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Metro vs regional property: where should you invest?

Investment adviser Paul Glossop speaks to Auction Day.

Azal Khan

Digital Journalist, Your Money

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It’s a common assumption to think investing in property in metropolitan areas will give you a better return than investing in regional areas.

But for most people, it can be really expensive to buy property in metro areas especially once savings, capital, stamp duty and insurance are factored in.

Paul Glossop from Pure Property Investment told Auction Day that buyers need to put their money where the infrastructure is.

“When you look at an area, factor in not only the jobs creation, the school catchments, the supply issues and transport, but also where is the money going in the next five, ten to fifteen years,” Glossop said.

“If you look at any major developing CBD area in metro and regional Australia, you’ll find areas with lots of future potential and current opportunities.”

Metropolitan areas

Glossop says the advantages of investing in metro areas include:

  • larger economy
  • bigger population
  • larger rental pool
  • higher long term growth

Despite the doom and gloom around property prices falling around the country, Glossop is still confident in the metro market, given the amount of investment being pumped into Sydney and Melbourne.

“I have no issues on where the Sydney property market will be in the next 10 to 15 years.

“I think there’s about $92-93 billion in infrastructure alone to be spent on the Sydney basin in the next four and half years.”

His advice to investors is to understand what you can afford and diversify if it’s in your budget.

“If you have one or $1.5 million to spend on investment, does that mean you should buy one property, or should you look a diversifying across the market?”

“You can still buy in a metro area without digging straight into the deepest hole you can.”

He warned investors to be aware that the closer you buy to the city, rental yields may also decline.

Regional areas

The advantages of investing in regional property:

  • higher yield and better cash flow
  • potential for faster capital gains
  • can be turned around quickly
  • lower entry price point

Glossop says there are regional areas in Australia that have reliable population growth, which is ideal for investors.

“One thing that regional areas don’t have is a limitation on land space, however, they do have a limitation on land that can be developed,” he said.

This can create a lack of supply in housing and increase rental rates, creating low vacancy rates which is a good sign for investors.

“Most developers don’t see an ROI when they can throw that money into a more developed and predictable market.”

To buy a good investment in a regional area, look for towns with a population of at least 50,000 to 100,000 with good amenities, Glossop advises.

“A market that’s got a population of 50-100,000 will be supported by a pretty diverse economic structure as well. We don’t want to see it driven by one main employment driver.”

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