Regional NSW

The Smartline Report – April Edition

The month in review: Regional NSW

By Herron Todd White
April 2016

Southern Highlands and Tablelands
The Southern Highlands residential property market has been increasing in both volume and price activity since late 2014. We saw a noticeable increase in activity by investors in 2015. The Highlands property market is heavily influenced by the Sydney property market, with many buyers relocating from Sydney to the region. Now that Sydney has slowed and softened, the Highlands is also anticipated to slow.

The fringe suburbs in the Southern Highlands are essentially the villages removed from the three major towns of Bowral, Mittagong and Moss Vale and include villages such as Robertson, Bundanoon, Colo Vale and Hill Top. Most of these fringe suburbs have local shops, parks and schools, but are lacking in the larger supermarkets that the three main Highlands towns feature. Residents of the fringe suburbs will drive to the larger towns for these services (usually a 10 to 20 minute drive). When compared to the main centres, the fringe suburbs offer better value for money. The market in the fringe suburbs has been strong. Prices have increased circa 10% to 15% over the past year and a half, which is in line with the growth of the majority of our regional market.

We have seen some new residential subdivisions emerge in Bundanoon and Colo Vale. Vacant land sales have been snapped up. Rent levels in the smaller villages have also increased. Our prediction for the medium to long term is for a steady to increasing trend overall, in line with the overall market movements for the region.

The Southern Tablelands region is steady. The Sydney investor activity evident over the past 18 months is reducing. We anticipate Goulburn to plateau or even soften slightly this year. There are similar trends evident in the Tablelands, with good land sales and new home construction activity in the new and modern residential estates on the fringe of Goulburn, including the Belmore, Merino Country and Mistful Park estates.

Goulburn can be viewed as a fringe suburb of Canberra. Being more affordable, some Goulburn residents commute to Canberra. Goulburn also offers affordable investment properties for the Sydney investor. The smaller villages and townships of the Tablelands could also be viewed as fringe suburbs of the larger towns, Goulburn and Canberra. Villages like Crookwell are steady. The outlook is a steady to slightly increasing trend.

 

NSW Mid North Coast
For our review of affordable living in the outer suburbs, we have focused on the largest regional town on the Mid North Coast, Port Macquarie, as well as some of the surrounding smaller towns.

Port Macquarie’s growth over the past twelve months has been the strongest on the Mid North Coast during the past five years and while the fringe suburbs have shown increases in value over that time, their rate of increase has been behind that of established residential areas within the township. This has created greater choice for buyers. For similar value, buyers can purchase an older dated dwelling close to town or they can move to the outer suburbs and purchase or build a new dwelling.

The town continues to grow and we are seeing rapid growth in these fringe areas as new services are being provided, including a private school, a new university and shopping centres.

At present the outer or western fringes of Port Macquarie comprise the expanding suburbs of Sovereign Hills, Brierley Hill and Ascott Park. These have all seen major growth over the past 12 months in new lot registration and in the approval and construction of new dwellings. Median land prices in these estates are around $195,000 (Sovereign Hills) to $240,000 (Brierley Hill and Ascott Park).

With the increase in services and popularity of these western localities, we have also noticed an increase in rental returns. Brierley Hill has seen good rental returns due to its local shopping facilities, private school, hospital and current and future student influx for the new Charles Sturt University still partly under construction.

Subdivision growth in the smaller towns includes Wauchope’s Glenview Park and Timbertown Estates, which have also seen good sales over the past 12 months with land prices ranging from $155,000 to $200,000 for larger lots. Located only 20 minutes west of Port Macquarie, the town has seen interest from families looking for a modern estate with moderate pricing yet close to facilities.

To the south, Caterina Estate at Lake Cathie is now under construction. This beachside estate will include a village centre as well as residential lots. Vacant land prices range from $300,000 to $400,000 with over 1,200 lots to be released over three stages. This estate will appeal to the prosperous buyer or retiree who just loves the location.

Sales of new dwellings are higher than previous years, with land values increasing in each new stage. Hasting Port Macquarie Council figures show the last financial year had a 40% increase in residential building approvals from the previous year. This financial year is on track to achieve a similar number of approvals as last year.

Generally, the present outer suburbs are developing rapidly and the increased building activity has helped fuel the local building industry and the area’s economy as a whole. We also note that the slowing of the Sydney market has not affected property prices or sale rates within Port Macquarie and agents are continuing to report a lack of stock and short selling periods.

NSW Central Coast
Due to its location just north of the Sydney metropolitan area and the good transport corridor and services between them, some may be calling the Central Coast region a fringe location of Sydney. The people of the Central Coast would of course, object to this reference.

