Home Insights The Interstate Locations Big City Property Investors Are Now Flocking To

The Interstate Locations Big City Property Investors Are Now Flocking To

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Real estate in South Australia and Western Australia is attracting more attention from interstate investors as the number of buyers based in the east is looking further away.

In 2020, 84% of searches for real estate purchases by people living in New South Wales were related to real estate in their home country. In 2021, this number dropped to 81% and year-to-date to 77%.

This means that more than one-fifth of searches for real estate purchases by people based in New South Wales are for out-of-state real estate.

South Australia has the highest interest from New South Wales buyers. Comparing the 12 months to May 2022 and the same period in 2021, the number of searches for real estate purchases in SA by New South Wales-based people has increased by a staggering 91%.

Not only in SA, but in Washington, the number of purchase searches increased by 47%, and in both Queensland and Northern Territory, the number of searches increased by 43%.

In contrast, the total number of home purchase searches in New South Wales fell by 2% during this period.

The same is true in Victoria. Searches for buying real estate in SA and WA have increased by 28% and 42%, respectively.

What is driving the rise of these buyers looking beyond their home state? The first and most obvious reason is price.

Median units in the Greater Sydney region in May were $ 785,000, according to PropTrack data.This is above the median House In all other Australian capitals except Melbourne and Canberra.

In Greater Melbourne, the median price is $ 621,000, which is higher than the median for buying a home in Perth, Adelaide, or Darwin.

At the cost of a Sydney unit, investors can get an entire home in most other capitals.Photo: Getty

In the two years since interest rates were cut in early 2020, Australian real estate has seen the third highest price increase in history.

For those who already own real estate, this has led to significant equity gains that can fund further investments, especially in our two most expensive cities.

The quest for strong yields could be another important driver of this interstate highway rush by investors.

In certain markets, units are usually cheaper than homes. Units tend to see relatively low capital gains, although they generally produce higher yields than homes.

Over the last two years, real estate prices have risen much faster than rent, which has led to lower yields.

Currently, the total yields of units in Sydney and Melbourne average 3.5% and 3.8%, respectively. Bar Canberra, these are below the average yields found in homes in all other Australian capitals.

Investors from Sydney and Melbourne are flocking to Perth in search of more affordable assets to generate higher incomes.Photo: Getty

For many investors, the quest for stronger yields has become more important.

Interest rates are starting to rise, but they are still very low compared to historical levels. This remains a challenge for income-seeking investors, especially as inflation recovers.

For buyers in Sydney and Melbourne, the interstate market offers the opportunity to buy homes and land at a lower price than the cost of a unit in the housing market.

And these types of investments are much more likely to generate higher yields.

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