The month in review: Regional NSW
By Herron Todd White
As we kick off 2017 there is an atmosphere of cautious optimism across the Southern Highlands. Buoyed by an 18% increase in average prices to $892,000 for the year to December 2016, the townships of Moss Vale, Bowral and Mittagong have been stand out performers, with access to infrastructure and price point being the main drivers of that growth. What local real estate agents have been saying is that sales activity has been brisk in the face of stock shortage. This has been borne out with a 24% decrease in the numbers of sales year on year to 1,600 properties. It is fair to say the rental market is tight with lack of stock driving rent increases of minimum 10% over the past 12 months.
The Highlands property market is heavily influenced by what is happening in Sydney and historically lags that market by six to 12 months. Accordingly we can expect to see continued strong demand for properties close to the townships at price points up to $1.5 million. Above that price point the market becomes less defined with the choice of residential, rural/residential and lifestyle acreage properties across the villages and hamlets coming into consideration. With respect to the range of land releases throughout the Highlands, established precincts such as Darraby Estate, (Moss Vale) Renwick and Nattai Ponds (Mittagong) and Bingara Gorge (Wilton) have seen strong sales over the past 12 months, with further stage releases scheduled for 2017. Likewise the soon to be released subdivisions of Retford Park ( Bowral) and Throsby Views (Moss Vale) have seen strong pre-sales activity. The recent announcement by the NSW Department of Planning that Wilton Junction has been designated as a priority growth area has brought the reality of the new township to accommodate up to 16,500 dwellings across the 4,175 hectare site located off the M5 East Freeway a step closer. Other areas earmarked for residential development include Tahmoor and Appin. Closer into the existing townships of Mittagong, Bowral and Moss Vale it is anticipated there will be limited releases of land predominantly restricted to resubdivision of appropriately zoned larger lots.
Regarding infrastructure, the State Government has committed to a $50 million upgrade of the Bowral Hospital in 2017. In September 2016, it called for expressions of interest regarding a public private partnership for the operation of the hospital.
The Goulburn Mulwaree Shire likewise has seen strong sales activity over the course of 2016 with a lift in average price for the calendar year to $502,000 (13%) on 16% less number of sales (991 properties). Buyers from Canberra, Illawarra and investors from Sydney have been prevalent over the past 12 months with this trend expected to continue. Similarly the rural / lifestyle property market has seen an uptick in sales activity together with the resurgence in rural property sales driven by increases in cattle and sheep prices. There have been good land sales in the new and modern residential estates in Goulburn, including the Belmore Estate, Merino Country Estate and the Mistful Park Estate, where there continues to be strong construction activity of new homes. The market in the smaller villages through the region such as Crookwell, Taralga and Gunning is expected to remain steady over the next year.
The rental market in Goulburn has remained steady and agents are reporting good interest from tenants at present, with the trend following the strengthening in prices to return gross yields in the order of 5%.
NSW Central Coast
2016 was a hot year in the Coast’s real estate market by anyone’s standards and we thought the Christmas break might provide the time to take a breath and regroup, but not so. As the new year kicked off, the market just took up where it left off and it’s just as busy.
For a while now, we have been talking of the end of another cycle in property when we can again see the market slow, prices come back a little before stabilising and picking up again. That’s how it has always been, but not so or not yet anyway. Local real estate agents are divided on where we are heading with some seeing a continuation of the hot market, others cannot see it lasting much longer and a few (a lot actually) are saying that the only thing they are certain about is that they don’t know!
For our part, the market just seems to keep rolling with each new reporting period throwing us a few surprises as to what’s moving and by how much. To us, the signs are that the market will continue to grow here locally while buyers with the will to enter the property market or buyers looking to expand their portfolios are being squeezed out of the Sydney market. They are finding that property prices on the Central Coast remain reasonable compared to the Sydney market.
At this stage, we see this as a scenario that will continue well into the year.
In the meantime, those suburbs spoken about earlier that have been overlooked for the more desirable locations continue to increase in popularity. Older houses under the stewardship of new owners are being renovated, modified and extended.
These areas include the peninsula suburbs of Narara, Niagara Park and Wyoming. In previous years Umina Beach, Woy Woy and Ettalong Beach have been the focus of attention and continue to be so, but a little less overall such is the pricing now within these suburbs.
