Tree change or sea change?

Is life really easier beneath the trees or by the sea?

Tempted by the fresh air, investors embark on journeys north, south, east and west in their quest to find the answer to this age-old question.

‘Changers’ are enticed by lower-cost alternatives to capital city housing. Some are making the switch, others are using it as a way to crack the market for the first time.

Investors are looking between the trees

With their soaring trees and lofty landscapes, they may stand out, but it’s only in recent years that investors have fixed their sights on the ‘tree change’ destinations of Hobart and Adelaide.

The profiles of these two cities vary, but they are starting off lower base prices in comparison to the major capital cities. Generally speaking, these destinations are also reaping the benefits of strong infrastructure pipelines.

Our Managing Director, Philip Ryan notes that Hobart in particular has seen its profile skyrocket thanks to a return of growth in business investment. Among its attractions is the Museum of Old and New Art (Mona), an area that has since become a catchment for hotels and restaurants.

It was once more a move for retirees, but favourable labour market conditions are drawing people of all ages to the island state. This is supported by net interstate migration figures, charting positive territory, contributing to above-trend population growth in recent quarters. Aquaculture, agriculture and a low Australian dollar are supporting the economy which exports much of its goods to Asia.

For investors, an unemployment rate of 6 per cent for 2017/18 can only bode well, with vacancy rates in Hobart less than half a per cent. Rents have been rising by more than 8 per cent per annum, outperforming every other Australian city.

Back on the mainland, according to SQM Research, Adelaide rents are tipped to grow at approximately 4 per cent. Despite the rolling hills, the market is a little flatter here, but things are looking up. If rents rise in Adelaide at 4 per cent for the next five years, properties will be cash flow positive in the next half-decade. Vacancy rates have been continuously tightening in Adelaide since the start of 2017.

Health care, tourism, education and defence are doing their fair share to offset the loss of the car manufacturing industry in Adelaide, with this moving the unemployment dial a few basis points.

Forget the weather, what’s the forecast?

Investors may be wondering, should we be looking for the ideal property between the trees or still the one by the sea?

In many cases the original Australian holiday destinations, ‘sea change’ hotspots continue to hold their appeal. The Sunshine Coast, Gold Coast and Byron Bay have all been beneficiaries of the multi-decade property bull market as southerners keep swapping concrete for sand.

In its annual Christopher’s Housing Boom and Bust Report issued at the end of 2018, SQM Research detailed 7-year price trend data for every suburb in Australia. It may seem unsurprising that sea change destinations keep shining through the property forecasts.

Philip says improving connections to a capital city can be integral in these cases.

“Areas like the Gold Coast, if the government is up to delivering fast rail, will raise the attraction immensely, because then people can live by the beach and commute to Brisbane,”

“People ask why South East Queensland hasn’t really boomed, we just haven’t had the jobs growth. I think the other thing that affected Queensland was the state government’s refusal to sell infrastructure assets. But, with the lower dollar, tourism is now a lot cheaper, commodities are cheaper, this all helps our export industries.”

Drilling into holiday haven data

It’s hard to compare like-for-like, but focusing on the centre points of these seaside spots, SQM Research rated Surfers Paradise as 2.8 on a 5-star scale of attractiveness in 2018, down from 3.16 the year earlier, and Noosa Heads as 3.01, up from 2.68 in 2017.

Ever excitable, there’s a risk things can get a little out of hand at the small end of town.

Oversupply has punctured every other cycle bar this one. Changers should be aware, regional economies tend to taper more easily, and a positive ‘export effect’ may be negative elsewhere if the Australian dollar surges once more.

Thinking about making a tree or sea change yourself? Check out what else to consider before purchasing your next investment property.