Regional NSW April 2018

The month in review: Regional NSW

By Herron Todd White
April 2018


The main Northern Rivers town centres of Lismore City, Casino and Kyogle each have their own primary economic bases (with subtle differences) which influence the residential market.

As a regional centre, Lismore City is considered to be the commercial hub of the Northern Rivers as well as having the benefit of the surrounding rural and horticultural industries such as grazing and macadamia growing. Therefore, employment opportunities are available within the service industries, finance industry (all banks are pretty much represented in the CBD), shopping centres, educational facilities (primary and secondary schooling and Southern Cross University). The Lismore Base Hospital is another major player in the employment sector, particularly with the significant upgrade and renovations carried out.

Other opportunities also exist within the engineering and industrial sector thanks to the growing industrial estate in South Lismore and ongoing infrastructure development in the general area along the highway.

As smaller residential centres, both Casino and Kyogle are predominantly dependent on the surrounding agricultural based industries such as grazing and dairying with a particular emphasis on the large abattoir based in Casino which is a significant employer in the Casino and Richmond Valley and Kyogle area.

This confidence in the area is bolstered somewhat by recent announcements of pending new projects in the locality, including the $14 million upgrade of the Northern Rivers Livestock Exchange sale yards, refurbishment of the Casino Drill Hall site with a new visitor centre, amphitheatre and riverside precinct for close to $1.75 million.

Possibly the most positive (and provocative) announcement is the establishment of a major medical cannabis facility near Casino.

Combine the strong, livestock-based influences with new industry and Casino could be advertised as follows!

All of these industries and announcements are pertinent to the security of employment for local residents and naturally, have an influence on the consumer confidence in real estate, either as first home buyers, investors or upgraders and across pretty much all sale price brackets.

At present, we are experiencing a strong demand in new build development in the suburb of Goonellabah (part of Lismore City) due to the increased supply of land within developing residential estates and spurred on by infrastructure bonds and discounts to encourage housing development (particularly for those looking to upgrade).

Hence, local builders and building companies are in strong demand and likely to remain so for the short to medium term. It has been noted, particularly within the past 12 months, a number of sales breaking the $600,000 plus price ceiling.

Rental accommodation demand continues to strengthen with Lismore City, Casino and Kyogle still experiencing significant enquiry and tightening the availability of rental space. The reason for this is new people coming into town for work-related purposes. Try finding a house to rent in Evans Head – good luck competing with Pacific Highway construction workers! The biggest concern is what happens when interest rates start to inch upwards and lenders apply more stringent measures to counteract the possible increase in risk.

So far, market performance (sales activity and price levels) has remained relatively steady in Lismore, Casino and Kyogle and although the threat of possible interest rate increases is always foremost in the minds of most owner-occupiers, renters and investors, there does not seem to be any panicked urgency. A review of one’s loan situation is possibly one simple task to carry out, with some lenders offering reasonable fixed rate options.


First home buyers, growing families and people relocating to the area are the driving forces behind the market. Families wanting to build a new home are keeping the vacant land market buoyant, while the older established properties in sought after locations such as East Ballina are being picked up by cashedup out of town buyers from Sydney and Melbourne. An interest rate rise probably will not affect the market as such due to the area being popular. The market slowing in the major cities of Sydney and Melbourne may impact the higher end properties over $800,000 as the profit on possible sales in the cities may impact how much a buyer is prepared to pay for a beach or near beachfront property in East Ballina.

The residential market throughout the Byron Shire is not driven by local employment figures. The predominant influence on the residential property market throughout the Byron Shire has been the strong residential property markets in Sydney and to a lesser extent Melbourne. The prestige residential property market is particularly influenced by the strength of the Sydney and Melbourne markets. With improvements in technology, ease of access to both Gold Coast and Ballina airports and flexible working conditions, we have seen an increase in people relocating from capital cities whilst still maintaining their current employment.

Any interest rate increases would likely see an immediate effect on the wider Byron Shire property market, however, the lack of supply across most price brackets would likely lessen the immediate effects of an interest rate increase.

The Clarence Valley

At present, the Clarence Valley has seen a surge in rental demand due to the increased workforce for the Pacific Highway upgrade. This influx has seen rental prices climb in line with, and in some areas even outperform, capital growth over the past few years and with years of sustainable rental demand predicted, this looks set to continue.

While this increased workforce has ensured a quick take-up of stock entering the market, particularly in the sub $500,000 price bracket, it has also likely contributed to a positive shift in vacant land prices with vacant land sales increasing in price and volume since the highway upgrade was announced.

Aside from this key driver, Yamba and surrounding beachside localities are still driven by the beach lifestyle which lures a vast demographic range. Yamba has a shortage of land and limited developed stock available sub $500,000 which is showing signs of increasing the level of demand for affordable properties and even resulting in bidding wars in some instances. This, in turn, has driven up the price of more a affordable stock. On the other hand, the prestige market remains steady, with slight increases noted but really quite limited turnover.

The market looks healthy across the board, however, with the highway upgrade completion drawing nearer, the medium term predictions indicate a stabilising or even slowing market.

