The month in review: Regional NSW
By Herron Todd White
The Southern Highlands residential property market has been increasing in both volume and price activity since late 2014. 2015 saw a noticeable increase in activity by investors although interestingly enough rental levels are steady. The Highlands property market is heavily influenced by the Sydney property market. Just like the ripples in a pond, the Sydney influence flows to our region. Now that Sydney has slowed and softened, the Highlands is also anticipated to slow. Over the first quarter of 2016, we predict the market to remain steady with sales activity constant. However later in the year, we expect the market to slow and soften slightly, especially if interest rates rise. This trend should be apparent for properties under $1.5 million.
There has been good land sales activity in the now established residential subdivision precincts such as Renwick Estate (Mittagong), Bingara Gorge (Wilton) and more recently smaller more affordable lots at Nattai Ponds (Mittagong) and Darraby Estate (Moss Vale). This uptick in activity has seen the emergence of residential infill developments in the townships of Bowral and Mittagong, with established larger land lots being subdivided into smaller allotments which are keenly sought after. New construction activity has also been evident, most commonly project style homes within these new residential estates. There has also been renovation and extension activity in the well located, older style character homes within the townships of Bowral and Mittagong. Prices in the new developments should remain steady.
Prudent buyers should exercise some caution if asking prices for vacant land continue to increase in the new estates (particularly in the Wollondilly region). We have seen strong prices lately for new medium to high density residential development developer sales (villas, townhouses and residential units). In a softening market, these strong prices may not be achievable on resale. Caution should be exercised in this sector over the next twelve months, especially if interest rates rise. The upper end of the market is steady and is expected to remain so.
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 have been good land sales in the new, modern residential estates in Goulburn, including the Belmore Estate, Merino Country Estate and the Mistful Park estate. There is good 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 rural residential property market (two hectares up to 100 hectares) is steady throughout the Tablelands. We predict that these markets should remain steady or soften slightly throughout 2016.
The rental market in Goulburn has actually declined slightly as some tenants have returned to the Canberra area. This has been compounded by Sydney investor activity and a slight over supply situation has occurred. We expect the rental market to also steady.
New South Wales Central Coast
Although the mechanics of the NSW Central Coast region are distinct, much turns and responds to what is happening in the local markets in neighbouring regions.
Many would say the Sydney market is the central hub with a direct effect on all other regional markets within its radius. The Central Coast’s strong market in 2015 was undoubtedly underpinned by Sydney based buyers finding themselves unable to compete in the Sydney market. This resulted in better than average rises in property values across the region as well publicised.
We therefore think this link is proven.
The predictions for 2016 are well publicised, with some analysts expecting ongoing increases in property values, others saying the market will plateau and some predicting falling market values. Each scenario has the potential to emerge and what will eventuate will most likely be the result of government fiscal policy, general economic forces, lending practices and whatever the media tells us.
After such a strong year for the period leading to October, the year ended with a bit of a whimper for the region’s market. Sales volumes fell somewhat and we really didn’t see any continuing increases in values. What we did notice however was:
• The sudden departure of Asian buyers having a noticeable effect on sale volumes;
• Purchase prices being nearer and sometimes below indicated asking prices as opposed to new records being set every other day;
• Buyers being a little more selective and acting with slightly less urgency;
• The much hyped talk of new residential unit developments in Gosford and other regionally significant developments falling away on whispers that presales and interest were less than expected and project finance was difficult to secure;
• Increased positivity in the retail sector that had been missing for the past several end of year periods.
What do we expect for the NSW Central Coast region for 2016? Well in short, if previous property cycles are to be repeated, then we see the region’s market slowing as one property cycle ends and another starts. We have felt the market has been at its peak for some time now and a slowdown around the corner, but the peak lasted longer than we expected. This is the main difference between this cycle which has been building slowly by comparison over several years and is more controlled as opposed to previous cycles which experienced faster rises over shorter periods.
Confidence in the market is a good thing, but we think that 2016 should be a year where buyers and investors will need to be more pragmatic and research especially well. We think that while some of the region’s 160 suburbs will see a fall in values this year, most will continue to trade close to or near current values, but with reduced volumes.
Areas likely to see a drop in value will be those where values increased well beyond levels that we as valuers were comfortable with. This include areas such as Umina Beach and Woy Woy where values have risen extraordinarily (between 47% and 49% over the past three years) to the point where they are now in direct competition with some Sydney suburbs and a wane in demand seems inevitable as buyers switch their attention to other suburbs. It may also be time to be wary of Wyoming and Kariong where values have risen quite significantly (upwards of 10% over a twelve month period) and need time to settle down again. Something for buyers to be wary of is the unit market in Gosford where close to 700 units have been approved recently. Many sites are still in the pre-construction phase and if too many start and finish in a short time frame, then we will no doubt be in an oversupply situation which tends to play havoc with the market.
Another sign that confidence has returned to the market is the presence of buyers at the higher end of the region’s value range. Absent for some time, some say the return of these buyers provides a restorative factor in the market.
