Regional NSW April 2017

The month in review: Regional NSW

By Herron Todd White
April 2017

NSW Central Coast
By far, the strongest performing location in the region now and for the past several years has to be peninsula suburbs at the southern end of the region. This includes Umina Beach, Woy Woy and Ettalong, with records being set and broken in very short periods of time. Almost daily, we talk with people and hear their surprise at the prices being paid.

These areas have been around forever. Originally a holiday or retirement destination, the Central Coast has been evolving over the years to become popular with first home buyers or those looking at a lower cost base. Nowadays, these areas have become a magnet for renovators and value adders with those looking to exit the Sydney market finding these areas particularly attractive due to the comparative level of affordability. It’s this exodus from the Sydney market that is seen to be driving the values in these locations.

Regularly, we are seeing prices rocketing past the $700,000 mark when the same property could have been purchased for much less just a few years ago. Knowing this, established locals are reluctant to pay the asking prices, but for every hesitant local, there is a new resident eager to step in. By the way, $700,000 nowadays will secure a 2 to 3 bedroom fibro dwelling close to the shops and beach, or a mid-1970s style, 3-bedroom brick and tile a little further from the shops.

Renovations are aplenty and the builders are happy. The peninsula has always had a love affair with backyard granny flats, mostly in the form of a converted garage and some even being council approved. But recently, they have been popping up everywhere and granny flat builders are flat out. These are particularly popular with investors, who in many cases are effectively doubling the income received from a property.

Whether the proliferation of granny flats is good for the area remains to be seen, but we have been saying for some time now that the increasing values have passed the point of being sustained on an ongoing basis and we still believe this to be the case.

The market moves on without waiting and whilst we can worry about the future of the peninsula’s values, a flow on effect is being seen in other areas further along the coastal strip, but at this stage, we haven’t heard any complaints of things getting out of hand. In this regard, we see the older areas on the fringe of the Gosford CBD as being the big winners. This includes areas such as Narara, Niagara Park and Wyoming.

NSW Mid North Coast
This month we will look specifically at the hottest property performers on the mid north coast. We will examine several factors for these properties including strongest location, price point and property type, and the factors driving demand.

Strongest location
The strongest locations on the mid north coast are generally the larger regional towns including Port Macquarie, Wauchope, Forster and Tuncurry.

Pockets within the Port Macquarie region include established coastal areas as well as coastal villages immediately south such as Lake Cathie and Bonny Hills. These areas are a mixture of older homes, either renovated or not, and new homes either constructed or under construction (especially in the southern villages). All these areas are within close proximity of the beaches and local services.

Price point
Entry points for houses within these areas range from $500,000 for a standard 3-bedroom home to $750,000 for something that may have ocean or golf course views, or is above average. This is well above prices in 2014 when the entry point would have been in the low $400,000 range.

Land sales within the new residential subdivisions on the outer fringes of Port Macquarie at Sovereign Hills and surrounding areas are selling quickly with demand outstripping construction at present. With the current fast-paced rate of sale and no further large scale residential developments for release in the immediate future, land and house prices are expected to continue to increase. This domino effect will also fuel demand and most likely increase land prices in other subdivisions in other regional towns as people look to these areas for more reasonable pricing.

Property types
The most keenly sought-after properties are family friendly dwellings, either houses or large villas, either renovated or unrenovated in areas throughout the mid north coast. However, as house property prices increase we have noticed an increase in unit sales, allowing the investor or first home owner the opportunity of entering the market at the lower end.

Demand
Strong demand, lack of available stock for sale and low interest rates appear to be the major drivers of the local real estate market and are causing rising housing prices throughout most of the mid north coast.

Is it sustainable?
That is the key question at present. As banks increase interest rates for investment property loans, we may see a slight slowing in this sector. However, it is likely that owner-occupiers will take up any slack in demand, thus keeping the market moving.

Barring any major downturn in the overall economy, the continuing rising demand and increasing prices should allow the mid north coast market to remain strong over the coming months.

NSW North Coast
Lismore/Casino/Kyogle

The Lismore region has seen an increase in sale prices over the past six months. There is a lack of good-quality stock, and high demand. Agents are reporting well-presented houses being sold within days, sometimes hours, of hitting the market. The top end of the market ($450,000 plus) is considered hot. We are seeing evidence of increases of up to 15% on houses that have resold within 12 months. Four-bedroom, two-bathroom brick and tile houses built after 2010 are proving very popular. The majority of purchasers are families looking to upsize or get into a home of their own. The other popular dwelling is the classic, older 1900 to 1940s renovated property; however, the renovation needs to be modern and opulent while staying true to the original design. This is a hard combination to pull off, but when done right the market will pay handsomely. There were two sales last year in Girards Hill that managed to get the right mix of modern and classic and were sold for $740,000 and $750,000 respectively. Traditionally this area achieves $300,000 to $375,000 depending on quality. The level of demand and lack of available stock is pushing prices up with premiums being paid to secure a property. This is not considered sustainable over the long term. We caution that if there were to be an increase in stock or changes in the economic climate, the higher end of the market would be impacted more dramatically than the lower end.