Mid-North Coast

The larger regional centres of the mid-north coast, especially Port Macquarie, have historically seen an influx of retirees from Sydney and other larger centres cashing in and moving to the area looking for a sea change and the small town feel. However more recently, as the area grows and a wider variety of work opportunities arises, younger families and couples are also relocating due to the area’s natural attractiveness, climate and less expensive housing opportunities.

There are many developing areas and subdivisions on the mid-north coast, most noticeably around the major regional centre of Port Macquarie and its surrounds (Sovereign Hills, Wauchope, Bonny Hills and Lake Cathie) as well as further down the coast around Harrington, Old Bar, Forster, Red Head and Tallwoods. These areas have seen surges in new housing development over the past two years and are popular with couples and first home buyers wishing to purchase a new, modern dwelling generally close to the beach. During the first few months of 2018, we saw this development start to catch up with demand, with selling periods slightly extended and resale prices in some areas showing only slight gains.

In Port Macquarie, Charles Sturt University has continued to grow in building infrastructure and course diversity, which has encouraged builders, investors and homeowners to the area. However, completion of major infrastructure works at the hospital and completion of the Pacific Highway dual lane upgrade has meant itinerant workers are starting to leave town and we are seeing an increase in rental properties coming onto the market, with higher rental vacancies and decreasing rents.

Considering the above, we also need to look at the overall influences on the local market, which include:

Positive drivers:

  • Interest rates remaining low
  • Reduction in foreign investment.
  • Negative drivers:
  • New regulations limiting lenders’ borrowings
  • Supply of new dwellings catching demand
  • Wage increases behind inflation growth.

Taking all the above into consideration together with the flow on effect of a slowing Sydney property market, the mid-north coast, especially Port Macquarie, has started to stabilise and we are seeing the beginnings of what looks like a return to a more normal and balanced property market.

Central Coast

The central coast region is broadly broken into two parts, the northern and southern ends, with a third part loosely defined as the central part. Each part has a mixture of established, emerging and re-emerging beach, lake and rural residential areas within them.

Drilling down into what influences the performance of each part can sometimes be helped by two seemingly innocuous questions often heard asked by coast residents: what part of the coast are you from and how long have you lived on the coast?

Listening to the answers to these questions coupled with the data we obtain ourselves through our everyday work provides a reasonably solid feel of where the market has been and where it might be going.

Much is being said of the influence that lenders’ interest rates have on the coast’s real estate market and rightly so, but at present, we are finding little conversation out there on this subject. With lending rates so low, it might be the case that owners and purchasers have little to worry about at present, so little consideration is given to current lending rates. No doubt though, that as lenders introduce new, higher rates, this will be a topic raised more often. Right now, lenders are very competitive in securing new business and we wonder what is in store for us at the end of this competition cycle.

The central coast sits on the shoulder of the Sydney real estate market and perhaps the greatest influencer at present is the affordability level between the two markets. It seems the peak of the real estate cycle has been playing out for an extraordinarily long time in the current cycle (and it has according to data).

Some parts of the coast’s market – the peninsula suburbs of Umina Beach, Woy Woy, Ettalong Beach immediately come to mind – have seen significant rises in values over the past several years. The peninsula has no better or inferior features, services or housing found in suburbs elsewhere across the region, so the question asked by many is what is the reason for the area’s popularity?

The popularity of the peninsula may pass or stay – we don’t know. What we have heard and seen though is that purchasers priced out of the Sydney market are seeing the peninsula as an affordable alternative and not too far away from work and family in their former Sydney base. In the meantime, statistics indicate a rise in the median dwelling values of around 25% over the past two years.

Meanwhile, the Gosford City Centre is undergoing somewhat of a re-emergence and revitalisation. The reasons for this include the major expansion of the hospital and medical related uses around the hospital increasing in tandem. Property developers are seizing the opportunity to develop sites for higher density housing within the hospital precinct and to date, demand for new units has been very good with stock availability remaining low. This is more than a little encouraging for the city centre with occupant levels increasing. Accordingly, there is a very real possibility of it becoming a real hub of life and activity. The new Australian Taxation Office within the city centre has also added to the demand for housing as employees have relocated from elsewhere to Gosford.

We say that demand for new units thus far has been good and this is evidenced by the level of pre-sales occurring within new developments. Marketing of the new developments has been beyond the levels of professionalism seen in the area in previous cycles and coupled with the exodus of Sydney buyers to the coast, acceptance and take up of the new developments have been highly successful. This has also had the effect of values for older units increasing as overflow demand for stock increases. According to Core Logic RPData, the median value of units in Gosford rose by 10% during 2017. We note the data stops in December 2017 and we think a higher percentage increase is likely for the beginning of 2018 as new data begins to filter through on settlements of new year purchases.

While the southern end of the region is mostly centred on infill development and the now emerging renovate and extend phase, the northern end of the region holds the key to new development and infrastructure. It is within the northern end that most of the available raw land is located.

