Comparing Capital City & Regional Economies

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Comparing regional and capital city economies. When looking to invest, regional cities and capital cities are always the major question. And everyone usually throws up population, population. Now, population on its own can never be directly be a growth driver. Population needs to be considered with supply as well as sentiment. Or some people like to call it confidence.

So how likely are people wanting to buy there, how much is available and then how much demand comes in? So now circling back to regional and capital city economies, I’ve got a few pieces of information and data and insights I want to share with you today. Now, the Regional Australia Institute has presented a lot data around population that’s really growing over the next 30 years and how regional centers can take on that and make a significant impact. So as it stands, there’s around 15 major regional centers. And what’s classified as major is populations of 100,000 up to one million. So there’s many of these out there, 15.

In Australia then there’s about 40 other regional centers that have populations of between 20,000 and 100,000. And then there’s places in between as well. So when you’re looking at all these different cities out there, that means there’s a lot of opportunity for population growth, infrastructure and so forth. Now, when you’re thinking of comparing economies, there’re so many stats and figures that you could look at, but let’s just look at two or three key areas. Number one is incomes, number two is employment and number three is workforce productivity. These are three pretty key and pretty important statistics to consider.

If you’re considering income, you might suddenly think, oh, well people all over the capital cities must [inaudible 00:01:59] way more than people in the regional cities. However, if you divide that capital city into two parts, inner capital city and then middle to outer ring. The actual fact is incomes between middle to outer ring suburbs in capital cities earn very similar incomes to those in regional cities. The gap is actually less than 10% with some of the capital cities outperforming. 

However, with the gap less than 10% and with growth rates very similar in the mid two percents across different capital cities and different major regional centers, it just shows to you that regional and capital performance in terms of income from jobs are very similar. It’s only when you get to the tail end, when you look at the inner suburbs do they start to differ. So with the inner suburbs, you might find incomes on the slight higher end in comparison to those regional centers. But the properties aren’t always confined there, they usually spread the capital cities. Example, in Sydney you’ve got all of the western, all of the northwest. You’ve got parts of the southwest, such a large demographic and geographic area that makes up a lot of the capital city when you’re looking at that middle to outer ring. 

So when you’re thinking of incomes, don’t be thinking that suddenly I’m investing in a regional city, the incomes must be low. The disparity isn’t too far off. Other things to consider are employment. Now, when you’re thinking of employment, there’s so many stats and figures to look at, but the percentage of jobs and vacancies that are rising are rising at a faster rate in regional centers. Obviously because the job amounts are smaller. The jobs that start to come in cause a bigger percentage rise. But with that percentage rise, what that is saying is that the growth is occurring. And as an investor, percentage rises are key for you, not necessarily small percentages on big volumes because it might already have a big volume baseline. Although important to consider, the percentages of jobs that are rapidly rising in regional centers are there. 

The next part is about unemployment rates. Obviously there are some regions where the unemployment rates have a big difference, but there are also regions where the unemployment rates or employment rates are tied quite closely. So to give you some perspective, the regional employment rates in 2016 were between 92 and 94% for different areas across both capital and regional locations. That means the variance between the two markets and capital region, we’re talking about 2%. And in the grand scale of things, you’d expect much more when you’re saying no to a regional investment where the variances are not that large at all. So employment rates are very key, vacancy increases the key and as you can see, both income and employment are quite similar.

Now the last statistic was the regional area versus capital city area workforce productivity. So how much on average, how productive are the workers there? What information was looked at and found was that regional center employment productivity in some cases even more productive than middle to outer ring capital city counterparts. So if you’re considering that as part of an economy and key statistic to look at, that is showing some promising signs. 

So if you’re ever looking at wanting more information, the Regional Australia Institute provide a great deal of information on regional cities. And in terms of economy, having to look at income, job vacancies and employment rates as well as workforce productivity are key things to understand when you’re looking at property investing as a whole. 

So next time you’re considering comparing regional and capital city markets, there will be portions which are just not compatible in terms of your inner city markets. But as a whole, they’re quite comparable and in some cases, regional markets perform from an economy perspective, even better to middle and outer ring capital city counterparts. That’s it from us here at InvestorKit, the experts in wealth creation, helping you take action.