Buying into regional towns with robust economies can help drought-proof investments

Media release - 14th February, 2014

Economic diversity critical in minimising impact of drought on real estate

Drought is starting to turn the screws on many parts of eastern Australia, yet it’s not all doom and gloom for real estate markets, particularly in regional towns with healthy economies.

“It’s been a very hot summer across Australia, which is exacerbating drought conditions in regional NSW and Queensland,” says Angus Raine, CEO of Raine & Horne.

“Seasonal challenges like drought, bushfire and floods are part and parcel of living in country areas, and it’s for this reason that it’s generally sensible to look for property in regional towns with robust economies, strong employment prospects and population growth.

“These factors can help underpin decent long-term growth and rental yields and provide some cover against the effects of environmental influences that are often out of our hands such as flood and drought.”

In the northern Queensland town of Charters Towers, Lisa Palmer, Principal of Raine & Horne Charters Towers, reports that the town hasn’t received much precipitation in the last 18 months, yet it’s enjoyed a shower of buyers and sellers recently. 

“Sales are up a significant 50 percent for the December/January holiday period compared with the same time last year, while buyer enquiries are 30 percent stronger than January 2013,” says Ms Palmer.

“It’s fair to say that confidence was low in our region last year due to a combination of factors, which included the impact of the drought. However vendors have realised that if they price their homes sensibly there are plenty of committed buyers ready to step in.”

Economic diversity is playing a critical role in minimising the impact of drought on the Charters Towers real estate market, according to Ms Palmer.

“Charters Towers doesn’t simply rely on agriculture – it has one of Queensland’s biggest local government areas, which employs plenty of locals, while there is a very strong education sector thanks to having nine schools located in the town.

Mining is also a big employer by virtue of Evolution Mining’s Pajingo Gold Mine and the nearby CitiGold Mine, while China Stone Coal Project, Guildford Mine and Adani Carmichael Coal Mine are at various stages of construction.

“While not every worker from the mines lives locally, many carry on regardless of the drought and these projects underpin long-term real estate growth in Charters Towers,” says Ms Palmer.

“There is also the new AgriPower fertilising plant that is set to create 300 jobs.”

In north western NSW, Kelly Atkins, Principal of Raine & Horne Moree, says the drought is influencing the local real estate market.

“This time two years ago we were facing the prospect of severe flooding, however dealing with shifting climatic conditions is a condition of where we choose to live, and most owner-occupiers and investors understand this situation before they buy into our market,” says Ms Atkins.

“Likewise, the rural sector generally counters the difficult times by putting a little aside for droughts and floods.”

Yet despite low rainfall, Moree’s real estate market is proving relatively resilient, underpinned by consistent enquiry from local buyers and aspiring landlords.

“Around 30 percent of buyers are investors, and many of these individuals don’t live in Moree,” says Mr Atkins.

Affordability and robust yields, which can be as much as 8 percent, are at the core of Moree’s appeal.

For example, a three or four bedroom house at 19 Boland Drive, Moree is on the market for sale for $164,500 and is renting for $255 a week.

Apartments are also popular with investors, while Ms Atkins says overseas buyers are snapping up rural properties thanks to the falling Australian dollar.

While Moree is popular with investors due to its affordability and rental yields, many also recognise that the local economy is relatively robust thanks to a diversified agricultural economy dominated by beef, cotton, wheat, sorghum and barley.

“Despite seasonal influences such as drought, Moree is a highly productive region, which is recognised as a good place for yield-hungry investors to buy a rental home,” says Ms Atkins.

–ENDS–

For further media information contact:

Angus Raine, Executive Chairman & CEO, Raine & Horne on 0498 071 991

Andrew Harrington, National Marketing & Communications Coordinator on 02 9258 5400