The regional towns that are booming, but not because of tree-changers

Property investors priced out of the city are flocking to far-flung regional towns in search of more affordable homes and attractive rental returns.

Houses can be bought for under $500,000 in some of the most popular destinations for city buyers, and prices are rising at a faster rate than in the big smoke.

The fastest price growth in regional NSW over the past 12 months was in the Lower Murray region of the state’s west, up 11.4 per cent to a median value of $344,580 by April, figures from Cotality (formerly CoreLogic) show.

Regional Victoria’s biggest price rise over the same period was just across the border in Mildura, up 9 per cent to a median value of $471,267.

These are sharper rises than in Sydney (0.9 per cent) or Melbourne (down 2.2 per cent) over the past year.

Over the past five years, the rise of remote work has enabled a tree-change boom, often to sought-after coastal or hinterland destinations.

But local agents say the price rises now are driven by city property investors seeking better value.

Ray White Mildura managing director Damian Portaro said that in the past eight months he had seen buyers’ advocates enter his market in significant numbers for the first time.

They are looking for properties between $300,000 and $600,000 with rental returns of 5 per cent to 6 per cent for investors, mainly from Melbourne and also Sydney, with lower land tax than they would pay on a property in Melbourne, the regional director of the Real Estate Institute of Victoria said.

“When you go above that range the market is far more stable, far more normal, in some places even slow,” he said.

He cited a recent sale at 132 Pasadena Grove that had 18 offers, all from buyers’ agents.

The out-of-area buyers are not tree-changers, though.

“Even during COVID we didn’t really have much of that just because Mildura is so far from Melbourne,” he said. “There’s no tree-changers, it is investors and mum and dad [investors], it’s not like big corporations.

“But Mildura has definitely been put on the radar, and I reckon it started to have an impact about eight months ago.”

$324,000 - $356,000

132 Pasadena Grove, Mildura VIC 3500

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Even so, the vacancy rate was low, and he thought tenants were trying not to move if they could avoid it.

“It’s making it hard now for locals in that price range, but if locals are buying out of that range they’re fine.”

In south-western NSW, Murrumbidgee Real Estate director Therese Perrignon said many investors from cities across Australia see properties online, buy them without seeing the homes in person, and rent them out.

Homes could be purchased as affordably as $200,000, and recoup $350 a week in rent.

A standard three-bedroom house for a family costs about $300,000, she said.

She said prices had been rising because there was not enough supply to meet demand.

“Plenty of people want to buy, there’s nothing to buy. Things are snatched up, if they’re cheap people snatch them up immediately,” she said.

“Lots and lots of investors, people buying investment properties in Hay.”

Perrignon said owner-occupiers had also been active in the market, including first-home buyers who can find more affordable prices than in the city.

She said some buyers were tree-changing, but she highlighted those who had family there and moved back, or grandparents moving to be closer to grandchildren in a safe, easygoing community.

“Your kids can walk to footy training, or you can send your six-year-old up the street to buy a bottle of milk,” she said. “Just the easygoing lifestyle out in the bush.”

At the same time, Hay is only an hour to Griffith which has flights to Sydney.

Buyers’ advocate Rich Harvey is having regular conversations with investor clients who have a limited budget and want to know where to buy.

“We are getting investors looking for cheaper options because interest rates are still high – yes they’re coming down, but they’re still so high that’s crimped borrowing capacity,” the chief executive of propertybuyer.com.au said.

“So it’s forcing investors to find somewhere they can park their money and that’s forcing people to go to places like Mildura or whatever.”

But he advises investors to look for towns with consistent population growth, plus existing and proposed infrastructure, such as some of the larger regional towns or even capital cities instead.

“The yields are very attractive in these far-flung minor regional areas, but I would issue a strong caution,” he said.

“Don’t expect to get outsized capital growth.”