When discussing fringe localities on the coast, we can think of those areas on the western side of the M1 Motorway. These are mostly rural areas with generally limited services.

We are finding these areas interesting at present as the rising prices in the Sydney market have opened the symbolic door to these areas with Sydneysiders discovering the good buying to be had. A noticeable level of activity has been seen since mid 2015 and demand is quite good. We have recently looked at more properties in these areas over the past year than we have over the previous five years.

This includes areas such as Calga, Mount White, Peats Ridge and Somersby which are close and handy to the M1 Motorway and Mangrove Mountain, Bucketty and Kulnura being that little bit further out but no less popular. We have seen a renovated dwelling on 16 hectares sell recently for just over $1.7 million. This is towards the upper end of the value range with numerous other properties available closer to or below the $1 million mark. Rental returns are not that great – expect around 3% to 4% – but it must remembered that these are lifestyle properties.

Another thing to remember with these locations is that traditionally, they don’t enjoy the same value increases seen closer in. In fact it could be argued that they only see rises every second cycle.

As we move further north, renewed interest has been shown within selected parts of the Dooralong and Yarramalong Valley areas. These are beautiful locations and well worth a close look. Another fringe location is Jilliby which adjoins the M1 Motorway.

Strangely enough, Jilliby has been a bit quiet lately and we expect its popularity to be on the rise shortly.

Close to the Gosford CBD but considered by many as being on the fringe are the suburbs of Niagara Park, Narara and Wyoming. As a result of the market increasing, these areas have grown in popularity with a recent purchase seen of a very tidy 3-bedroom family home purchased at Narara in the mid $500,000 mark – a very good buy by today’s standards. These are areas that have lacked the popularity enjoyed by the beachside suburbs and as new owners move in and gentrification occurs, they may well prove a smart buy as we move forward. Tip: take a good look at the Wyoming area.

Rental returns in these areas have hovered around the 5% to 6% mark.

Further north, we think of Chain Valley Bay, Gwandalan and Summerland Point as fringe locations. Popular with retirees and the budget constrained, these areas have also enjoyed the benefit of the rising market and it is our hope they continue to do so. They are great family locations with sound community support and good access to Lake Macquarie. Grab the fishing rod or water skis and inboard – take a look at these ones.

Rental returns for investors are pretty good in these areas at around the 5% mark generally and we think the prospects are also good in terms of values increasing.

Back to the southern end, there are also a number of locations along the coastal strip that have enjoyed continued popularity with Sydney based owners as their choice of location for weekenders. These areas include MacMasters Beach, Killcare, Hardys Bay, Pretty Beach, Wagstaffe and Pearl Beach. So as not to offend, we are being respectful of these people and will refer to these areas as quaint or out of the way suburbs, rather than fringe locations.

Whatever the term, they fit the criteria inasmuch that they are away from the hustle and bustle of the busy Central Coast life with privacy, plenty of trees, a beach close by and a good café – de rigueur to entice investment here. Imaginative house name plates or faux rustic signs abound in these locations with The Shack and Beach House popular choices and others reminiscent of European resort spots often attached to them.

Mind your step though and think big values, not so big returns (excluding holiday rentals) and values fluctuating according to economic sentiment rather than traditional supply and demand for these areas – it’s about quality, refinement and having friends around in these locations.

Lismore
For this month’s topic of affordability and fringe dwellers, we have focused on the North Coast regional township of Lismore. Given the relatively small size of the regional centre (Lismore City), there is not a discernible fringe suburb element.

However, in regard to affordability, the older suburbs of North and South Lismore on the (curiously) western side of the river fit the bill. These particular suburbs are well known in recent history as being flood prone and have been subject to some intense debate following the construction of the levee designed to protect the Lismore CBD from nuisance floods i.e. below a one in ten year flood event. Cold comfort if a bigger flood signals its arrival… and North and South Lismore usually cop it.

The price levels and rental levels are therefore traditionally lower than the other suburbs of Girards Hill, East Lismore, Lismore Central, Lismore Heights and Goonellabah.

However, North and South Lismore are not bereft of services with local schooling nearby, a small retail strip with food outlets, bakeries and a pharmacy and its fair share of liquid refreshment from the various taverns and hotels located in this area.

A typical North or South Lismore home is generally well elevated (to escape those nasty flood waters) which in turn provides ample car-parking space and storage underneath. As a result of the estimated height of 12.4 to 12.6 metres according to the Australian Height Datum for a so-called one in one hundred year flood event, any new residential development requires a minimum habitable floor height 500 millimetres above this level. The main habitable floor would therefore be expected to be a neck craning 2.5 to three metres above ground level.

