Regional NSW

The Smartline Report – February Edition

The month in review: Regional NSW

By Herron Todd White
February 2015

Illawarra
On the back of a very strong 2014 where the Illawarra real estate market exceeded expectations, January 2015 continued this trend with a strong start. We predict that this will continue until at least mid 2015 and after that, continued growth although at a slower rate. Local real estate agents are bullish that results in 2014 will be replicated in 2015, with many claiming that the past 12 to 18 months strength is simply the catch up that was needed. Whether that is true is debatable. In our view we can simply attribute the strength of the local market to one thing – a continued low interest rate.

Major infrastructure such as GPT’s new Wollongong CBD shopping centre, West Keira and the Shellharbour Marina will be beneficial to employment prospects in the area and keep investors in the market. This will be felt principally in off the plan sales of new units in and around the CBD and vacant land in Shell Cove and Flinders.

The current Government rebates offered for purchasing vacant blocks and building or buying new homes will also see large subdivisions such as Brooks Reach Horsley continue to show growth and keep developers playing a positive role in the market.

As mentioned previously, the continued buoyancy in the market in 2014 across all residential sector types was largely due to near record low interest rates, but a strong local economy with relatively good job prospects also provides a base.

For 2015 to continue the same trend as 2014, interest rates must remain relatively low. These low interest rates are crucial for investors, first home buyers and also renovators and extenders to maintain confidence.

Buyers and lenders should also be cautious about not extending themselves in this low interest rate period to avoid financial stress when interest rates inevitably do rise.

The employment climate in 2015 in the Illawarra will also be a key factor in helping to determine the strength of the local market. Employment security in the mining and manufacturing sectors is still uncertain.

Overall we predict the market to continue its strong growth at least for the first half of 2015. In the latter part of the year, we believe sales will slow and we will no longer see a seller’s market but rather a steadier environment.

Tips for best localities are much the same as always… inner northern suburbs up to Bulli offer the best
value for money in our opinion and postcodes such as 2519, 2517 and 2518 rate highly. Look for flat blocks, beach and train access. Sea views are becoming less valued than proximity to shops, schools and transport.

In the southern areas, Shellharbour and Kiama are our picks. Shellharbour Marina is well underway and will really boost this seaside village, particularly now that the new train station has opened at Shellharbour Junction. Kiama is a well preserved seaside location with relatively low rise development and that special
village feel.

Southern Highlands
After several subdued years, the Southern Highlands and Wollondilly residential property markets have both started to improve. Over the past 18 months, this increasing trend in prices is most apparent in the lower price bracket (under $1 million). The market for properties under $700,000 is increasing briskly, with short selling times. There has been marked increases in both volumes and values in all of the towns and villages of the Southern Highlands. Our conversations with local real estate agents also confirm that the enquiry rate is up and the market is increasing. For the year ahead, we anticipate this increasing trend to continue. The rental market in the Highlands had increased and is now steady.

We note that there are further planning revisions in 2015 proposed for release by Wingecarribee Shire Council that will allow for further density in town centres. This should see an increase in medium density development in towns like Bowral, Mittagong and Moss Vale. This will lead to more villas and townhouses that are relatively close to the town centres. There has also been an improvement in rail services to Sydney over the past 12 months.

There has been good demand for vacant land and for new properties throughout the Highlands region.

New construction is mainly in Renwick-Mittagong and on the outskirts of Bowral and Moss Vale. There has
been an increase in investor activity generally. We also expect these trends to continue in 2015.

The middle of the market ($1 million to $2 million price bracket) is also increasing and this should continue throughout 2015.

The prestige end of the market (over $2 million) is steady and some caution is still evident in buyers. If properties are priced correctly, then they will sell. If vendors’ expectations are excessive, longer selling periods apply until the vendors eventually meet the market. We are expecting this sector to remain steady in 2015.

Southern Tablelands
The regional city of Goulburn has been stable throughout 2014 and we expect the market will continue to be steady in 2015. Crookwell Village and the rural residential property market have also been stable and we predict that these markets should remain steady throughout 2015. The rental market in Goulburn has actually declined slightly as tenants return to the Canberra area.

