Regional hotspot Toowoomba shows great investor potential

There are few better examples of the potential for investors in regional Australian than Toowoomba.  

Queensland’s biggest inland city (population 155,000) recorded price growth in 2013 that out-performed capital city Australia, with the possible exception of Sydney. Most Toowoomba suburbs delivered double-digit growth in their median house prices last year, headed by Rangeville (the number one location in terms of sales volumes) which rose 14% and Newtown which rose 16%.  

Part of  Toowoomba’s appeal lies in affordability and rental returns. Despite the recent high growth, most suburbs have median house prices in the range between $240,000 and $330,000. House yields suburb-by-suburb mostly fall in the 5.5% to 6% range, while apartment yields are mostly between 6% and 7%.  

Toowoomba does well because it ticks most of the Hotspotting boxes: a strong and diverse economy, a growing population, plenty of infrastructure spending, a growing business community, affordability housing – and a big kicker which takes it to another level, in the form of the coal seam gas industry in the nearby Surat Basin.  

Toowoomba is regarded as one of the best places in Australia to get a job. Its jobless rate is about 1.5 percentage points below the national average.  

I particularly like regional centres that benefit from resources activity but don’t depend on it. The CSG industry is quite recent in this part of Queensland and Toowoomba was a prosperous city and steady property market before it became a factor.  

Toowoomba has delivered some level of price growth every year for the past decade, with the exception of the flood-affected year of 2011. Toowoomba suburbs typically have long-term capital growth rates around 7-8% per year.  

Australian Property Monitors senior economist Andrew Wilson has forecast further price rises for Toowoomba in 2014, tipping an average rise of 8%,  

At the same time, University of Southern Queensland Professor John Cole has forecast a population boom, with Toowoomba’s population tipped to reach 240,000 by 2031.  

Toowoomba and the surrounding region are alive with resources projects, infrastructure projects and property developments, which include the impending completion of a new airport facility and proposed major road and rail links.  

One example of the impact is the growth of local business FK Gardner & Sons, which has tripled staff numbers in the past three years and recently opened a $20 million head office  

As with all growth centres, the one danger to the city’s property market is the potential for oversupply. Other boom centres in Queensland, notably Mackay and Gladstone, have had their markets undercut by over-building by developers. To date, that has not happened in Toowoomba and vacancies currently are around 2%.  

But the potential exists. The number of new dwellings approved has grown steadily in the past three financial years. And in the first half of the current financial year, there was a further 50% increase. Investors need to keep an eye on vacancies and ongoing approval levels.

Terry Ryder is the founder of hotspotting.com.au and you can contact Terry via email or on Twitter.