Are Victoria’s regional centres the rental goldmine you’re searching for?

Solid and rising rental returns are an intrinsic part of most people’s property investment strategy. However, in the quest for such returns, many people make the mistake of narrowing their vision and focusing only on the city. But by failing to look beyond the metropolitan area, they often miss out on valuable opportunities waiting for them in the regions. And with recent Covid-related events, combined with a genuine push for greater infrastructure investment in regional Victoria, the appeal of the state’s smaller cities is growing astronomically, and demand for good quality rental properties is increasing with it.

From well-connected Geelong and Ballarat, to booming Greater Bendigo in Victoria’s historic central goldfields region, and even further afield to Shepparton, Sale, Stawell and Mildura, the state’s outlying cities and towns have consistently delivered both solid rental yields and strong growth in value.

Modern, attractive, well-serviced and well-connected regions such as the goldfields and Bellarine Peninsula have managed to find that appealing balance between convenience and comfort. With both freeway and regular rail connections to Melbourne, as well as a prosperous economies, vibrant arts and culture scenes, university campuses, and impressive sport, community and commercial facilities, it’s no wonder that regional Victoria continues to be a favourite amongst those of all ages looking to escape the rat-race of inner-city and suburban living.

Even through the height of the Covid pandemic’s first wave in Melbourne, when many landlords feared the double hit of declining house prices and increasing rental stress, returns in cities such as Bendigo were actually still on the rise. In its May review, the Real Estate Institute of Victoria, noted that, while median rents dropped by around 2% in Melbourne, Bendigo’s median rent went the other direction, actually going up by 2%.

Rental supply vs demand

The increasing rental returns are, of course, simply evidence of those undeniable fundamentals of economics: supply and demand.

While metropolitan residential vacancy rates have been hovering around 2.8 to 3.0% through the middle of the year, average vacancy rates across the regions were sticking firmly around the 1.8% to 2.0% mark[1], with quality homes being snapped up by reliable tenants within a few days of their listing, and many local agents maintaining waiting lists for new leases to come online.

 Healthy returns

According to data from the REIV[2], regional vacancy rates are not only attractively low, but its yields are exceeding those you could expect in the city. Compared to just 2.8% across metropolitan Melbourne, Greater Bendigo for example is seeing yields of 4.0% to 4.8% with Ballarat regions seeing similar returns.

Of course, the great benefit of the high demand for rental properties is that these returns can start to be realised within days of settlement, as tenants eagerly line-up to sign a lease as soon as a home becomes available.

Country lifestyle, city benefits

Victoria’s main regional cities – Geelong, Ballarat and Bendigo – all enjoy the advantages of being diverse, substantial and fully-serviced and self-contained cities, while still enjoying a regional, laid back feel. They also benefit from being cities of distinctive suburbs ranging from the traditionally working class or the more student-oriented, to upmarket precincts, family-focused suburbs, new developments and semi-rural options with acreage.

This diversity, connectivity and sense of community make them all popular choices with tenants of all ages and lifestyles willing to pay that little bit extra, for a home in one of the state’s most popular and thriving locations, and therefore a boon for investors willing to think outside the Metropolitan Ring Road.