The month in review: Regional NSW
By Herron Todd White
June, 2010
DUBBO
Low cost sales volumes have increased significantly, with
buyers being predominantly first home buyers and local
investors who are returning to the market place after
showing low levels of interest in the property market
during the past six to 12 months. Mid cost value levels
have stabilised after a period of increase throughout
2009. The increased First Home Owners Grant had the
effect of increasing sales volumes and value levels during
2009, however now that the grant has reduced, prices and
sales volumes are beginning to return to normal levels.
This compares with August 2008, when the demand in
this price range had softened over the previous six to
12 months. There had been no obvious downturn in
prices, but the marketing period for these properties had
lengthened due to the increase in the number properties
on the market and increased competition from the new
housing construction market.
Demand and sale prices for high cost homes has
increased slightly over the past six months, depending
on the location and appeal, in contrast with 2008, when
demand for high cost homes had softened after a period
of downward pressure. This was a result of the increased
competition from the new home construction market.
MUDGEE
Potential buyers in the Mudgee market range from coal
miners to tree changers, young professionals through to
retirees and many more. Luckily Mudgee provides a good
range of different property types to suit the needs of
these buyers. The traditional allotments in close proximity
to the town centre are generally older style double brick
dwellings, which are often renovated which suit retirees
with the convenience of being able to walk to the shops.
The unit market is attractive to young professionals and
non-local investors alike due to the low maintenance
and good rental return. The rural residential market is
relatively strong with a lot of miners interested in living
out of town.
Generally the market has performed quite well so far in
2010. Activity has dropped slightly on results seen in the
second half of 2009 but with good rainfall and a strong
local economy the market should continue to perform
throughout the year.
BATHURST/ORANGE
Within the Bathurst/Orange area there is still a good mix
of buyers active in the market including first, second and
third home-buyers, executive/rural residential buyers, and
investors. The first home-buyers’ market took a distinctly
backward step in early 2010, yet still has a moderate level
of activity given the reductions in the first home-buyers
grant. First home-buyers are expected to further retreat
with rising interest rates.
Second and third home-buyers have slightly increased
in activity as most of them have sold to the first homebuyers.
This includes quite a good level of new dwelling
construction, particularly in Bathurst.
Executive and rural residential properties are selling,
however there is a mix of purchasers. Some are looking
for a bargain and searching for a vendor under financial
duress who is willing to negotiate, as well as purchasers
willing to offer and pay slightly above the market price to
secure their dream property.
The Orange area is experiencing a good level of new
dwelling construction in response to the increase in
activity at the Cadia gold mine. As fast as new three and
four-bedroom dwellings and duplexes can be constructed
they are selling and being owner occupied and or
tenanted. There is evidence of these dwellings selling for
between $365,000 and $410,000 and being tenanted for
$420 to $460 per week on six to 12-month leases.
Since our report in August 2008, the first home-owners
have come and gone from the market to a certain degree,
and activity has increased in the middle and high-end
markets. Rents in 2008 were static, resulting in investors
exiting the market. Now in 2010, there is a severe shortage
of rental properties putting upward pressure on rents. On
the strength of these shortages, investors are returning to
the market albeit cautiously.
MID NORTH COAST
So who are the buyers? The main regional centres along
the Mid North Coast of NSW have significantly lower
median house prices in comparison with the major cities
of Australia. Our research has found the median house
price in Port Macquarie to be approximately $385,000;
Taree approximately $240,000 and Forster approximately
$380,000. Being more affordable, the region hence
remains attractive to wide range of local first homebuyers
and families, retirees relocating to the area, and
investors.
2010 has seen sales volumes weaken, with our research
indicating falls over the past quarter of approximately
20% for Port Macquarie and approximately 33% for both
Taree and Forster. Please note that total sales volume for
the past quarter is still incomplete as some exchanged
sales are yet to be recorded, but when complete they will
still show a significant decrease. This slowing can be part
attributed to the reduction of the First Home Buyers grant,
though overall most buyers are remaining more cautious
following rising interest rates and the speculation of more
to come.
Who is active? The local rental market remains tight with
vacancy rates typically around 2%. Investors most often
target the lower end of the market (sub $300,000 in Port
Macquarie and Forster; sub $200,000 in Taree) where
higher yields are usually obtainable coupled with lower
capital outlay. A recent sale in Port Macquarie saw an
investor purchase a house for $210,000 with a tenant
now in place paying $285 pw. Investor activity for no
permanently occupied holiday income property remains
weak.