NSW Mid North Coast
This month we will look forward to what is in store for the property market in 2015 along the mid north coast.

Last issue, we reviewed 2014 and how it affected our region and we noted that the region was experiencing increases in both values and sale rates during the later half of the year.

Continuing low interest rates will fuel the residential market across the mid north coast and we expect that these increases will continue throughout the first half of 2015, especially within the larger coastal towns throughout the region.

We expect demand to continue to rise in these larger regional centres, although perhaps at a slower rate than the last few months of 2014, and values to continue to increase over most market segments in varying degrees.

The current increase in demand and a lack of listings or stock available in the low to mid segments of the market will continue to drive up values as purchasers compete for properties.

The higher value prestige and rural property markets in the region remain slow, with a continuing oversupply of product available for sale and limited demand combining to produce generally static values. We expect this to continue over the fist half of the year.

The investor market will continue to be strong during the fist half of the year, with low vacancies and good competition to lease properties resulting in increasing rents, which have in turn increased investor returns and made the lower to mid value range properties good value for investors. These properties are often positively geared due to the current high rentals.

At the start of 2014 we were more optimistic for the year than we had been in previous years and for 2015 our optimism continues.

Dubbo
The Dubbo residential market appears to be steadying as we commence 2015 after a period of strong growth in 2014. Low interest rates combined with low vacancy rates saw an influx of investors to the Dubbo property market last year which pushed median house prices to a record high of $290,000 and median unit values to $220,000 (source: RP Data).

A large number of vacant allotments was also sold off the plan as demand for new housing construction skyrocketed in 2014. Many lots are due to settle early in 2015 so we expect to see some significant new housing construction in the early part of the year. The Council-owned Keswick Estate has been popular with investors, currently having the cheapest available land suitable. Maas Group Properties who acquired the Southlakes Estate development have also had record numbers of sales off the plan.

This estate is most popular with families due to its artificial lake and parklands features. Dubbo’s newest subdivision, Huntingdale Estate in the city’s south west, has also begun its marketing plan in 2015 with lots starting from $180,000.

There has been strong demand for median density properties and estates such as La Dolce (opposite Orana Mall) which saw strong demand from professionals and investors in 2014.

It is expected that more medium density subdivisions will come onto the market in mid to late 2015 to accommodate increased demand for these properties.

Uncertainty surrounding interest rates and potential increases in 2015 may contribute to a steadying of the residential market for established dwellings.

After the rapid increase in values throughout 2014, it is quite possible the Dubbo residential market is at or near its peak. Vacancy rates have increased from 1.5% at the start of 2014 to around 2.8% towards the end of 2014. This can be attributed to an increase in available rental properties due to the influx of investors last year. Although this rate is still low, new housing construction set to increase again in 2015 will further ease the pressure on the rental market.

Only time will tell which direction the Dubbo market will head in 2015, but if interest rates do increase we will most likely see a plateau of values across the residential sector and an increase in property listings.

Tamworth and Northern NSW
Some thoughts for 2015… Overall steady as we gain market confidence again after a flat period driven by drought. In our mining affected areas such as the Hunter Valley, there is further potential to fall as the rental vacancy remains high and more desperate investors try to sell or are sold up. In the Gunnedah and Narrabri areas, the market is strongly influenced by mining and agriculture, however mining in this area has remained stable over the past 12 months and it appears that it will continue to do so throughout 2015.

The middle to higher price bracket in the residential and rural residential markets is slow and opportunities to buy will arise as buyers in this market are limited. Stay away from mining affected regions and stay in the big centres such as Armidale and Tamworth for the safest bet for 2015.

Continual growth and expansion is expected in residential development, large service centres with board industries and services. Consumer confidence in the agriculture sector will also return if it continues to rain.

