Regional property markets outperformed capital cities in 2012: Terry Ryder

The regions have outperformed the capital cities in 2012, with Sydney and New South Wales providing one of the best examples.

While Sydney house prices have barely budged this year – with the ABS, Australian Property Monitors, the REIA and RP Data all giving Sydney growth of around 1% in their various price measures for the 12 months to October – several of state’s regional centres have done much better.

Dubbo, Orange and Mudgee are among those that have performed solidly in the past 12 months, with median price growth in the 7% to 10% range.

Sydney’s underperformance is a long-term factor. It has been the worst of the capital cities for capital growth over the past 10 years.

A comparison with Brisbane illustrates how bad Sydney has been: the top suburb in Brisbane has a long-term growth rate of 14%, and most suburbs have double-digit growth rates. In Sydney, the best performer has averaged 7% and most have been between 4% and 5%.

Many of the upmarket suburbs have done worse than that: Mosman, median price over $2 million, has averaged 3.6% a year; Longueville, median price $2.3 million, has averaged 3.8%; Vaucluse, median price $2.7 million, has averaged 3.2% a year (which means it takes 23 years for values to double).

The best growth rate across Sydney has been achieved by humble Canley Vale (median house price $450,000) with a growth rate of 7% a year. Cabramatta ($427,000) and Canley Heights ($440,000) also made the top five. Five of the top seven had median prices below $460,000.

Many regional centres have done much better than Sydney over the past decade. Gunnedah and Lismore, for example, have averaged 12% a year, Singleton, Branxton, Yass and Casino have managed 11%, while Scone and Muswellbrook have recorded an average of 10%.

Sydney will do better in 2013. Recent figures show the first glimmers of recovery in Sydney, with moderate growth in average prices and rentals. I’m expecting to this to carry into 2013 and become stronger.

But the best prospects will continue to be found beyond the state capital. NSW is blessed with many strong regional centres that are a lot more affordable than Sydney and have provided much better capital growth over recent years.

Ones I expect to continue achieving include Dubbo, Tamworth, Gunnedah, Mudgee, Orange, Goulburn, Albury and Wagga Wagga.

Dubbo presents a typical case. It’s the regional centre for an important region, it has a substantial and growing population, its economy has strength and diversity, its council is energetic and proactive, money is being spent on infrastructure, and there is a growing influence from major resources projects.

As a bonus for investors, houses are affordable (median price $275,000). Dubbo presents the win-win-win situation that attracts me to solid regional centres, compared with capital cities: cheaper prices, better rental returns and strong prospects for ongoing capital growth.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

For more, watch Terry's free webinar Regions vs capital cities: Where to invest in 2013