In real estate terms, we think of popularity and activity radiating out from a central point and this could well be the year for areas at the northern end of the region. As suburbs go through their cycles and buyers look to get in early on the next big thing, we are thinking (once again) that Budgewoi, Buff Point, Lake Munmorah, Gwandalan and Summerland Point may become popular.
Always sure to draw an opinion is the Gosford City Centre. The developers are back in town with numerous projects completed during 2016 and more under construction. Sales rates are proving the unit market is popular once again. Commencements seem to be well managed meaning that the potential for a glut of units on the market simultaneously should be avoided. Even more encouraging is the quality of the new projects under way with higher standards the norm.
NSW Mid North Coast
This month we are looking at what’s in store for the 2017 property market on the mid north coast.
Last month we reviewed 2016 and how it affected our region and we noted that the region is still experiencing increasing values but at slower sale rates (mainly due to a lack of available stock on the market). For the first part of 2017 we expect these conditions to continue.
In the major regional centre of Port Macquarie, the rapidly developing and outlying subdivisions, both to the west of Port Macquarie and along the coastal strip to the south (Bonny Hills and Lake Cathie) are continuing to see rapid expansion with the high demand for residential land during 2016 expected to continue into 2017.
The other coastal towns and villages all along the mid north coast are also experiencing strong demand for land and modern dwellings and this is expected to remain strong and continue to grow in the coming months. However there is a significant amount of vacant land and recently completed dwellings available for sale within these rapidly developing smaller towns and we consider that this expanding market may not be sustainable over the long term and we would anticipate that the growth may slow later in 2017. This current construction boom in some of these smaller towns may result in an oversupply of dwellings and land if demand were to lessen.
During 2017, it is expected that Port Macquarie will continue to remain one of the fastest growing regional centres in NSW for property investment. New housing development continues to be based around the continuing growth of the Charles Sturt University campus, with an increase in the number of house and granny flats being built especially within the adjoining areas to cater for student accommodation.
The construction of the new Pacific Highway between Port Macquarie and Kempsey continues and is expected to be completed in late 2017. Last year demand from construction workers boosted the rental market in Port Macquarie, however we have noticed that rental demand and rates have plateaued and this is expected to continue for the next few months, although the continuing influx of university students will assist the rental market to remain strong.
The higher value, prestige properties and rural residential property markets in the region remain slow but steady, with slow demand combining to produce slowly increasing values.
We have been quite optimistic for the region over the past two years and our optimism continues for the coming year.
NSW North Coast
Lismore / Casino / Kyogle
The residential market for the year ahead in the Lismore area is expected to continue to firm following on from the last three months of 2016 where the demand for good quality residential stock improved and real estate agents were desperately seeking new listings. Richmond and Kyogle Shires are expected to remain relatively steady.
Whilst not at the same demand level as residential, the rural residential real estate market is likely to remain steady in 2017 with the possible exception of very well-presented properties with highly valued features such as expansive views, creek or river frontage and high quality improvements enjoying a greater interest level than 2016.
As in 2016, one area to keep a close eye on in 2017 is the affordable but modern detached duplex unit. Having a smaller footprint area compared to the modern 4-bedroom, 2-bathroom, double garage home on a typical freehold site of 650 square metres plus, not much is really sacrificed. The detached duplex design can vary like any other free standing residence and can possess a similar number of rooms and garaging on a smaller site and smaller open space by employing split level, part two level or two storey designs. More and more people are starting to realise that a large back yard is not a necessity for young couples or mature aged couples with no children or pets.
The prices are generally lower than their larger counterparts and the properties provide good quality improvements and living accommodation. It is now commonplace to note that most corner sites in new residential subdivisions are specifically targeted for this type of development.
Generally, properties within the $250,000 to $350,000 price bracket are likely to be the main price brackets receiving most of the activity in 2017 within Lismore City although the superior quality product within the $400,000 to $600,000 has improved markedly of late and will likely have the same amount of interest well into 2017 (assuming current interest rates remain low).
Casino and Kyogle houses within the $200,000 to $300,000 range will still appeal to the first home owner as they are very affordable at the current interest rate level.
The most affordable property type will continue to be the older stock of the typical circa 1970s and 1980s 2-bedroom brick and tile units of which few have sold in 2016.