Hunter Valley prices in both the residential and rural residential sectors are declining and transactions are minimal. The best buy would currently be rural residential as the miners have dropped out of the market and prices have reduced, creating a buyer’s market. Residential is still an uncertainty as prices continue to fall. The Hunter Valley residential market would be a no go zone with an over supply and potential for the market to continue to fall. In general, the higher end of the lower price bracket is often a trap with poor to average quality new builds. Pushing though to the next price bracket often pays its way in the end.

Bathurst / Orange
There is an air of enthusiasm in the central west as 2015 will see the celebration of the 200th anniversary of the proclamation of Bathurst.

Bathurst is known as the gateway to the central west and is the oldest inland settlement in Australia.

Activities over the year can be found on the Council’s website (http://www.bathurstregion.com.au/event/2015/1/).

Unfortunately it is unlikely that the property market will see the same level of enthusiasm over the next 12 months. Demand and prices appear to have peaked in Orange in early 2014 and numerous Bathurst vendors are failing to achieve their asking prices that they may have based on a trajectory from previous price growth, albeit with minimal reduction in price.

Properties that benefited most from the flattening of market segments in the times of higher demand are expected to experience the most effect as the market segments return to more historical norms of relative willingness on the part of purchasers to buy at a given price. Such a property might be one offering basic amenity that was attractive as an investment when rents were higher, that is now subject predominantly to the owner-occupier market.

Another property type that will also be affected are small rural residential properties of limited aesthetic appeal around mining areas. Evidence suggests there is more than an average amount of such properties on the market. This shift will continue to be partly attributable to the state of employment in the local area.

The end of the mining boom will continue to affect the local area, although the effect will not be on a par with the highly publicised boom and bust scenario of some mining towns. The economy of the central west is diverse and the overall population is expected to continue to increase. The broader economy is expected to be sluggish in 2015 and this is the likely scenario for the highly interdependent local economy. This will be due to non-mining economic activity such as construction and services being unable to fully replace the broad employment opportunities and profitability of mining in the short term. Construction of new dwellings will continue at a similar pace to the past few years and 2015 will be the year when price signals that determine future construction will reach the industry.

Overall 2015 will swing slightly in favour of the buyer, but with no expectation that the bottom will fall out.

With interest rates at a record low and forecast to fall even further from 2.5% to possibly 2%, liquidity will remain good and will encourage first time buyers and investors into the market, although with reduced expectations of return and capital gain.

Leeton
How our markets will travel in the area in 2015 will relate closely to what is happening within our local economies. Activity in the residential market will reflect what is happening in the employment market. The ability to keep your income or earn more of it will have a larger impact on the housing market than interest rates. Vacant land prices and modern 4-bedroom homes in Griffith are likely to experience upward price pressure as stock levels in the Collina area dry up. Tidy, entry level properties below $150,000 in Leeton and Narrandera are also likely to lift due to competition from investors looking for bargains and first home buyers. New home construction will increase but the majority of houses will be smaller and cheaper than the region has historically experienced. Caution should be exercised by those looking at house and land investor packages in the area. Land is still being purchased well above its current market value, so ensure you do your
homework.

Lismore
The residential market for the 2015 year ahead is expected to remain relatively steady with continued improvements in consumer confidence and sale rates which occurred throughout the 2014 calendar year
(especially for coastal based localities within the Byron and Ballina Shires). However, the residential market for the year ahead in the Lismore, Richmond and Kyogle Shires is expected to remain relatively subdued with softer consumer confidence and sale rates.

The ongoing low level official interest rates will likely to continue to have a steadying impact on the overall residential market throughout 2015.

It is difficult to see a significant change for the coming year of 2015 for the residential/rural residential real estate markets of Lismore, Richmond Valley and Kyogle Shires with continued reticence likely to be expressed by investors and home owners despite record low level interest rates. This activity is expected to continue with predominantly macro economic factors having a dampening impact upon general market confidence in bricks and mortar.

There are no significant LEP changes expected for the coming year with all the respective local authorities of Byron, Ballina, Lismore, Richmond Valley and Kyogle now governed by new LEP’s and DCP’s as per the NSW Government edict.

