Millions of baby boomers will be a driving force of Australia’s property market over the next 20 years and many will head to the affordability of regional Australia.
Today we identify 40 regional locations likely to be targeted by baby boomers and these are areas every investor should want to know about.
Kevin: As I said at the start of the show, one of the things that investors love to do is get ahead of the race. There’s been a really interesting report that’s been published that I want to talk about now, published by Propertyology, about what Baby Boomers are doing. We know there’s a huge number of them, but it’s interesting to note that they could be just looking at some of the regional areas around Australia.
Let’s talk more about this. The author of the report, Simon Pressley from Propertyology, joins me.
Simon, thanks again for your time.
Simon: Always a pleasure, Kevin.
Kevin: Sad and almost poor Baby Boomers are going to reignite that regional property market? I’ll ask you to tell us where those areas are, firstly. But how did you reach this conclusion, Simon?
Simon: It’s logic, I think. What we do know is that the Baby Boomer generation – those born between 1946 and 1964 – is 4.5 million people, or 20% of our national population. We’re talking about a big segment of the population, and a large percentage of them don’t have sufficient retirement savings.
Obviously, they’re all going to exit the workforce at different times, but as they do and they’re confronted with what options they have to fund a better lifestyle, in a lot of cases they will say, “I’m attracted to downsizing my family home and relocating to somewhere that’s a lot more affordable.” That will open up all sorts of opportunities throughout regional Australia.
Kevin: Yes. Many of these Baby Boomers only enjoyed some of the superannuation contribution benefits toward the end of their working life, so they have a fairly limited amount of saving, I would imagine.
Simon: Absolutely. Now, it’s really, really hard to get official data out of governments on this. I’m sure it’s there in Treasury somewhere. Official data – so last census, 2011 – there were 3 million Australians who were 65 years or older, and 2.5 million are receiving an age pension. That’s a big number.
Kevin: That gives us a bit of an insight then as to how big that number really is overall, isn’t it?
Simon: Absolutely. Now, an age pension, what is it? For a couple, it’s about $31,000 per year. The odds are most of the Baby Boomers, their current combined household income before they exit the workforce in a lot of cases will be a lot more than $31,000.
The thought of significantly decreasing their lifestyle won’t be appealing, and when they work through “What options have I got?” because obviously it’s too late to invest at that stage, some might say – I’ll paint a scenario – “I have an $800,000 family home, four bedrooms. The kids have moved out. Hmm, what if I sold that to a $400,000 property and freed up this extra cash? That can supplement my pension.
“But then where can I buy that $400,000 property where I’m still going to be counting on living a lifestyle?” A capital city? Probably not going to tick the boxes. But different parts of regional Australia might.
Kevin: Some of the areas that you’ve identified – and I want to quickly run through them now, if we may – they’re pretty attractive areas. If you look in New South Wales, I think you’ve picked Coffs Harbour and Port Macquarie at the top of the list there.
Simon: That’s right. Some of these places, those who’ve lived most of their life in a capital city might have been to these places for holiday. In Western Australia, beautiful places like Busselton, Bunbury, Albany, Geraldton. There’s certainly nothing wrong with lifestyles there, and typical houses are worth between, say, $300,000 and $450,000.
New South Wales, as you said, Kevin, Coffs Harbour, Port Macquarie, they’re probably the more expensive options in regional New South Wales. But you have places inland, beautiful places like Orange, Bathurst, Dubbo. For those who don’t have to have a costal change but prefer the tree change, there are places like that.
Queensland is littered with places up and down the coast – from Cairns, Townsville, Hervey Bay, Sunshine Coast, and Gold Coast. Still a little bit expensive, but relatively very affordable, compared to, say, Sydney and Melbourne.
Kevin: Just in Queensland, Toowoomba is one of the areas you did pick.
Simon: Yes. Demand for accommodation comes in different formats. Often, as property market analysists, we’re referring to things to do within an economy that’s going to create more jobs, and that will always be applicable. But here’s another form of demand, and that’s in the form of extra demand for accommodation from Baby Boomers relocating from a bigger city to a smaller regional city.
Kevin: Let’s not miss out on Tasmania: Hobart, Launceston, Devonport, and Burnie. Of course, Tasmania overall is still a very, very affordable state, isn’t it?
Simon: The most affordable state in Australia. Tasmania at large, not just Hobart, is already well renowned as a very, very popular retirement place. Beautiful golf courses, best restaurants, cafés, alcoholic beverage, makes the best premium in the world, and exceptionally affordable accommodations. This is why Tasmania’s average household age is already above the national average – because lots of people in the Baby Boomer generation have already said, “We went to retire there.”
Kevin: Here’s a bit of trivia for you, Simon. Off the subject, but did you know that Brisbane was actually a cheaper capital city than Hobart back in 1975?
Simon: Is that right?
Kevin: It is right. I was quite amazed. In fact, Brisbane was the cheapest capital city in all of Australia in 1975.
Simon: That might be reflective of how old Brisbane is. In the context of other capital cities, Brisbane is a baby, really. Hobart is actually Australia’s second-oldest city, outside of Melbourne.
Kevin: Just to wrap up, if we could, tell me about capital growth in some of these regional areas compared to the cap cities over the last, say, 10 or 15 years.
Simon: There can be a misconception that capital cities have experienced higher capital growth than regional ones. It’s a gross generalization, really. If you took snapshot windows of five-year blocks, there will be times when we can say capital cities did better than regions; maybe other times, we say the regions smashed the capital cities.
But over the last 15 years, if we look at the average annual rate of growth, most of the best-performing locations throughout Australia are regional locations, not capital cities. Then when you add to that the better rental yields that regions typically offer, the total return on investment has historically been better in regions than capital cities.
Kevin: Always great talking to you, Simon Pressley, from Propertyology, Propertology.com.au. Simon, of course, has been three times the winner of REIA and REIQ Buyer’s Agent of the Year Award.
Congratulations for that, Simon, and also thanks for joining us today on the show.
Simon: Always a pleasure. Talk to you next time, Kevin.