Buyers place their bets on Geelong
Lifestyle, accessibility to employment hubs and affordable housing are the perfect property trifecta in the Victorian port city of Geelong.
Incredible capital growth over recent years has put Geelong on the map and the forecast remains extremely positive despite the major impacts of COVID-19.
This is according to the latest analysis by RiskWise Property Research that found remote work is likely to be a major contributing factor to high population growth. That, combined with a rise in infrastructure projects, are likely to further improve the increasing popularity of the area.
"Add to that it only takes an hour to drive to Melbourne and housing is significantly more affordable, it is ticking plenty of boxes for a lot of people with their eye on capital growth in the future," RiskWise CEO Doron Peleg said.
In addition, Mr Peleg said COVID-19 had helped strengthen 'work from home' opportunities meaning owner-occupiers could take advantage of 'lifestyle' prospects instead of being tied to employment hubs.
"Those who work in a stable corporate environment, but do so remotely, are now taking advantage of great buying opportunities in NSW, southeast Queensland and Victoria, particularly Geelong," he said.
"Before COVID-19 hit, there was already a strong trend of sea- and tree-change homebuyers looking for the best of all worlds – lifestyle, accessibility to employment hubs and affordable housing.
"So, homebuyers with long-term holding strategies are well positioned to negotiate aggressively to purchase high-quality houses that have usually enjoyed strong demand.
"While there was definitely uncertainty during the first wave of the pandemic, the second wave shows us quite clearly these new work practices are here to say most likely until end of 2020 and well into 2021," he said.
"Therefore, the demand for regional areas offering great lifestyle choices is likely to further increase among those with stable incomes and they can expect good capital growth over the next few years."
The median house price in Geelong is only $632,000 compared to $809,000 for Greater Melbourne. While capital growth over the past five years was 49.4 per cent, materially higher than Greater Melbourne with 30.6 per cent, over that period.
"This means you can buy a house in Geelong for around the same price you could buy a unit, with a median price of $580,000, in Greater Melbourne. Not only does it represent excellent value for money, houses also tend to deliver stronger capital growth due to the land scarcity and carry materially lower risk for price reductions, particularly in comparison to units in Melbourne that are currently experiencing oversupply in many areas." he said.
There are also a number of additional incentives that put home buyers, especially first home buyers, in an enviable position.
These include federal government programs such as the First Home Buyers Deposit Scheme whereby a deposit of just a 5 per cent deposit can be used to enter the property market and the avoidance of Lenders Mortgage Insurance (LMI), as well as stamp duty exemptions.
"Lower interest rates also materially improve housing affordability in terms of serviceability ratio, i.e. the monthly repayments for any price point are simply lower," Mr Peleg said.
"What this all means is now is the time to buy if you are a first home buyer or an owner-occupier as this current slowdown in the property market is only temporary, with houses in popular areas likely to experience solid capital growth in the medium to long term.
"Once the COVID-19 issue is resolved or becomes less pronounced, most likely in 2021, the traditional connection between low interest rates and increase in dwelling prices is likely to reassert itself."
He stressed, however, that investors buying rental apartments unsuitable for families were taking an enormous gamble, with both equity and cash flow risks expected to materially increase. Serviceability is also a major factor for investors who rely on a stable rental income to cover the costs associated with property and particularly the mortgage.