Within the Lismore and surrounding village localities, older residential stock will struggle to sell for anywhere near their prior purchase price of three five years ago.

New residential building stock for first home buyers (together with stamp duty exemptions and other incentives) & “upgraders” will depend on the availability of vacant land. The current supply of vacant residential lots within Lismore, Richmond Valley and Kyogle will become more limited in the short to medium term.

The general residential markets for the Yamba, Ballina and Lennox Head regions are expected to remain generally steady following on from improved rates of sale and slight value increase throughout the 2014 calendar year. As with the Lismore, Casino and Kyogle markets, if properties are competitively priced they will continue to sell.

The Byron Bay residential market during 2014 (and in particular the past six months) has been performing strongly with increased rates of enquiry and resultant sales. The increased volume of sales has generally been concentrated in the lower and middle market price point segments; however, there has also been good activity in the prestige sector as well. We are now seeing a shortage of stock with some properties presently being marketed receiving multiple offers. This is resulting in continued upward pressure on prices in this market sector. However, the buyers will remain well educated and properties will need to remain realistically priced.

There are considered to be potential capital gains to be made within the township of Mullumbimby due to the affordability and price point of the residential product compared to the more coastal based areas.

The most difficult market for 2015 will continue to be the larger rural residential properties and farmlets within the Lismore, Richmond and Kyogle Shires. The increase in “costs” to maintain such properties will be a pertinent factor.

In summary, we expect the residential property market for Lismore, Richmond Valley and Kyogle Council areas for 2015 will continue with a period of softening activity and confidence despite the low interest rates. However, in contrast the coastal localities within the Byron and Ballina Shires will continue to remain steady and will be dictated by available stock levels. Current sale rates for vacant land will continue resulting in continued building
activity.

Coffs Harbour
2014 saw the market bottom and the start of the recovery from the proceeding four to five year decline following the Global Financial Crises in late 2008. Consumer confidence has returned to the market place driven by low interest rates, change of government (Sept 2103) and a strong rental market.

The start of 2015 will continue to see the market characterised by higher enquiry and sale rates primarily centred within the affordable sector (sub $500,000) of the market which will filter through to the mid to upper price bracket.

More promising signs in the upper price bracket ($1 million plus) have been seen with several beachfront
properties having sold and selling agents reporting renewed interest from the Sydney and out of town markets. The possibility of an interest rate cut in early 2015 would only add to the growing consumer confidence.

The northern beach suburbs between Coffs Harbour to Woolgoolga including Sapphire Beach, Emerald Beach, Moonee Beach and Sandy Beach traditionally have been stable markets and we expect these localities to continue to improve with the now completed Sapphire to Woolgoolga highway upgrade reducing travel time to the main service centre of Coffs Harbour.

To the south of Coffs Harbour the townships of Valla Beach, Valla, Urunga, Macksville and Nambucca Heads will continue to see increases in rental and sales activity in the short term due to the ongoing highway upgrade between Warrell Creek and Urunga.

The pick of these areas is Valla Beach which has already seen demand outstrip supply for rental and sales stocks with values expected to increase into 2015.

We note the road works are ahead of schedule and are due to be complete in mid 2016 which will see this demand fall to more traditional levels.

The rural residential market continues to remain stable with increased activity for the well located properties close to Coffs Harbour such as Boambee, Bonville, Karangi, Upper Orara and Bucca and typically within the lower to middle price ranges.

Rural properties in secondary locations or at the high end of the market segment are still showing signs of subdued market activity with longer selling periods.

The notable ‘blueberry’ expansion of 2014 which has seen several $1 million plus sales in recent times sees
no signs of rebating with selling agents reporting good interest from growers for land which has suitable characteristics for producing blueberries.

There is no surprise that it is this affordable end of the market sector we are seeing the most activity with prices firming and selling periods shortening. We consider this market will continue to improve throughout 2015 and possible price increases of 5% to 10% may be seen if this demand continues whilst supply diminishes. The upper end (700,000 plus) and rural residential market will naturally increase in activity as demand and confidence grows which will result is more sales activity more so than increases in values.

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