The month in review: Newcastle
By Herron Todd White
October, 2009
The main areas of concern with regards to possible
weakening residential values are those property types
that currently have a significant oversupply. This mostly
comprises:
• large scale vacant land releases
• modern high-rise units in coastal areas
• resort style/serviced apartment styled investment
property
Vacant Land
Demand for vacant land has only shown a slight
improvement throughout 2009 and generally remains
weak, with a number of developers offering discounts/
rebates on top of the current government incentives. As
with any oversupply situation it will only take a developer
to reduce list prices (in an attempt to clear stock) to
further reduce the value of existing residential lots.
There are a significant number of vacant lots located
throughout the Port Stephens Shire Council, around the
City of Maitland and some western suburbs of Newcastle.
Outside of these areas there is also land available at
Murrays Beach (just to the south of Swansea).
High-Rise Units
Most concern is for modern units located in the Port
Stephens area and to a lesser extent in the City Centre of
Newcastle.
In Port Stephens, it remains unclear how long developers of
modern residential apartments dated from 2004 onwards
will be able to withstand holding costs whilst seeking
premium prices above $500,000. Some recent attempts
at targeting interstate/Sydney investors appear to have
been largely unsuccessful. There is a clear oversupply
and the market remains volatile to a wholesale clearance
within any one large development.
Resort Style/Serviced Apartment Investments
Property which cannot be owner occupied or permanently
let is mostly concentrated in and around Port Stephens
and the City Centre of Newcastle.
Demand by investors remains weak and it is not
uncommon for resort style/serviced apartment
investments currently listed for sale to have been on the
market for up to 24 months with minimal buyer enquiry.
With the holiday market not as strong at the moment
further lower returns could be expected and quite often
the achievable returns are not known and such schemes
will continue to be shunned by investors until lower price
adjustments become more attractive.
Next 3 years
As with most residential areas throughout Australia we
are keen to see where the “real market is at” (ie once
the artificial influence of the higher First Home Buyers
Grant is removed). The removal of this higher grant, the
likelihood of increased interest rates and the possibility
of higher unemployment (it would be more correct to say“higher underemployment”) should see demand remain
weak. If supply of residential stock were to increase then,
as with any supply/demand scenario, we could see future
median prices weaken – particularly at the lower end of
the market which has seen substantial growth over the
last 12 months. |
