With booming commodity prices and significant government spending on infrastructure and liveability, the appeal of investing in our regional and rural areas continues to dominate headlines. Here, we look at the key benefits of these types of investments, how your investment dollar drives further growth, and the crucial factors to consider before jumping on the regional or rural investment bandwagon.
Regional and rural investment has been a hot topic of discussion in recent years, with many jumping on the bandwagon and a spike in these types of investments occurring since 2020. This spike can be attributed to several factors, with the key drivers being booming commodity prices and extensive government investment in infrastructure and liveability.
For those of us that don’t know, commodities are things like coffee beans, oil and agricultural products that are in demand across markets globally. Whilst the coronavirus pandemic caused havoc amongst many industries and disrupted production and distribution lines, agriculture stood unwavering in Australia.
Along with commodities, the federal government’s extensive investment made into our regional and rural areas has had a significant impact. The 2022-23 Regional Ministerial Budget Statement outlines that there will be a $1 billion investment over three years into two new programs, which are targeted at regional and rural areas. These programs support enhancements to infrastructure to improve liveability and support prosperity.
Liveability includes more than infrastructure, however. It provides access to resources, such as healthcare. Looking back to the 2021-22 Budget, it was stated that the health and wellbeing of Australians living in regional, remote, and very remote Australia are a top priority, with a large chunk of the $36 billion investment into Australia’s Long Term National Health Plan, being dedicated to these regional areas. Looking closer, the government invested a combined $4.5 billion in programs and initiatives to improve the health of regionally and rurally based Australians.
With all of this investment, it’s no wonder the value of both residential property and agricultural properties continue to rise year on year. In 2020 alone, the housing values across regional Australia saw a 7.9% increase.
Based on the above, it’s easy to see why investing in regional and rural Australia is gaining momentum. But before you speak to your lender, we’ve outlined the key benefits, flow-on effects, and crucial considerations to take into account before looking to invest regionally or rurally.
Key benefits of regional and rural investments
While risks like limited infrastructure, lower population density and potential market volatility exist, for many, the benefits of regional or rural investment far outweigh the negatives. The six key benefits are:
Portfolio diversification
Diversification is crucial for a balanced and successful investment strategy that minimises risk. Often, urban areas are saturated with investments, leading to increased competition and potentially lower returns. Investing in regional and rural areas allows investors to tap into different sectors and industries and minimise risk.
Government support and incentives
The Australian Government encourages investment in regional and rural areas by providing various support programs and incentives – particularly to first-home buyers. These incentives can include grants, tax concessions, infrastructure funding, and regional development schemes. Such support can enhance the viability and attractiveness of investment opportunities in these areas.
Yield growth potential
Due to the rental crisis happening Australia-wide, renters are venturing further afield in search of more affordable options. With smaller rental markets in regional areas and an increase in people looking to rent, it secures positive cash flow and good yield potential on your investment property.
Long-term growth opportunities
Purchasing the right land with the long game in mind can open you up to the opportunity of capitalising on future developments as regional and rural areas expand. With government investment continuing year after year, the expansion of new estates and development of these regional and rural areas is slowly but surely coming to fruition. Carefully consider the potential for local developments and the area’s predicted economic growth when purchasing land in regional or rural areas with this strategy in mind.
Affordability
Regional and rural areas undoubtedly offer some of the most affordable investment opportunities in Australia. Comparatively, property in these areas (like regional Victoria) is far more affordable than metro areas due to current low supply and demand levels, but of course, the idea is that this investment will see a great return on investment if you have invested wisely.
Lifestyle and tourism appeal
Regional and rural areas offer a unique lifestyle and natural beauty, attracting tourists and residents seeking a different pace of life. Investing in tourism-related infrastructure and accommodation facilities can mean capitalising on the growing trend of eco-tourism and providing opportunities for the hospitality, recreation, and leisure industries. Do some homework on Airbnb to see what returns you might appreciate.
How your regional or rural investment dollar drives further growth
Investing in regional or rural communities has a substantial flow-on effect within the community that, ultimately, can have a significant positive impact on the desirability and value of your investment. Here’s how:
Stimulates economic growth
Investing in regional and rural areas can drive economic development through the use of previously untouched resources. Things like agricultural land, mining resources, and renewable energy sources can be explored to their full potential.
Drives innovation and technology
Regional and rural areas are not immune to advancements in technology and innovation. As their populations grow, so too does the investment in these areas. This can lead to the development of technology hubs, research facilities, and innovation clusters, along with the creation of high-tech jobs, knowledge transfer, and, ultimately, the growth of the local economy.
Boosts quality of life
Investing in regional and rural areas can have a positive social impact by improving the quality of life and infrastructure for local communities. It can create job opportunities, bolster local businesses, and provide better access to essential services like healthcare, education, and transport.
Crucial factors to consider before investing
There’s often no return without risk, so it’s crucial to carefully consider the potential risks associated with rural and regional investment before going ahead. The four main considerations are:
Potential for economic growth
Choosing a region pegged for strong economic growth potential is vital. This means diversity in job opportunities and diversity of the industries that support the population. Locations that rely heavily on one sector can be volatile, as an entire community can implode if that industry collapses or experiences disturbance.
Projected and potential infrastructure and resource developments
While regional and rural areas are currently reaping the benefits of significant government investment, it’s still essential to research and explore exactly where the investment is going. Infrastructure like schools, hospitals and airports can all drive growth, desirability, and value.
Potential for natural disasters
If a price seems too good to be true, it probably is. Properties in locations subject to regular natural disasters like bushfires and floods are best avoided.
Population growth
The best indicator of future growth is looking at ongoing population growth markers. Simply put, the more people in an area, the higher the demand for housing can be, leading to better chances of a positive yield and cash flow.
Where to invest?
Finding the perfect location for your investment dollar takes a lot of homework. It’s important to conduct thorough market research, understand the local market dynamics, and assess the viability of any suitable investment opportunities. Canstar is an excellent resource, covering investment information across Regional Queensland, NSW Regional Towns, and Regional and Country Victoria. First National Real Estate also has information about the different suburbs using Census data via Your Patch. You can always contact your local First National Real Estate office for advice before investing.
Strike while the iron is hot!
Regional and rural areas will continue to see exponential growth in years to come, and with the extensive government budget investments, there’s plenty of investment potential to be realised. If you are unsure about your next investment move, speak to one of your local First National Real Estate agents today. We’ll ensure you feel supported throughout the process and can assist you with local market insight and advice.
DISCLAIMER
The following advice is of a general nature only and intended as a broad guide. The advice should not be regarded as legal, financial, or real estate advice. You should make your own inquiries and obtain independent professional advice tailored to your specific circumstances before making any legal, financial, or real estate decisions. Click here for full Terms of Use.