By Herron Todd White
August 2020

Lismore/Casino/Kyogle Property Update

“When I stepped out into the bright sunlight from the darkness of the COVID-19 lockdown and sharemarket fail, I had only two things on my mind… property investment and renovation” (said someone).

This could be argued as the mindset for the savvy property investor following on from “lockdown” measures imposed on the economy since March 2020. And how could you blame them – record low interest rates, a market sentiment that is a little unsure of itself and generally treading the waters to see what is available and how to act with the available information.

The fallout from the “lockdown” still remains to be seen within its entirety. However, the Lismore/ Casino/Kyogle regions are proving to be rather resilient in face of the obstacles compared to their more sizeable metropolitan cousins. One thing is certain – if you can “tick all the boxes” for the lender and satisfy myriad of conditions that they currently adhere to, then, what a time to invest in property!! The available interest rates from 2.09 per cent to 3.0 per cent fixed or variable are at unprecedented lows (there’s that oft used word again!!) and are not expected to rise significantly for some time yet. So, the return on investment becomes just a little bit more attractive.

Property investors with Lismore, Casino and Kyogle are primarily interested in “rental return” as capital gain is not traditionally considered to be particularly strong due to being a relatively steady market that is not subject to the volatility experienced by more coastal localities.

That being said, there are some opportunities for property investors which require a bit of thought and persistence.

We have noted that thanks to some forward thinking from the local Councils in the recent past i.e. Lismore, Kyogle and Richmond Valley who have seized on “updating” of their respective LEP’s (Local Environmental Plan) and DCP’s (Development Control Plan) since 2012, with the encouragement for medium density development in certain localities which benefit from proximity to the CBD, hospital, schools and other key municipal infrastructure.

For example, the ability to subdivide a 950 sqm corner site into two vacant freehold lots and approving a dual occupancy on each lot. Hence, four units permitted on an original single lot. Sure, there are private open space and building setbacks to consider. However, through a bit of creative building design and negotiation, such developments can become a reality now and provide a welcome relief to a tight rental market.

Other avenues that property investors look for in this area is the existing block of original flats where the rental return may be improved by a “slight adjustment” of the existing (and possibly low) rent levels to a market rate. For example, a recent sale in Girards Hill of 5 x two-bedroom flats for $910,000 returning 5.57% in its original condition. With a bit of targeted renovation to the kitchen & bathroom areas and some cosmetic attention to floor coverings, could see the rental levels increase. This is aided by the already strengthening demand in rental accommodation.

Certainly, better than current term deposit rates or a slap in the face from a half-frozen snapper.

Even better, if the block of flats is designed in such way to allow strata subdivision, then the creation of separate titles could paved the way for some capital gain and the ability to improve security for lending finance on individual titles.

Detached dual occupancies on a single lot with separate driveway access to each unit has been relatively popular in new residential estates as it not only provides an additional revenue stream as opposed to just plonking a large house on the site BUT also the potential to “strata” subdivide and create two separately saleable properties. There is also the double-whammy effect of securing depreciation allowances for a new build. That is likely to whet the appetite for the savvy property investor.

It is difficult to see the advantage in purchasing a house for the sake of a rental investment without some thought given to improving the overall value of the property with simple renovations or improvements. As an existing house, the net rental yield rates can be as low as three per cent per annum. However, if such a house is wedged into the front corner of the lot and is relative flat or has a gentle slope, there could be the possibility to either construct a secondary dwelling or detached, Council approved granny flat to boost rental return. This avoids having to purchase bare land in order to build and provides the advantage of securing some rental from the existing house while “Doug the Builder” (Bob’s uncle) creates a masterpiece in the back yard.

There is no real determining price point or specific suburb as everything comes down to buying well regardless of the location and buying the property “as is” without any hint to the owner or agent about your plans for the property. As long as the fundamentals are in place i.e. building setbacks, private & open space, any property with a land lot size in excess of 800 square metres, such development to improve rental return could be achievable.

The recent announcement of Federal Government to graciously gift $25,000 to those looking to build new or renovate their existing residence looks appealing, but remember,you need to spend $150,000 to receive that “gift”. For those property investors building new, that $25,000 could go a long way in providing some additional features i.e. solar power system, ducted air conditioning that may or may not be covered in the building contract.

Therefore, to summarise, for the property investor in these areas of Lismore, Richmond Valley and Kyogle there is a significant degree of “research, research, research”, not just “location, location, location”.

Speak with a Lismore Mortgage Broker today.

Byron Bay Property Update

As Covid-19 travel restrictions have eased, property sellers and real estate agents have heaved a collective sigh of relief. Property sales have kicked upward over the last month in the Byron Shire as intrastate and interstate travel brought non-local buyers back into the fold. But in the blink of an eye, we are faced with border closures on the Murray River and hot spots in Sydney restraining the market once more. It is truly a fluid situation and one that will develop further as rates of Covid-19 infections wax and wane.

