Downsizers impacting regional property markets
We all know that retirees have been migrating to warmer climates for years, swapping their fast-paced city lives for palm trees and the local golf course. But with many retirees facing the daunting prospect of insufficient superannuation savings, are we about to see an army of downsizers cashing in their family homes, and pushing up regional property prices in the process?
According to the Association of Superannuation Funds of Australia (ASFA), the average man retires on a super balance of $292,500 and woman on $138,150, significantly less than what is required to meet their long term retirement needs. With the family home being the largest asset for most Australians, more and more retirees are choosing to downsize from their one million dollar plus city pads to more affordable regional locations. In doing so, they can redirect the spare changes towards funding their retirements.
So if more and more retirees are relocating, what does this mean for our regional property markets? According to local Newcastle property developer Andrew Millis, there’s been a real change in the profile of recent purchasers.
“While we’re still experiencing strong demand from local buyers, the uptick of Sydneysiders looking to relocate has been very noticeable. Recently we sold 25 percent of our Merewether townhouse project to Sydney purchasers relocating, which is starting to have a real impact on local property prices.”
According to Core Logic’s latest report, the Illawarra region was the best performing regional market with annual sales growth of 15.2 percent. The Newcastle and Lake Macquarie areas recorded solid annual growth of just under 10 percent. In Victoria, Geelong recorded the largest annual increase outside of Melbourne, with a respectable 5 percent annual price rise.
This is positive news for property investors. Not only are houses in regional markets like Newcastle more affordable than larger cities like Sydney, the long-term outlook for capital growth is promising. With the average property investor priced out of the Sydney and Melbourne housing markets, regional locations like Newcastle offer investors the chance to purchase property at more accessible price points, with real opportunity for long-term capital growth. Binnari Property believes that cities like Newcastle possess all the right investment characteristics via its beaches, diverse job market, solid infrastructure pipeline and expected increase in migration.
Robert and Linda recently sold their south west Sydney home for $1.2 million and used part of the proceeds to purchase a $700,000 Shellharbour property. They transferred the majority of the remaining cash to their super funds, as they knew their super savings wouldn’t be enough to support their ongoing lifestyle.
“It was an easy decision for us. We still wanted to be within driving distance of our family and we’ve always dreamt of living near the coast. We’d noticed south coast property prices were steadily on the rise, so we took the opportunity to relocate now and provide the boost to our super we needed.”
With strong potential returns on offer, many investors are beginning to look outside Australia’s major cities for investment opportunities. However when deciding to invest into a regional market, to ensure success it’s important that investors understand the local tenant demand and what drives their decision making.