Zero growth Regional property for 5+ years

Well, that's my prediction anyway.:eek:

Be interested to hear if you agree or disagree and why.

Obviously "regional property" is a fairly broad term so I'll narrow it down to regional NSW which is where I invest. Of course there are always markets within markets and there may be a few mining towns that could be exceptions but in general I think regional is headed for a prolonged period of stagnation at best.

My prediction is based solely on the law of averages. Most regional towns and cities have outperformed the average Sydney suburb over the last 10 years due to the time lag between regional and metro cycles. Although not familiar with the Sydney market I believe it peaked in about 2003. The upswing in regional NSW was just starting to get going then and in the areas that I study the growth has continued until Dec 2009 with only a couple of short "breathers" along the way.

Prices in many regional areas have tripled in this time.

Now, assuming that-

1. The sydney market outperforms regional over the long term.

and

2. House prices double every 7-10 years.

By the law of averages regional should be in for a long period of zero growth or a falling market to bring everything back into line.

That's unless the world HAS changed and things really ARE different this time!

I think us regionals are going to be waiting a very long time for the next ripple to reach us, which is why I've just finished a sell down of regional property to hopefully put the money to better use elsewhere.

Interested to hear your thoughts.

Don't be afraid to tell me I'm an idiot!:D

RC
 
Prices in many regional areas have tripled in this time.
Which regoinal areas tripled between 2003 - 2009?

By the law of averages regional should be in for a long period of zero growth or a falling market to bring everything back into line.
If regoinal stood still for a while and Sydney reverted to trend by putting on a huge growth spurt for the next 3-4 years, wouldn't that also satisfy your requirement of "the law of averages"?
 
Which regoinal areas tripled between 2003 - 2009?

By 2003 things were moving, it actually started in 2001. I'm not saying all areas have tripled but it's not hard to find houses that have tripled in that time. I have personally experienced house prices triple in Armidale, Guyra, Walcha and Uralla between 2001 and 2009. I would suggest that it would be possible to find cases of tripled values in a lot of the regional areas that I frequent over the same period.


RC
 
If regoinal stood still for a while and Sydney reverted to trend by putting on a huge growth spurt for the next 3-4 years, wouldn't that also satisfy your requirement of "the law of averages"?

Yes it would.

That's pretty much what I'm tipping. Regional to stand still for quite a while and Sydney to keep rising to balance things out.

Regional falling and Sydney remaining stable would also correct things.

Either way it's not looking too good for regional in my opinion.


RC
 
I have similar concerns as all my IP,s are on in the shoalhaven. I expierienced the boom in 2001 to 2003 but very little since. Things are starting to move now but still behind in real terms.
If you look before the last boom things did not move until around 1990. So that is a long pause between gains.We are far from a bubble here. You still get the standard gain when split evenly per year just as most of the country would have. It just does not happen in a nice smooth line as most would know.
I believe this will happen again. Sydney will continue upwards. Then the ripple effect will start as it has every other time. Then regional will play catch up.If you can time it then you have done well. But if things take off its hard to accumulate quickly and cheaply.
 
By 2003 things were moving, it actually started in 2001. I'm not saying all areas have tripled but it's not hard to find houses that have tripled in that time. I have personally experienced house prices triple in Armidale, Guyra, Walcha and Uralla between 2001 and 2009. I would suggest that it would be possible to find cases of tripled values in a lot of the regional areas that I frequent over the same period.

RC


I'd reckon most regional property doubled from 2003 to 2006 in my area. Certain acreage property would have quadrupled. Some acreage went up 10 times, from agricultural value of $2,500 per hectare to real estate hobby farm value of $25,000 per hectare. Some houses would have quadrupled, dumps of houses that were 25k in 03 went up to 100k in 06.

We now have extremely low rental yields, and investor interest seems to have moved away. With no shortage of work there is a good flow of city people into the towns though who have had it with sydney congestion and crowds.

There is houses for sale in Tamworth for $1 million. Not saying they have a hope in hell of getting that, but I've not seen it before.


I'd agree with a lot of your thinking. All just part of the cycle, it's done out here and has moved back to the start again in Sydney/Melbourne CBD.


See ya's.
 