This applies to new development. However, most of the houses in North and South Lismore were built circa 1920 to 1940 when such fastidious building regulations were not in place.

Therein lies the sting in the tail. Generally most houses with a habitable floor level below the estimated one in one hundred year flood event level could experience a lot of difficulty in securing lender finance, unless the intending owner or purchaser can provide a much higher equity injection i.e. below the standard 80% LVR. Then there is the tricky issue of insurance premiums which have soared in recent years for flood insurance.

These aspects have an impact on the overall price level for properties in North and South Lismore, but not as much as you would expect.

There was a time when purchasing a property in these areas would have a figure south of $150,000. Today, well presented and renovated homes with a floor level above the one in one hundred year flood event can attract sale prices greater than $300,000 with rental levels of $300 per week plus for 3- to 4- bedroom and 2-bathroom homes.

Generally the median price level ranges from $230,000 to $250,000 with typical rents in the region of $250 to $280 per week for a 3-bedroom, 1-bathroom home.

Just as the other suburbs in Lismore City have improved over the past 12 years, so to have the northern and southern Lismore regions. Currently, the North and South Lismore residential markets are relatively stable with no records being broken or set, just like the other suburbs in Lismore City.

However, beware the precipitous beast known as the Northern Rivers flood rains and often the faded memories of 1954 and 1974 will come rushing to the fore. Nary has a Lismorean forgotten those times of flood and debris. A bout of that may put a dent in the value of homes on the North and South Lismore lowlands. Let’s hope not.

Coffs Coast Region
The Coffs Coast is made up of several small coastal and rural townships located at varying distances from the major centre of Coffs Harbour. A high proportion of the population would be considered fringe dwellers being within commuting distance of Coffs Harbour for work and major facilities including tertiary education, airport and medical facilities. When considering the fringe dweller, a travelling time of around 30 to 60 minutes from Coffs Harbour is assumed, which would be considered standard travel time to work in most major metropolitan areas.

North of Coffs Harbour, this time criteria would see you reach the more traditional beachside locations of Arrawarra, Arrawarra Headland, Mullaway and Corindi Beach (30 to 35 minutes). Traditionally these areas have been popular due to the small community feel, beach access and proximity to good facilities at Woolgoolga to the south. Entry level prices start at $300,000 for basic 3-bedroom cottages and extended upwards of $1 million for prime headland locations. Corindi Beach is the cheapest of these localities with recent vacant land sales in the $160,000 to $200,000 price range for 600 to 800 square metre sites. House prices start at around $300,000 with average prices around $400,000 and rental returns around $400 per week. Further north (40 minutes) is the sleepy fisherman’s village of Red Rock where there are basic corner store facilities and a bowls club, traditionally developed as weekend style accommodation popular with rural land owners. Entry level is around $275,000 for very basic accommodation with average prices in the $350,000 to $400,000 range. Due to the more distant location and lack of facilities, rental returns are low and not the reason one would purchase in this area. Capital appreciation has been steady over recent years although can be very slow during times of economic downturn.

From here, a further 15 minutes drive will place you in the rural localities of Dirty Creek, Kungula and Halfway Creek. These areas are midway between Coffs Harbour and Grafton and are typically scrubby country with land sizes ranging from 4,000 square metres to 200 hectares. Entry level for small acreage sites with no building can be as low as $25,000 or around $100,000 for sites with basic weekend accommodation. Typically these are rural lifestyle location with minimal market movement and low rental returns.

To the north west of Coffs Harbour, dotted along the Orara Way (the back road to Grafton) are several rural townships such as Coramba, Nanna Glen and Glenreagh which provide cheap housing options in small communities within commuting distance. Prices for modest 3-bedroom homes start around $250,000, however these areas do not have high rental returns and generally show slow capital growth.