Specifically, we are talking about the Warnervale Release Area, which includes Wadalba, Woongarrah and Hamlyn Terrace. New housing is the main type of development occurring and there has been action aplenty here. New builds are predominantly projectstyle housing and this has proven popular with new entrants to the real estate market, young families, the odd upgrader and investors.

Pricing levels are thought to be slightly behind to comparable to that found in the outer western and south-western suburbs of Sydney. Keeping up with the movement in values in these areas is as challenging as in other areas no doubt, but we regularly see ourselves doing a double take at some of the prices being paid, although in the context of rising values generally, we are not really that surprised. We are now seeing prices regularly exceeding $800,000 for a well presented two storey, 4-5 bedroom home with good garaging, undercover outdoor entertaining areas and pool. According to sales statistics, a rise in the median dwelling value of just over 21% in the past two years has occurred.

Of course, demand for housing creates demand for services and infrastructure and much of the responsibility of this rests with local and state governments in response to the wishes and needs of the electorates. Forward planning information suggests that the need for services and infrastructure has been recognised, but the challenge for authorities will be delivering before social issues disrupt the quality of these suburbs.

These are working-class suburbs where long daily commutes to Sydney for work are commonplace. While accepted as a small sacrifice (according to those doing it) for living here, we suspect one of the biggest challenges facing these newer suburbs will be maintaining a comfortable lifestyle while meeting commitments made in the pursuit of gaining it. To this end, we see the current low-interest rates providing affordable loan repayments for mortgagors. But again, as new lending rates are introduced, this has the potential to change quickly. If the balance shifts and some of the events seen in previous property cycles return, mortgage stress will become a real issue. Noting the perceived number of vulnerable or at risk property holders in these areas, if mortgage stress takes hold, then values would most certainly be affected.

South East NSW

The Highlands property market is heavily influenced by what is happening in Sydney and historically lags that market by six to twelve months. Accordingly, we would expect to be observing a flattening of demand and that has been observed in isolated pockets across the region. The demand is strong though, for properties close to the townships of Bowral, Moss Vale and Mittagong at price points up to $1.5 million.

The announcement by the New South Wales Department of Planning that Wilton Junction has been designated as a priority growth area to accommodate up to 16,500 dwellings across the 4,175 hectare site located off the M5 East Freeway, combined with the recent announcement of up to 1,500 new land lots at South Moss Vale (Chelsea Gardens and Coomungie) has seen an uptick in asset transfers, positioning forward of major scale development activity across the region.


Tamworth is a city not reliant upon any one industry, allowing it to expand and grow even when certain industries are stagnant. Its good mix of industries ranging from commercial, agricultural, education and health allows Tamworth to be less susceptible to fluctuations due to its large spread of employment. The most recent statistics from the September quarter 2017 show the city sitting at an unemployment rate of 6.06% which is down 1.39% from the same quarter in 2016. This drop has been driven by the recent expansion of the hospital, growth within the city as well as increased spending on infrastructure within the area.

The increase in employment and city growth has led to an increase in investor interest in the area. Given that there is no one industry fuelling the fire, this flow on investment ranges from sub $200,000 dwellings in West Tamworth up to $500,000 plus executive townhouses in East Tamworth to provide the accommodation required for newcomers to the town. The rental market in Tamworth provides solid returns with the average around a 5% gross return. This level of return allows investors to buffer against interest rate rises providing strong market confidence within this market segment.

Interest rate rises will have a stronger impact within the owner-occupier market, particularly first homeowners who may have purchased with only a 5% deposit. This will particularly affect the $250,000 to $450,000 market as this is the market first home owners predominantly operate within. The growth of Tamworth is encouraging higher paid professionals to move to town, which has resulted in an increase in prices and competition within the higher end market ($700,000 plus). In the past six months, there have been seven sales over $900,000, with more than half being on the market less than a month.

The outlook for Tamworth is a positive one. With the unemployment rate dropping and jobs and spending on infrastructure increasing, it is understandable that we believe that the city will continue to grow. This growth will encourage further investment and migration to town providing the drive for increased property values as already seen over recent years.

Central West

Dam levels in the central west seem to be the neatest and most comprehensive measure of the fortunes of the area, with consequences for the real estate market. Dams in the central west include Burrendong Dam, Windamere Dam, Carcoar Dam, Oberon Dam (or Lake Oberon), Chifley Dam (Bathurst) and Wyangala Dam.

Dam levels may seem innocuous enough, however, one only has to consider the developing situation in Cape Town to understand how important water security is and how this can have flow-on effects to the health of an area, figuratively and literally.

Percentage dam levels can be a snapshot of current and future conditions, if not in an actual sense, then at least in a perceived sense, and what can be more important in an age of confidence surveys? Dam levels are a regular with local television and newspapers.

Dam levels are not just an indicator of how much rain there has been, but also of how much is being used which can indicate population change. Dam levels can indicate the future price of commodities and incomes. Calculations are made by producers with different water security dynamics as to their ability to continue production and at what cost. Dam levels can also correlate with how green or brown the paddocks are which goes to a general element of attractiveness of the area for potential purchasers.

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