Diversity is the key to residential property investment success: Terry Ryder
Someone asked me the one element, above all others, I seek in a location worthy of property investment. That one thing is diversity.
Mining towns often deliver the highest capital growth and rental yields, but they also have the highest risk, because they lack that one thing.
This week I met a guy who was tossing up between buying in the WA mining town of Newman, where scarcity has driven the median house price to $850,000, and the iron ore hub of Port Hedland, where you pay around $1.2 million for the average house - and it's a very average house. He understood the risks and was interesting in getting those seductive double-digit rental returns. He has stronger nerves than mine.
I prefer places with diversity. Multiple strong economic elements in play and lots of diverse drivers of future growth.
I visited such a place this week, to gather research and speak at a seminar for property investors. I've had Albury-Wodonga in my hotspotting reports for the past year or so, but until I spent a full day touring the twin border cities with local agent Peter Drummond I did not fully appreciate its credentials.
Because of its diversity and solidity, Albury-Wodonga avoids the volatility of single-industry economies. As Albury City's director of economic development Tracey Squire says: "Instead of having peaks and troughs, we tend to have waves."
Albury-Wodonga ticks all the boxes. Its population (around 85,000) is growing at rates above national averages. Its location is strategic. Its connectivity is good. It sits beside a lake and a river runs through it.
The two local councils are forward-looking and proactive. It has multiple economic pistons driving prosperity. It has the critical mass and all the amenities of a modern city. Money is being spent on infrastructure. Property developers are active but not over-active. Major national enterprises have a significant presence there.
Its real estate is affordable and its rental returns well above average. Do you get the feeling I like the place?
I can think of few regional centres with the multi-faceted strength of Albury-Wodonga. Only Townsville in North Queensland might have greater claims.
Albury-Wodonga, which straddles the Murray River beside Lake Hume, generates economic activity and jobs from agriculture, manufacturing, defence, tourism, education, health services, construction and government administration.
Many national and some international businesses have a major presence. The Australian Taxation Office, for whom a $50 million office building has been completed recently, is a big employer.
The city's location of the Hume Highway (and the main rail line) between Melbourne and Sydney, with good links also to Canberra, makes it strategically important. Many transport and logistics businesses are based there.
Education is a strong element, with five university or TAFE campuses and 74 schools, including 20 private ones. Medical facilities, which include the base hospital and a private hospital, will soon be expanded with a $75 million cancer centre.
There's a newsprint mill, an abattoir, a massive Woolworths distribution warehouse and a cardboard box factory. Mars Corporation has its corporate HQ in the city, Bunnings has two major warehouses and the military economy includes Latchford Barracks.
Albury Airport is the second busiest regional airport in NSW. There's a lot of business traffic and Quest Apartments, which services the business traveller, has two hotels with a third under construction. Accor is also planning a hotel there.
Property and infrastructure projects recently completed, under construction and advanced in planning total well over a billion dollars. The energy of the local councils is partly responsible. "We deliver red carpet, not red tape," says Squire.
It's in the city's favour that, while its population growth rate exceeds national averages, it's not the boom growth that inspires developers to procreate an over-supply. There are many new residential estates sprouting but they appear to be in balance with genuine demand and vacancy rates are low.
Most of the twin cities' suburbs have median house prices in the $200,000s and most have median rental yields in the 6% to 6.5% range.
No, I don't own property there, but I'd like to.
Terry Ryder is the founder of hotspotting.com.au