16 Dec 2021
Words Trudy Crooks Informer Issue 101

Regional demand still runs strong

From the start of this financial year, it feels like we’re all aboard a runaway train with a slew of sales going through to settlement and levels of inquiry which we’ve never experienced previously. A large percentage of the inquiry is from people who are reassessing the way they want to live, with COVID-19 the obvious reason behind that.

Even as state and international borders open up and vaccination rates accelerate, there’s a real sentiment towards moving to regional areas and, for many of these people, the “no brainer” option is to buy an accommodation property which provides an automatic cash flow business, often with a home attached. 

Naturally, there’s also that added advantage of  “being your own boss” which helps, but what this all means is that there is a lot of activity in the market right now. This buyer demand means that many operators are choosing to put their businesses on the market to make the most of the fact that they can achieve a good price.

While the regions are benefitting the most from this intense demand, some of the more experienced and sophisticated operators are now looking to get back into the capital city CBD market, especially now that borders are opening and people are returning to the cities.

Directors Alex Cook and Tim Crooks, who handle our off the plan management rights sales in Melbourne, are reporting that the Victorian capital is set to undergo something of a renaissance after some pretty tough lock-downs.

Office workers have already started returning to the city centre and 200,000 dining vouchers worth up to $150 were handed out to Victorians in November to encourage people to dine at the city’s restaurants, cafés and bars.

All this activity means there have been some pretty big transactions taking place, and none bigger than the Barkly Homestead in the Northern Territory. This one sold at the $14 million asking price, which is a record for a roadhouse.

Barkly Homestead is a unique destination in itself, providing accommodation, food and fuel in one of the most remote regions of Australia. It is the only stop on a 450 kilometre stretch of road between Camooweal in Queensland and the Threeways Roadhouse near Tennant Creek in the Northern Territory.

We also sold the freehold to the Powerhouse Hotel Armidale by Rydges in an off market deal which delivered an eight percent yield. The Powerhouse Hotel Armidale is a short distance from the CBD on the main New England Highway and is widely regarded as the best accommodation business in the region.

One other big trend so far this year is that caravan parks in regional destinations are emerging as some of Australia’s hottest commercial assets. 

Experienced investors and operators are looking to capitalise on a major surge in domestic and drive tourism. In one four week period after the start of the new financial year, we sold four regional caravan parks, including the Hidden Valley Holiday Park just outside Darwin, with a combined total of $22 million and there is another five parks under contract worth a total of just over $34 million.

The Hidden Valley Holiday Park was picked up by Lifestyle Villages, which has around 10 other similar properties across Australia. They’ve made no secret of the fact that they’re positioning themselves for a domestic travel boom once the country is fully open.

One final point to consider - RBA Governor Philip Lowe has dismissed market pricing for a rate increase next year as “a complete overreaction”, although he has softened its stance a little on its previous schedule of “not before 2024”. 

Against a backdrop of a bullish economic outlook, he said: “borrowers need to be aware that rates will rise again – not quickly, and not next year; the most likely case is 2024, but it’s possible it’s 2023”. 

So what does that really mean? It means that for those who are thinking about selling, it might be a good time to get your ducks in a row. The cheap money is out there right now, which is really helping fuel this demand. But will it be there after next year?

Words_Trudy Crooks, Managing Director