Moving south of Coffs Harbour the townships of Urunga, Valla Beach and Nambucca Heads are within a 45 minute drive which is soon to be reduced with the opening of the Pacific Motorway upgrade (Urunga Bypass) at the end of 2016. These areas have seen recent increases in rental returns and capital growth as part of the highway upgrade work currently being undertaken. Urunga (20 minute drive) is popular with the retiree market due to its reasonable facilities, good water and beach access and proximity to Coffs Harbour. Entry level is $300,000 to $350,000 with average house prices between $400,000 and $425,000. Expected rental return for the average 3-bedroom home is $350 per week. Valla Beach which is 10 minutes further south has become an extremely popular beachside locality with recent land releases for a standard 600 to 800 square metre site ranging from $165,000 to $200,000. Entry level for basic older style cottages is $350,00 to $375,000 with prices rising to around $750,000. Rental returns have recently increased due to the influx of road workers, plus we have seen capital growth in the order of 5% to 10% over the past 12 months. The cheapest or best value for money locality is Nambucca Heads which lies 45 minutes south of Coffs Harbour. Being a low socio economic locality, Nambucca Heads has traditionally seen little capital growth over the past five to seven years, however like Urunga and Valla Beach has experienced increases in rental returns and market activity due to the Pacific Motorway upgrade. Nambucca offers good lifestyle opportunities with quality beaches and waterways and school and shopping facilities. Entry price is around $250,000 and the average price for a 3-bedroom home is around $300,000 to $325,000 returning $330 to $350 per week.

In short, there are many options for the fringe dweller within the region offering a wide variety of options from remote rural localities to popular beachside communities. Typically these areas have been established for their lifestyle attributes and not capital growth or rental returns, however increasing population growth and infrastructure improvements in the form of Pacific Motorway upgrades to the north and south of Coffs Harbour are seeing renewed interest in these fringe localities, placing upward pressure on rental returns and increasing capital growth.

Bathurst / Orange
Like Sydney, the larger centres of Bathurst and Orange include a collection of suburbs. Surrounding the established areas and retail districts, the suburbs have their own characters as a result of previous, current, and planned development.

Google Maps shows the localities around Bathurst including Gorman’s Hill, Kelso, Robin Hill, Llanarth, Windradyne and Eglinton. Around Orange there is Glenroi, Warrendine, Calare, and Bletchington. Neither of these is an exhaustive list.

The suburbs compete and can exceed in terms of land value with central localities, particularly if they have, or plan to have, large modern houses and good amenities. The variability, and sometimes the inferiority, of older central development can hold those areas back. In addition the market power of families who on average prefer a modern house and surroundings, as opposed to the relative market power of retirees and students who, for example, prefer to be closer to town, evens out the market.

In terms of investment student specific accommodation has reduced the demand and volatility for central accommodation in the general market, while incomes are a determinant of what can be achieved in the suburbs.

Wagga Wagga
Like all towns and cities the edge is where expansion occurs. In Wagga Wagga this includes areas to the north at Estella, Boorooma and Gobbagombalin, to the east at Forest Hill, to the south at Bourkelands and Lloyd and the south west at Uranquinty. All these areas have seen 10% to 20% growth in vacant land values over the past two years. It’s not necessarily affordability that people are looking for, it’s a new dwelling. It must be remembered that nothing is more than ten minutes away in Wagga Wagga which compares a lot more favourably than the bigger cities where a trip to the local shop can take ten minutes.

Dependent on the size as well as other variables, new houses sell in the outer areas for between $350,000 and $550,000. This is comparable to the cost of housing in the central suburbs of Wagga Wagga, Turvey Park and Kooringal. It appears some people do not want the hassle of maintenance an older dwelling requires.

Infrastructure does not seem to be a factor either. For example Estella, Boorooma and Gobbagombalin do not have a public school, local shop or licensed premises.

It will be interesting to see how all these areas fair over the next five to ten years. There is a chance that in the short term, because of the number of new dwellings having been constructed and currently being constructed so close together both by locals and out of town investors, that values will drop. Other factors too will have an impact including higher education funding and housing requirement, defence housing requirements and probably more importantly the weather. This is one factor that politicians can’t simply add money too. Wagga Wagga’s economy relies heavily on the rural sector and should it be negatively impacted the flow on affect will be felt around the town.

Albury
Over the past few years there has been an increasing trend for people to purchase land on the outer edge of the two cities in the suburbs of Thurgoona, Glenroy, Killara and Baranduda and construct a new dwelling.

The outer edges of the two cities are generally a maximum of 10 kilometres from their respective CBD’s and are therefore not far to commute.

We are also seeing an increase in demand for vacant rural lifestyle and general residential allotments and in the towns surrounding Albury/Wodonga, such as Tangambalanga, Kiewa, Ebden, Howlong, Jindera and Ettamogah, as once again people are preferring to build a new home rather purchase one that may require renovating.

The twin cities have no real areas to avoid with the exception of some government housing areas, although demand for these areas is reflected in their relative low value overall compared to other parts of the twin cities.

We see an ongoing trend for the outer markets to continue to perform and grow because of opportunities of development with large tracts of englobo residential land.

There has however been a recent increase in prices being achieved for vacant land and as such we see these markets as a long term proposition.

www.smartline.com.au

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

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