This is likely to continue throughout 2017, however at price levels of $125,000 to $175,000 (depending on whether renovated or not) they still generate a reasonable rent return in areas close to the CBD and major educational facilities such as Southern Cross University. Good buying opportunities may present themselves providing the body corporate fees are kept in check.
We expect the larger rural lifestyle and rural residential property market in Lismore, Kyogle and Richmond Valley to be subject to the vagaries of distance and accessibility as well as maintenance of the land as determinants for the type of buyer. However we are seeing an evolving trend of real estate agents outside of the general area, for example Byron Bay based agents, bringing in potential buyers to the outer area of the Lismore City Council area and achieving improved sale prices for well-presented rural residential properties. As the more traditional sought after areas have become increasingly expensive, these outlying areas of the Lismore City area become attractive.
In summary, we expect the residential property market for Lismore, Richmond Valley and Kyogle Council areas for 2017 to continue with some assurance of stability. Whilst unlikely to see major growth, quiet confidence should remain while couched in the hope that a low interest rate environment remains, even if there are modest rises in bank interest rates.
Market conditions throughout the Ballina Shire remained strong throughout 2016 and there are early signs that the market will remain strong into the first quarter of 2017. Price levels across most market segments are at record levels and stock remains low. Given that price levels are at record levels any further increases in value would appear unlikely in the short term however low stock levels, particularly throughout the sought after beachside localities may result in some further growth in prices.
The lack of stock and strong demand resulted in the Byron Shire area having tremendous growth in 2016 and it is predicted to remain this way into 2017. If interest rates remain low, it will cause demand in the area to become very high, particularly in the coastal resort towns of Lennox Head and Byron Bay.
The suburbs that are worth watching this year in the Byron Shire include Ocean Shores, New Brighton and South Golden Beach. These have had an entry level pricing point of $500,000 to $1 million for a coastal place for many years and are well sought out on the coast due to proximity to Byron. These appeal to many buyers looking for alternative areas in this patch.
There are no areas in this shire that seem comparatively affordable in today’s market. The market for 2017 is set to remain steady or even to rise over time. Mullumbimby seems to be a particular suburb to treat with caution. This is a suburb that has had a very strong price increase in recent years and the worry is that if interest rates rise, it may not be sustainable.
The overall feel for the Byron Shire is that if interest rates and stock levels remain low there will be a strong demand for the area and the markets in Lennox Head, Byron and Suffolk will have growth, particularly Lennox Head as buyers choose this suburb as a less expensive alternative to Byron Bay.
The Clarence Valley
The overall feel for the Clarence Valley Shire is that it is set to track similarly to 2016. This conclusion can be made because as far as we see it right now, there is no immediate change in the area. There is potential for change due to slowly increasing interest rates which may be damaging and result in a slowing of the local market, however there is increased Government spending in the investment of building major infrastructure, for example, plans to build a second bridge in Grafton and a new jail. This may influence the number of workers and increase real estate prices as access to the bigger cities will be made easier.
The most interesting suburb to watch in the shire would be Grafton. It is situated at the low end of the market which always attracts investors and could be seen to be a good purchasing area. The average price point for a house in this suburb is around $200,000 and is not likely to increase by much in value. Maclean however could see a greater potential in property value increases as there are plans in place to build a new shopping centre and move the highway closer to the town. This may attract new owners to the area and in turn create growth.
The only areas that could be seen as comparatively affordable in the market right now fall under the suburbs of Grafton, South Grafton and Maclean. Everywhere else cannot be classified as affordable in today’s economy.
In the Clarence Valley Shire there is no concern that any suburbs need to be treated with caution. The market is quite strong and there is no oversupply. In fact there is a stronger demand in the area and perhaps a slight undersupply in the market.
So looking to the year ahead, any possible decreases in the property market can be attributed to the raise in interest rates by the banks, but as far as we can predict the market will remain much as it is, as there are still workers in the area and no loss of any building structures.
2016 realised significant growth through lower and middle market sectors due to increased demand and diminishing supply fuelled by continuing low interest rates, strong rental market and infrastructure upgrades.