With the pressure on the higher end of the market we are seeing good demand for lower end (sub-$300,000); fixer-upper, older-style properties with good bones that can be readily updated to be flipped or kept as a first home. This is proving popular with the younger demographic as an affordable way to enter the market.

Since the beginning of 2017, Casino and Kyogle have enjoyed an improving trend of potential buyer enquiries. The type of buyer comprises a mixture of first home buyers, investors and existing home owners; however, what is interesting to note is there has been an increase in non-local interest, i.e, people moving into the area where it has been mentioned that the local area (Kyogle and Richmond Valley Council area) is considerably more affordable than other areas within the Northern Rivers.

Predominantly, the properties of interest within Casino and Kyogle are houses in the $200,000 to $300,000 price bracket and, interestingly, the modern, well-presented, rural residential estate properties on a typical one to five acres around the $400,000 to $600,000 price mark. These are generally sought by established property owners looking to upgrade.

However, it has been generally remarked that well-presented and maintained residential properties within most price points are in demand and are sold relatively quickly (in less than three months). The demand is somewhat driven by the simple fact of lack of stock, as lamented by the poor suffering real estate agents. So, it would appear the adage “have property, will list, will sell” is quite pertinent.

Other reasons point to the limited supply of vacant residential lots (most of the available stock in Casino and Kyogle residential estates are nearing the end of their final stages). Therefore, recently established modern houses become in demand as there is no land available to build on.

With that said, there is a ceiling point at which asking prices become over the top and potential buyers will look further east and closer to the coast.

More inventive or industrious buyers would do well to find renovation projects. There are always some in Casino and Kyogle. Buyers who can improve the overall appeal of a house are likely to benefit financially when it is placed on the market for sale and achieve a quick turnaround while the market is still improving.

Is the improving market sustainable? For Casino and Kyogle, the majority of the residential properties are considered to be in one of the more affordable regional localities within the Northern Rivers regions, hence, already at a relatively lower base compared to the coastal regions. The improvement in property prices is not drastic (as it is in Sydney and Melbourne) hence there is really no major concern regarding out of control prices. There is always going to be that hand brake of the lower average wage experienced in these regional towns that would remind the local market when a price gets too high.

Most of the demand in Casino and Kyogle is centred on established 3- to 4-bedroom houses with on-site garaging and prices between $200,000 to $300,000. Residential units have not really been faring well with limited sale activity of units in Casino and Kyogle over the past 12 months.

Contemporary or Classic? – Doesn’t really matter. If the house is well presented, tidy and functional, then it’s all good brew.

Ballina/Byron Bay
The locations desired most at present continue to be the more sought-after coastal areas; however, locations that have been traditionally less sought after remain strong, with prospective buyers operating in a heated market prepared to overlook negative attributes.

With significant increases in values over the past 24 months, any increase in stock or reduction in demand will likely see a reduction in value. The increases in value would not appear to be sustainable.

Demand appears to be across all price brackets, with the demand for lower-priced units in the Ballina area strong, whilst the $1 million-plus market in coastal areas such as Lennox Head and East Ballina continues to perform well.

The location in the Byron Shire area that seems to be the most desired at present is Mullumbimby. This demand is being fuelled by interstate buyers looking to find alternatives to the more expensive resort towns of Brunswick Heads and Byron Bay.

The average house price point for the particular suburb of Mullumbimby ranges between $750,000 and $1 million. The product at this price point is varied between either an older-style dwelling or newer product. The older dwellings comprise single-level houses built about the 1950s located in the flat part of Mullumbimby close to the local township. Alternatively, for this amount of money, you can get a newer-style home in the recently developed estate of Tuckeroo.

This level of market activity will continue to be sustainable in the near term only if the market forces remain the same. Specifically, if interest rates remain low and the demand for these particular houses remains high, the current sustainability of these houses to the market place will remain unchanged.

The housing types in Mullumbimby are classified in appearance as more traditional, built as far back as the 1950s. People tend to be paying a significant premium for a renovated or revamped classic product in this suburb.

There is opportunity for renovation in Mullumbimby and for purchase of properties that have already had renovations done. In this area, most buyers are actually looking for prime opportunities to renovate with the intent to do up and sell in order to increase the property’s value.

The type of accommodation most sought after in this suburb are houses, specifically family-friendly accommodation with an emphasis on detached secondary dwellings or studios for an alternative option for a higher rental gain.

The Clarence Valley
The localities that seem to be the most desirable for buyers at present appear to be those located within close proximity of the highway due to an increase in road workers for the highway upgrade as well as traditionally popular beach locations such as Yamba.

Sub-$500,000 properties remain the most appealing to investors and owner-occupiers alike.

