Buyers now need a 30% deposit to buy in regional areas

Those looking to buy or invest in property in regional areas need to watch out – if you are using the ANZ bank then buyers and investors will now need a whopping 30% deposit. This is due to the property market still very volatile at the moment especially in riskier markets such as mining towns that are reliant on the mining industry and are seeing a downturn.

One such town that will require a 30% deposit is Gladstone situated in the Central Coast region of Queensland, whilst the higher deposit classification also includes towns of Blackwater, Chinchilla, Cracow; Dysart, Miles, Rolleston and Roma.

There are also towns in Western Australia that will require a 30% deposit (Kalgoorlie-Boulder) as well as in NSW (Broken Hill) and South Australia (Roxby Downs).

The ANZ has recently taken on a more conservative approach when it comes to lending money to smaller towns and classifies them more like ‘mining towns’. The banks are simply tightening up in riskier markets, like the mining towns which are reliant on resources investment in order to protect themselves.

So how much does a 30% deposit really equate to?

The median house price in Gladstone is approximately $346,000, which means you will need to get your hands on a deposit of just over $100,000. This is a ridiculous amount of money to put down as a deposit which is making the dream of owning a home more and more unattainable. It’s already hard enough for buyers to raise a 10% deposit, let along a 30% deposit – people simply can’t save this amount of money easily.

An ANZ spokesperson commented that this change to a 30% deposit was due to Gladstone experiencing a localised downturn in its market and is dependent on the mining sector. However, Gladstone is not an actual mining town and is self-reliant, whilst Mackay is more of a mining town, but is not featured on the ANZ list.

Previously, Gladstone had been a property investment hotspot for property investors due to vacancy rates falling to just 1.4% in 2011 from 4.1% in March 2010, whilst rents have increased for all housing types. However, today, vacancy rates sit at a high of 5.2%.

As ANZ is one of the major top four banks, it will be interesting to see whether any of the other banks will follow suit.

In spite of this there are other lenders who buyers can go with, but interest rates might not be as attractive and it’s best to seek the advice of a good mortgage broker.

As regional areas tend to be higher risk, along with buyers now requiring larger deposits in certain areas, buyers and investors should avoid purchasing property in these locations. Housing might be more affordable here, but there is a reason for this. Although rental yields might be higher, allowing you to make higher returns and benefit from positive geared properties, vacancy rates can be higher meaning that it can be hard to find a tenant, especially when mining comes to an end. There becomes no reason for people to live here and so people move away and in the worst case scenario, your property will sit amidst a ghost town.

The best thing to do is to invest in a property in a major city such as Brisbane which is starting to see property values grow and is benefiting from new infrastructure and developments. People today want to live closer to the city and their workplace with convenient access to public transport, major roads, shops, schools and restaurants.

You should therefore look at the inner-city areas where there is a lot of infrastructure spending and tends to be a more reliable investment whilst you can still find affordable properties and only pay a 10% deposit.

If you would like more information on why you should avoid investing in a regional area, please feel free to give the iBuyNew team a call where you can speak to one of our Property Consultants.
Published on 27th of July 2015 by Marty Stanowich
Marty Stanowich
Marty Stanowich

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