The COVID-19 issue is of particular relevance to the Byron Shire market as many of the transactions that occur are for investment purposes with many of those investors originating from Sydney, Melbourne and Brisbane with a smattering of buyers from overseas. The absence of these buyers from the market because of coronavirus has caused much angst to sellers. In turn, some absentee investors have resorted to purchasing properties sight unseen in what must be an indication of their strong desire to invest in the Byron Bay area. Maybe it’s a bit of FOMO?

There are some locally-based investors active in the area as well. There is very little new land being released in the Byron Shire but with a growing population there’s increasing pressure on housing affordability, particularly for first home buyers, and with a large portion of the population unable to afford a unit or house (see last month’s topic “lazy $700,000”) and a steady turnover of shortto- medium stay holiday makers utilising AirBnb style properties, there is consistent, if not strong, demand for rental accommodation.

Because of the high buy-in prices of property in the area, investors are looking to maximise returns by utilising the holiday market or by purchasing properties with multiple letting opportunities such as dual occupancy properties. Yields for investors in the area can appear to be relatively modest. For example, a one-bedroom unit in a new development on the northwest fringe of Byron Bay recently sold for $610,000 and was leased for 12 months at $550 per week, or $28,600 per annum, gross income. That reflects a gross yield of 4.68 per cent. Costs such as rates, body corporate fees, management fees and incidentals will eat away at that before the buyer has to meet their mortgage payments. The relatively modest return is a reflection of the popularity of the area. In the more central and beachside locations of Byron Bay, yields are firmer still. It’s a good thing we still have negative gearing, right?

Many of those absentee buyers are not, however, investing for the rental returns alone. The properties they buy are seen by many investors as a future retirement destination or as a holiday home, so rental return is but one facet of some investor’s decision process.

Clarence Valley Property Update

COVID in the Clarence Valley is not having much impact as auctions, borders have been opened up allowing people to travel to the Valley more easily.

Investors see the Clarence Valley as a safe haven from a downturn in the market due to broader economic conditions. Cashed up buyers are spending above $1 million on canal or Yamba Hill properties to be used as holiday homes or as longer term rentals. Investors also are seeking rural residential properties to get out of the city life due to the Coronavirus impact in the cities restricting movement of people. Investors are mainly from the Gold Coast/ Brisbane and Sydney areas.

The Valley is typically cheaper than Ballina to the north and Coffs Harbour to the south. The Clarence also is benefitting from Government spending on a M1 Motorway upgrade and a new large Jail in the region. In Grafton, rental return net is expected to be around five per cent although in Yamba on the coast capital gain recently has been and strong 6.1 per cent per annum (realestate. com). Agents are reporting a lack of stock and good buyer enquiry.

In the future the Clarence Valley will benefit from the M1 Motorway joining Ballina to Coffs Harbour reducing travel time also to the Gold Coast and Brisbane to two hours approximately and the new Jail creating jobs. However, the risk is the broader economy in Australia and the world with a rise of these threats. First home buyers are able to apply for discounted mortgage rates, stamp duty rebates, and renovation/construction incentives which may help fuel this part of the market in the near future.

Albury Property Update

What a difference a month can make in our new world living with a pandemic. Our patch encompasses Albury-Wodonga and stretches east to Corryong, west to Mulwala/Yarrawonga and north and south of the NSW-VIC border along the iconic Murray River. A seamless community with border town residents not giving much, if any thought to crossing the state border every or even several times a day pre-COVID-19. The very serious second wave challenging the state of Victoria is a real blow for communities already suffering from the effects of the summer bushfires and the effects of the first COVID-19 lockdown, a real time example of one step forward, two steps back.

Needless to say, the closure of the NSW border with Victoria has been disruptive, stressful and logistically challenging, however any measures to assist in flattening the curve of the second wave must be undertaken with genuine compliance. The sectors most at risk in our patch are tourism, hospitality, education and the flow on effects to unemployment in the region. We hope that this time next month we might be able to report some better statistics for Victoria and that somehow NSW has avoided the same fate. The pandemic has proven it is a long game and complacency has dire consequences. In some ways, discussion about property markets does seem second tier, however all our staff have been amazing and continue to service all areas adhering to the restrictions in place without complaint.

The Albury-Wodonga investor’s playbook focuses strongly on the lower end of the market, where opportunities for good rental returns or uplift from improving and reselling within a 12-to-18 month period are both popular choices.