Of the 17 house sales recorded so far for 2017 in Yamba, 71% were in the sub-$500,000 market while of the seven house sales recorded in Maclean for the same period, 85% were in the sub-$400,000 range.

In terms of the type of buyer that is most attracted to this locality, we can see that a number of downsizers and retirees are relocating to smaller units or small-lot housing in the suburb of Yamba. Investors appear to be buying across all locations due to the hype surrounding the highway upgrade, and renovators are particularly active across all markets and price points.

Consumer sentiment is continually firming as the market follows a positive trajectory and this is likely to be sustainable in the short term.

There is a varied range of property types within these markets; however, due to increasing house prices, the affordability of units (generally and not inclusive of beach and waterfront), appears to be sparking an increase in unit sales.

At high price points, the market expects a good level of presentation while the lower end of the market is more willing to renovate.

All property types are sought after at present; however, for investors, properties with strong rental returns remain the most popular.

Coffs Harbour
The Coffs Coast is known for its lifestyle benefits with demand traditionally being driven by population growth from retirees and, more significantly, families moving from the southern regions looking for a more affordable and relaxed lifestyle. The appeal of the area is a reflection of the climate, attractive nature of the locality including its many beaches, and diversity of housing product close to the coast with good regional facilities. These features make the area a popular tourist destination with various larger scale resort developments located in the northern section of the town.

Due to the geographical features of the area, supply is generally in the coastal localities and it is no surprise this is where we see the strongest levels of demand. The northern beach localities of Sapphire Beach, Moonee Beach, Emerald Beach, Safety Beach and Woolgoolga have all been strong performers in recent times, which reflects the increasing demand brought about due to these lifestyle factors, good level of services available, easy access to the main centre of Coffs Harbour, continuing low interest rates and decreasing supply of product. This has resulted in significant increases in values over the past 12 months and it is becoming increasingly more difficult to find quality property within the affordable sub-$500,000 market. As a result, the secondary or cheaper beach side locations of Sandy Beach and Corindi Beach have now also increased in popularity and value accordingly.

Centrally, the sought-after beach side suburbs within Coffs Harbour of Diggers Beach, The Jetty and Sawtell are the best performers in terms of strong capital growth. There is a mix of residential properties available appealing to a wide variety of purchasers looking for lower end units in the $275,000 to $350,000 range, to the high-end prestige properties in excess of $1 million.

The region to the south of Coffs Harbour encompassing Urunga, Valla, Valla Beach, Nambucca Heads and Macksville is experiencing a surge in activity driven by the Pacific Highway upgrade between Warrell Creek and Raleigh seeing strong rental and buyer demand under $500,000.

Another area of strong performance is the historic rural township of Bellingen, being popular with Sydney and greater metropolitan buyers looking for the green change.

In general, the Coffs Coast has seen strong performance within all sectors of the market not being isolated to any particular locality or product type. There is a diverse type of product available, from suburban family homes to prestige beachside properties, or rural lifestyle options from small acreages close to town to larger rural holdings – all within a 45-minute drive of Coffs Harbour.

The region is seen as a solid investment opportunity offering diverse property outcomes supported by a range of lifestyle choices, services and good regional access. The strong level of demand from buyers has been driven by investors and owner-occupiers who are looking to take advantage of these lifestyle factors, consistent long-term capital growth and strong rental returns, all of which are underpinned by the low interest rate climate over recent years.

Tamworth
We are seeing a good demand for North Tamworth, Calala and Hillvue where there is a good mix of new and established homes. These areas are giving buyers the choice to either build, buy a modern home or buy an established home with the intention to live in as is or to renovate.

Demand is being driven by the affordability of the areas and the current low interest rates. As East Tamworth continues to grow in price, buyers who initially were looking in this more prestige area are branching out to growing suburbs where they can get more bang for their buck.

The majority of activity is in the $300,000 to $400,000 range. This range opens many options for buyers with the availability of either established homes in need of TLC, fully renovated homes, or brand new 3- to 4-bedroom homes. It is the established homes that have had some, but not all, work done that we are seeing to be the most popular. This is allowing buyers to purchase the home and live in it comfortably while doing small jobs around the home such as paint, new bathrooms etc. to increase the value.

Within these suburbs, we are seeing a good mix of first homeowners and upgraders. While there are certainly investors in these suburbs, they are not as prevalent as in other suburbs such as Westdale or Oxley Vale.

The level we are currently seeing is certainly sustainable as further subdivisions are underway in each area. As the subdivisions continue we may see a slight shift towards the newer housing as the most favourable. It may also increase the level of investor activity within the area.

The Tamworth market is certainly more in favour of houses than units with only a small amount of unit developments (one to three) undertaken each year. The style of housing favoured varies from suburb to suburb, with the older suburbs (east and west) showing Federation-style houses to be the strong performers. The three previously mentioned suburbs show a mix of styles as the age of the dwellings varies greatly (1970 to current) with no clear favourite. The higher price range of $350,000 to $450,000 shows modern houses to be the favourite.

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