Despite a weakening in sales volume, a wide range of
buyers continue to be active in 2010, which has seen the
median price level remain steady to most market sectors
within the main regional centres including that of the
prestige house market, typified by recent sales such as
a $1.03 million house overlooking Lighthouse Beach at
Port Macquarie, and $1.425 for a house on Dumaresq
Island, Taree.
CENTRAL COAST
In our daily work life, we analyse the emerging sales
evidence coming through which in part involves
discussions and interviews with those behind the scenes
of, but responsible for the goings on in real estate world.
This includes real estate agents, investors and banks.
With the first home buyers’ scheme now well and truly
behind us, the market seems to have settled down to a
more orderly pace, but there is an underlying sentiment
that is coming through – there is no real identifiable buyer
profile at present.
Market segments that rise and fall during the normal
cycle seem to be in a state of convergence and at the
same time separation. Buyers, including investors, are out
there and making their presence felt, but there is some
hesitation across the board. We are still seeing activity
in the first homebuyer and investor market. But this is
subdued, as is the activity in the second and subsequent
homebuyer markets.
The underlying, but clearly audible sentiment is that the
people are anxious about interest rate changes and what
the banks are going to do next. Buyers clearly long to
hear some calming news from the banks. This may come about in the fullness of time as the overall economy
settles down.
In the meantime, life continues on the Central Coast, but
symptomatic of the overall market, there is no standout
suburb or market segment at present. The mortgage belt
areas are trading quite well with vacant land considered
to represent good buying in areas like Hamlyn Terrace and
Woongarrah. There are examples of developers in these
areas who have purchased land in bulk and are building
affordable homes with first buyers and investors being
targeted. Some good and solid purchases are being seen
here.
The beach and waterfront locations like Terrigal, Avoca
Beach, MacMasters Beach, Forresters Beach and The
Entrance are steady, but the impending news on how
the local councils will be treating these properties in
response to their respective interpretations of sea level
rises has the potential to affect these markets.
Interestingly, after an extended absence, we are seeing
a trickle of new unit developments coming out of the
ground with more enquiries of late from developers. This
type of enquiry usually occurs when the developers are
getting ready for the next round - welcome back.
WAGGA WAGGA
In 2008 we looked at the prestige market, rural residential
holdings and the unit market in Wagga, all three of which
were fairly flat. We have seen various changes in these
markets since 2008 with the strongest performing sector
of the three being the unit market. The first home-buyer
market has definitely been the star performer throughout
2009 with a very high volume of transactions taking
place, although this market has slowed dramatically over
the past few months due to the reduction in the FHBG
and a lack of available stock.
2009 was a good year in the Wagga prestige market with
the highest residential sale ($1.2 million) taking place. The
top end of this market tends to be dominated by retirees
and well established local business owners/empty nesters
who are looking to stay in these dwellings for a prolonged
period of time. However, the $500,000 to $700,000 price
range generally attracts a younger/middle-aged buyer
looking for space and modern accommodation. This
market has been quite active during the past 12 months,
particularly in Tatton where the quality of the housing
is high and demand for land is very strong. There are
few investors in this market with the exception of The
Defence Housing Authority, and most dwellings are
owner occupied. Agents are, however, reporting that
enquiry levels have dropped off significantly in the past
few months, as has the volume of sales coming through
in this sector.
The rural residential market has remained relatively flat
during the past year, although over the past two months
we have noted an increased level of sales in this owneroccupier-
dominated market. Generally TBE valuations
have been on the increase in this sector, which is a
positive sign for the year ahead. The buyer profile for this
sector hasn’t changed and is typically young families that
appear to be relying on bank credit to purchase/build.
As always in Wagga our units are very sought after,
providing strong returns and low vacancy rates. This
market historically has been investor dominated, however
we have been seeing some owner-occupiers enter the market with the assistance of the FHBG. There has been
a lack of available stock in this sector during the past six
months, which has resulted in a slight increase in prices.
A two-bedroom unit in central Wagga will generally fetch
between $230,000 and $265,000 with a rental return of
5% to 6%.
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