Gambier highlights that the combination of affordability and value in investing in regions like the Limestone Coast has attracted a diverse array of investors. "We see everyone from small-scale family investors to individuals purchasing properties through their superannuation funds, as well as many out-of-town buyers from major cities like Sydney and Melbourne," Gabrielli explains.
She adds that the practice of buying homes sight unseen became common during the pandemic, with buyers relying on virtual video walkthroughs or simply deciding based on online listings. "This revolutionized how real estate is perceived, marketed, and sold."
While such investment activity has benefitted sellers significantly, Professor Beer cautions against overlooking the negative consequences. "Many individuals are now forced to seek temporary accommodations in caravan parks or even tents due to the lack of available housing," he warns. "In some cases, regions may not experience growth at the expected rate because there aren’t enough workers to fill job vacancies."
With interest rates on the rise, Professor Beer suggests that government intervention is crucial. He advocates for investments in infrastructure to boost housing supply along with training programs aimed at cultivating a skilled workforce to facilitate the construction of new homes. "These two measures could effectively address the pressing issues we currently face in the housing market."
What do you think about the growing trend of investors buying homes sight unseen? Is this a sign of progress in the real estate market, or does it highlight deeper issues that need to be addressed? Share your thoughts in the comments!