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Reality Cheque, what do you know about the tax law changes regarding hobby farms and wealthy investors?

Someone was telling me ages ago that these changes would make wealthy city investors sell hobby farms and acreage as they can't claim tax benefits anymore or something like that? Seems there is a hell of a lot of hobby farms for sale now, and even real farms owned by city people and thinking it might be connected? Or maybe it's just the smart money cashing out and following the cycle back to the start again in inner city property again.

It doesn't concern me in the slightest. I'm just seeing maybe an opportunity and wondering how big the effect is or will be?


I googled this up,....

http://thegovmonitor.com/economy/au...00-million-hobby-farm-tax-loophole-11593.html


See ya's.
 
I'd reckon most regional property doubled from 2003 to 2006 in my area. Certain acreage property would have quadrupled. Some acreage went up 10 times, from agricultural value of $2,500 per hectare to real estate hobby farm value of $25,000 per hectare. Some houses would have quadrupled, dumps of houses that were 25k in 03 went up to 100k in 06.

Exactly.

Tripled values from 2001-2009 is probably closer to the norm than the extreme. The extreme examples are far greater as you say. Commision houses that were sold for $20,000 in 2001 are now worth $220,000. House blocks in a lot of the smaller towns have gone up 5 to 6 fold.

There's gotta be one hell of a hangover somewhere along the line.


RC
 
Reality Cheque, what do you know about the tax law changes regarding hobby farms and wealthy investors?

Someone was telling me ages ago that these changes would make wealthy city investors sell hobby farms and acreage as they can't claim tax benefits anymore or something like that? Seems there is a hell of a lot of hobby farms for sale now, and even real farms owned by city people and thinking it might be connected? Or maybe it's just the smart money cashing out and following the cycle back to the start again in inner city property again.

It doesn't concern me in the slightest. I'm just seeing maybe an opportunity and wondering how big the effect is or will be?


I googled this up,....

http://thegovmonitor.com/economy/au...00-million-hobby-farm-tax-loophole-11593.html


See ya's.

Thats the first I've heard of it.

Haven't really noticed a sell off happening up here. It does concern me a bit though, will be looking into it further.

RC
 
I have similar concerns as all my IP,s are on in the shoalhaven. I expierienced the boom in 2001 to 2003 but very little since. Things are starting to move now but still behind in real terms.
If you look before the last boom things did not move until around 1990. So that is a long pause between gains.We are far from a bubble here. You still get the standard gain when split evenly per year just as most of the country would have. It just does not happen in a nice smooth line as most would know.
I believe this will happen again. Sydney will continue upwards. Then the ripple effect will start as it has every other time. Then regional will play catch up.If you can time it then you have done well. But if things take off its hard to accumulate quickly and cheaply.

I wouldn't be too concerned with the situation you've described. As you say, that doesn't sound like a bubble at all.

I start to worry when things seem like they simply can't get any better....and then they do...... again and again.


RC
 
I think your assumption of low or no growth in regional areas is correct.

By now most of us have heard of the ripple effect with property growth. Theory suggests that growth starts in the inner city suburbs and then spreads out. In the last property cycle this effect started in around 1998 in Sydney and Melbourne then it moved to the outer suburbs and then on to other cities and towns. Of cause there are other micro economic factors at work at the same time as the overall cycle.

Within the property market we have three predominant types of buyers namely, first home buyers, up graders and investors. Largely it is the extra input and volume from investors that causes greater than average growth.
 
What if you buy under value in a regional town, eg purchase a beat up house that only requires a cosmetic reno, then add value by renovating up the median price. Haven't you then just manufacturered the growth, plus have the cashflow perks as well?
 
What if you buy under value in a regional town, eg purchase a beat up house that only requires a cosmetic reno, then add value by renovating up the median price. Haven't you then just manufacturered the growth, plus have the cashflow perks as well?

Yeah I think there will always be ways to make money in any market. In my area I reckon simply buying and holding now is too risky. If I had to buy now I'd be wanting some good subdivision potential as insurance.
When vendors start greeting me at the door with champagne again I'll know it's time to start thinking about getting back in. Always a risk in trying to time the market but not as much as being over exposed to an overheated market.
I haven't quit regional completely but I'm much happier now that I've reduced my exposure.

RC
 
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