There is a limited amount of transactions in the flats building market, although these do appeal to local and out of town investors, whereas the new build duplex or triplex developments seem to attract out of towners predominantly, often SMSF’s. We speak often of affordability in the region, and this is not lost on the investors. The entry level to property investment in the region has attracted Melbourne and Sydney investors and also locals investing in their towns, we have definitely less outof- town transactions in the past 12 months however In Albury-Wodonga, Myrtleford, Kiewa Valley and Wangaratta, the local investor has been active.

The investor seeking gross rental returns of six per cent to eight per cent and possibility of positive gearing are evident in the market. The price range for a basic house is creeping up, however we are still seeing sales in the $200,000 to $300,000 bracket, and this would be the most popular range, units are lower than this, range of $140,000 to $240,000 bracket, some one-bedrooms, but more two-bedrooms, available. The more modern houses, price range from $300,000 to $450,000 are more likely four bedrooms, and there is definitely a ceiling on rents that will be achieved and as the purchase price increases returns drop as the cost of renting starts to look less appealing and more people consider buying over renting.

One market segment with active investors has been modern homes being rented to university students, especially in Thurgoona, and with more new homes under construction and the FHBS ramped up, and universities feeling the strain from the pandemic, this segment may be under pressure from downward rent and a possible oversupply of dwellings. Albury-Wodonga has seen some modest lifts in resales from investors buying, renovating and flipping basic homes, many in ex-housing commission estates and city central fringe suburbs, however the better money might be the astute investor purchasing these “ready to go” properties for long term investment. The goal is to strike a balance between location, purchase price, rent and quality tenants. Thankfully our region benefits from a broad employment base so there is a good cross section of industries seeking rental accommodation, in addition to the burgeoning Air BNB and short stay accommodation offerings which are available in Albury-Wodonga and throughout north-east Victoria.

So far, across the board, our markets are holding up well. That said, the latest development of Stage 3 lockdown for Melbourne and Mitchell Shire will have a significant effect on local tourism and events, especially in towns such as Bright, Beechworth, Yackandandah, Corryong, the King Valley and the ski villages of Falls Creek, Hotham and Dinner Plain. The ski season being closed is a loss for tourism, local businesses and seasonal employment in these areas and surrounding towns that capture these travelers, who cannot travel. This will be a market to watch over the coming months.

To end on a positive note, we are so fortunate to live in Australia and feeling very grateful to be living our best life in regional Australia, the investors alert is we are affordable, offer variety of property investment options, have NO traffic issues (once the border reopens) and if you can work from home…well just saying!

Tamworth Property Update

As we approach the end of July and at the time of writing, according to the NSW Health the Hunter New England Local Health District has five confirmed cases of COVID with the Tamworth, Armidale, Gunnedah, Narrabri, Glen Innes, Upper Hunter and Inverell LGA’s currently recording no active cases. Despite the challenging times we live in and surprising to many, the residential and rural residential property in our region market continues to perform reasonably well with generally stable property prices in residential and rural lifestyle properties.

While overall demand has softened slightly, investors in the New England North West are reasonably active in the major centres of Tamworth and Gunnedah with properties in the $200,000 to $400,000 selling at or near their listing price with locations such as West Tamworth and North Tamworth continuing to appeal to the investor market seeking renovation and/or development opportunities at reasonable prices.

Generally, there is still solid demand for older dwellings located on larger blocks with multiple occupancy potential and the rental market in these localities remains stable with good duplex, triplex and flat building investments still providing a gross return of around six per cent in well-established areas and up to eight to ten per cent in the higher risk small rural towns and non-sought after suburbs in the regions larger centres. Investors chasing long-term capital returns are still active in the newer residential suburbs of Forest Hills/ Moore Creek and Calala.

Anecdotal evidence is still showing fewer high-value properties are listed on the market and selling periods have increased, this is a sign that many owner occupiers are continuing to bunker down through the COVID pandemic. At present, these higher value residential assets appear to be most vulnerable in this time of economic uncertainty.

There is generally a rule of thumb that regional property markets normally experience a ‘time lag’ factor following larger city property market trends, this feeling can also be echoed on the subject of COVID’s impact. The unknown future economic impacts on regional communities do play on the minds of investors and owner occupiers alike, however the concept of having space to run with clean, fresh air and a safe remote working environment continues to provide larger regional property markets such as Tamworth with a distinct trump card.

The NSW Government’s First Home Owner grants continues to provide incentives to first homes owners, while the Federal Government’s Home Builder stimulus packages (which provides eligible owner-occupiers, including first home buyers, with a grant of $25,000 to build a new home or substantially renovate an existing home) are welcomed by the property industry and while still in its infancy it’ll be interesting to monitor the uptake of these stimulus packages over the back end of 2020.

Speak with a Tamworth Mortgage Broker today.

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.