2017 has forecasters predicting interest rate rises which are expected to be moderate off the back of record low levels. January as always has started slowly however initial feedback from local selling agents still report strong levels of demand with selling periods measured in days rather than months. We consider the early part of 2017 will see much of the same with demand slowing as prices reach record high levels and interest rates trend upward. We caution these increased levels of demand may not be sustainable over the long term, making the current market somewhat more volatile. Any decline in economic activity or decrease in market sentiment driven by talks of interest rises could see a softening in the market which could result in downward pressure on values over the short to medium term.
As returns are degraded by continually increasing property prices the lower end will continue to be best performers and more attractive to investors with less capital outlay and higher percentage return.
The one location were prices still appear ‘cheap’ for a beach side suburb is Sandy Beach were you can purchase an esplanade position (opposite beach reserve) starting at $575,000 to $700,000. This locality is traditionally considered a lower socioeconomic area with little infrastructure, however a large 200 lot development is planned for the area coupled with good access and increased services which are offered in the nearby township of Woolgoolga 6km to the north make this a suburb one to watch.
To the south of Coffs Harbour the townships of Macksville and Nambucca Heads are starting to look even better value as prices in Coffs Harbour steadily rise and driving times decrease with the completion of the highway upgrade between Warrell Creek and Urunga.
The rural residential market has also recorded considerable increases in values typically for the well located properties close to Coffs Harbour such as Boambee, Bonville, Karangi, Moonee Beach, Emerald Beach, Upper Orara and Bucca and typically within the $600,000 to $900,000 price range.
There is no surprise that it is this affordable end of the market sector (sub $500,000) which will experience the most activity with prices remaining strong and shortened selling periods.
Vacant land has become scarce which has seen significant increases in land values coupled with normal building cost increases are seeing premiums paid for new homes.
Typically new homes are at their peak of value upon completion and usually require upward market movement to maintain their value as the property ages. There is a perceived higher risk of reduced value over the short to medium term for property of this type. The combined house and land purchase price is considered to place these ‘house and land package’ at the upper limit of current market parameters for their locality, thus increasing the chance of future price reduction should the market soften over the short to medium term.
Sales evidence within new estates like Sapphire Beach Estate, Safety Beach, North Sandy Beach and Seacrest Estate reflect premiums being achieved for new homes above cost however, should market sediment and conditions soften over 2017 these premiums may deteriorate.
Property values are likely to keep rising over 2017 continuing a trend from over the past couple of years. As previously it is expected that the larger centres of Bathurst and Orange will see higher percentage growth, along with Lithgow which will continue to attract attention from investors. Central West small acreage properties will continue to increase in value as a reflection of increased wealth in the local area, and also by retirees and families from capital cities having more to spend from the sale of their property. Selling periods will reduce particularly for areas around Lithgow where previously they were longer than average.
The region will continue to attract people and businesses from western areas as climate change sees an increase in extreme heat conditions, and from capital cities looking for better affordability. While the investors will continue to seek the higher returns in the area, this will reduce as values increase.
While vacant land sites are currently in good supply, the number available will decrease over the year as houses are constructed, although it is not expected that more will be needed before the end of 2017.
The overall feel for 2017 in the Tamworth market is one of confidence. With vacant land demand remaining strong and a noticeable increase in land values throughout 2016 it is expected that this trend will continue. Established dwellings continue to sell well and as the town continues to grow opportunity for investment increases.
The developing parts of Calala and North Tamworth are worth watching as they are more aimed at owner occupiers resulting in good demand for resale of new properties. The mid range ($300,000 to $500,000) will be the price point to watch as low interest rates continue. With the increase in new housing, the more tightly held suburbs of East and North Tamworth will be worth watching with their older federation style houses and typically larger blocks attracting higher prices due to their location and difference to the modern developments.
The Tamworth region continues to expand with all sectors of its economy performing well. With increases in the agricultural sector, education sector and industrial sector, there continues to be good opportunity for employment.
The suburbs of Hillvue, South Tamworth and West Tamworth are providing affordable housing while still remaining within a respected locale. The driving force behind this is the lack of vacant land in these areas.
Parts of West Tamworth are currently experiencing an increase in subdivisions that are being used for housing commission or affordable housing. While providing cheap housing it is having a negative effect on the surrounding development.
2017 is shaping up to be a good year for the Tamworth region. With several new residential, commercial and industrial developments having just started or given approval there is a strong sense of confidence in the market after having come off the back of a strong performing 2016.