Where to nab cheap properties under $300,000 that have good long-term growth prospects

Just a few months ago, Danielle and Jamie Wall bought a three-bedroom house for just $160,000 – the kind of affordability many buyers can only dream about.

It’s located in Rockhampton in central Queensland, which is just one region of many around the country identified as having bargain real estate markets that also boast great prospects for future growth.

The list has been compiled by Steve Palise of Palise Property, who has also tipped Townsville, Mackay, Toowoomba, and Bundaberg as other Queensland regions offering houses with the best capital growth prospects at this price level.

In Victoria, he has picked Bendigo and Shepparton, in South Australia it’s Port Lincoln and Whyalla, in Western Australia it’s Geraldton and Carnarvon, and in Tasmania it’s Launceston.

When it comes to the ultra-expensive state of New South Wales, Mr Palise picked Broken Hill as an affordable area with good long-term prospects. 

While some of the houses in this low-price bracket will need renovating, Mr Palise said many are very liveable.

In all these areas, properties under $300,000 are regularly available, but buyers must find the right one, avoiding areas with very low socioeconomics, flood-prone pockets, and bushfire zones.

The key things to look at when identifying areas with great future growth prospects include infrastructure spending, business growth, diversity of employment sectors and low unemployment, Mr Palise said.

Other factors to consider include affordability, by looking at the average household income compared to house prices, rental vacancy rates, supply and demand and the quality of lifestyle, he added.

“My picks for future areas have the most and best mix of these.

“Choosing a region where people want to live and can live, due to availability and diversity of employment, where there is a lack of properties, as in a low supply, is the key.”

High demand and tight supply will drive future growth, he added.

Mr Palise said the regional areas that have had the best growth historically are those that typically have a mix of solid industries including mining, agriculture, tourism and lifestyle.

“When investing be mindful to stick to multi-industry towns with solid growth fundamentals.”

A snapshot of some regional picks

In Rockhampton, the industry hub of central Queensland, the economy is diverse and less reliant on the resource sector, with military infrastructure, a power station, a university, plenty of tourism, and two big abattoirs, said Joe Tucker, head of research for Palise Property and the director of Property Principles Buyers Agency.

He said listings in the region were trending down, putting upward pressure on prices, and with a vacancy rate of less than 1% and a 17% rise in rents over the past year, there was a rental crisis.

The Walls’ house in the Rockhampton suburb of Berserker near the CBD, which is an investment property, will be rented for $410 per week following a $25,000 renovation.

That equates to a yield of 11.52%, around triple what is on offer in the capital cities.

The couple also own numerous other properties in central Queensland, many of which are 40 minutes away from Rockhampton, in the beachside town of Emu Park where they live.

Ms Wall described the Berserker property as the “perfect investment opportunity”, having not only an affordable price but very high rental demand.

She said the Capricorn Coast region was booming, and Rockhampton was only 30-odd minutes from the picturesque and popular beachside town of Yeppoon. 

“The demand for housing is very high with many people moving to the region and a current shortage of housing, meaning the area is ideal for investors,” she said.

“Prices in most Rockhampton suburbs are very reasonable. First-home buyers and investors can find properties at achievable prices.”

Townsville, in the state’s north, which is Australia’s 14^th largest city, is expected to continue growing, averaging a 2.1% population increase per year compared to 1.9% for Queensland, Mr Tucker said.

There is significant capacity for price growth, with the median household income on par with the national average, but the city being the 72^nd most expensive in Australia, despite its size.

Infrastructure projects are also set to bring people in and create activity, Mr Tucker said.

These include the $2.25 billion Singapore Army Barracks, a port expansion, world-class sporting stadiums, water security projects, hospitals, urban renewal, and major highway upgrades.

The economy is already diverse, with strengths in education, healthcare, retail, construction, and manufacturing.

In South Australia, Port Lincoln and Whyalla are benefitting from the regional move that gathered momentum during COVID, with big government plans for Whyalla through industries such as energy and mining, education, food and agribusiness, tourism, defence, space, technology, and health, Mr Palise explained.

Launceston is set to take the torch from Hobart in Tasmania as the state’s leader in future price growth due to its affordability, desirability, and project spend coming from the Launceston City Deal signed in 2017, Mr Tucker added.

“Several initiatives were announced under the plan, including a $90 million Launceston creative precinct, $44 million in infrastructure improvements for water projects, and the major $260 million redevelopment and relocation of the University of Tasmania’s new campus.”

Why do the regions offer strong growth potential?

Over the past 30 years, many regional cities have outperformed capital cities in terms of capital growth and cashflow, said Mr Palise.

According to the PropTrack Home Price Index for April, prices in regional areas are up 48.4% compared to 30.7% in capital cities since March 2020.

PropTrack economist Angus Moore said regional areas have been in high demand throughout the pandemic as many people looked to get away from the cities in search of more space at home and a better lifestyle. 

“That has meant prices in regional areas have grown faster than in capital cities over the past couple years,” Mr Moore said.

He said some of the shift to regional areas over the pandemic will be permanent, while some will start to reverse.

Many regional areas are cheap to buy into and have good growth prospects, but for investors, the added bonus is that they will also typically offer a higher yield than capital cities, of around 5% to 6.5%, Mr Palise said. 

If you buy in a regional city that has very tight vacancy rate – which means there is high demand for limited rental stock – you can hold the property long-term without it impacting your current lifestyle, he said. 

The holding costs will be minimal, and often these investments will be cash flow positive.

Mr Palise said most regional towns had only 10% to 30% of homes owned by investors, which meant there was tight rental stock, and it was easier to find a tenant.

Some townhouses closer to capital cities also offer good potential

In some areas closer to capital cities, townhouses could also be purchased for less than $300,000, said Mr Palise.

He recently purchased one in Eagleby, near Brisbane – a location he said was primed for growth with big infrastructure spends and diverse employment opportunities – for a client for just $280,000. It has a yield of 6.1%, being rented for $330 per week.

Mr Tucker said townhouses were starting to rise in price in some areas, despite usually being thought of as minimal growth assets.

“People have lived in an area all their life and they want to continue to live there, but they are priced out of houses and are willing to compromise to a townhouse or unit,” he explained.

He said duplexes also offered opportunities, with buyers being able to rent out one side and live in the other, giving them an income to help pay down their mortgage.

Rather than just looking at the price when looking at investing in property, it’s important to consider how the purchase will fit into your circumstances, noted Mr Moore.

“How much the property costs is important, but it’s also important to consider all the other aspects of investing in property like how you’ll finance the purchase, the rental yield you can expect, how competitive the rental market is, and what you’ll have to pay in ongoing costs like rates and maintenance.”

Source