Suburbs likely to see increased levels of popularity and well worth watching include Pearl Beach, Avoca Beach, Narara, Niagara Park, Bateau Bay and Budgewoi. These are suburbs that inexplicably seem to have escaped the attention of buyers during the recent period of increased market activity. Two areas well worth a watch and act approach include Woongarrah and Hamlyn Terrace. These are suburbs considered attractive to a range of purchasers including first home buyers, young families, commuters and investors due to their affordability levels and good local infrastructure.
New South Wales Mid North Coast
This month we are looking at what’s in store for the 2016 property market on the Mid North Coast.
In our December Month In Review we reviewed 2015 and how it affected our region and we noted that the region was still experiencing increases in both values and sale rates during the year, however this year we expect the market to cool somewhat.
Due to the increase in median house prices (above normal trend), in mid 2015, the Australian Prudential Regulation Authority (APRA) required banks to slow growth in the value of outstanding investor loans, which prompted banks to demand bigger deposits from investors, tighten credit assessments and raise investor interest rates. This will most likely slow investment borrowing and allow for owner occupiers to increase their share of the property market.
The curb of growth by the banks has weakened the strong buyer demand within the Sydney and metropolitan regions, but is yet to be felt on the Mid North Coast. We expect that this flow on effect will start to impact the Mid North Coast within the coming months with the smaller outlying towns and villages being affected most.
The new outlying subdivisions to the west of Port Macquarie currently undergoing rapid expansion (Inneslake, Brierley Hill and Thrumster areas) have seen high demand for residential blocks over the past year due to owner occupiers opting to build rather than buy existing homes. We expect this area to remain strong and continue to grow throughout 2016.
During 2016, it is expected that Port Macquarie will remain one of the fastest growing regional centres in NSW for property investment. Most recently, housing development has been based around the expected influx of Charles Sturt University students, with an increase in the number of house and granny flats being built, especially within the adjoining areas.
Construction of the new Pacific Highway between Port Macquarie and Kempsey has also boosted the rental market within Port Macquarie, however we expect that demand for rental properties will decrease as work is completed throughout this year and 2017. The steady influx of university students will assist the rental market in remaining somewhat strong.
The higher value, prestige and rural property markets in the region remains slow, with continuing limited demand combining to produce slowly increasing values. We expect this to continue over the first half of 2016.
At the start of 2015 we were optimistic for the year and for 2016 our optimism continues.
Looking at 2016, we see the residential property market in the Albury/Wodonga region continuing to remain stable and perhaps firming to increasing in some areas.
The region is quite stable in terms of population, employment and industry growth and appears well balanced. The agricultural sector also appears to be on a positive trajectory. This should see steady future growth and capital gain at a low level if employment and industry remains steady.
The region also continues to be promoted heavily to investors due to good returns available.
This has resulted in out of town investor activity over the past couple of years as they can achieve twice the return they would receive in the capital cities.
Places worth watching in the region over 2016 include Bright, Porepunkah and Beechworth. Sales continue to remain strong and show signs of rising. Several good back-to-back ski seasons, strong events and promotional programs for these regions, the area’s move towards the gourmet food and wine industry and proximity to Melbourne all factor into this.
In addition Wodonga and Thurgoona are also seeing some growth with new development. The Wodonga CBD is currently undergoing a multimillion dollar redevelopment since the railway diversion and is currently seen as one of the fastest growing Victorian regional towns. Thurgoona is also rapidly developing into a large suburb with more land being subdivided and infrastructure continuing to be improved.
Demand for vacant land looks to remain strong and steadily increase due to availability and continued demand from investors for new housing.
Affordable residential housing is still available in the surrounding towns of Howlong, Jindera, Holbrook and Tallangatta. They are an easy commute to Albury and provide a relatively inexpensive option, particularly in the $200,000 to $300,000 range.
In Albury, the suburbs of Lavington, Springdale Heights and Hamilton Valley continue to remain good value along with parts of North Albury and some of the older established areas of Thurgoona.
The year ahead does not look like it is going to be one of increased volatility. In contrast to the major centres of Sydney and Melbourne, percentage movements have been relatively modest over the past few years. The benefit of this is that any knockon effect from a softening in the capital cities will be felt less acutely in our market. The most likely scenario is continued gains in the order of 1% to 5%. Rents are not expected to move much with supply staying ahead of demand.
New development is expected to continue as is the renovation of existing dwellings with a rising market allowing owners to tap into equity. The majority of new development will be freestanding dwellings, pushing the driving time from the suburbs to the shops beyond 15 minutes. This raises the question of at what point will developers sense the market potential to go up rather than out. That may possibly be this year on the old Orange hospital site.
There is very little available in the towns below $200,000 besides slightly dated 2-bedroom units. The trend over the next year and beyond is for properties in the $200,000 bracket to move into the $300,000 bracket, $300,000 to $400,000 and $400,000 to the $500,000 bracket. Properties above this price range are unlikely to experience the same percentage increases as small acreages become available to purchasers.
Rural residential properties will continue to be in strong demand with these recognised as having some of the most attractive country in NSW.
The Tamworth market is predicted to remain stable overall, however it is likely a split will occur between new and existing dwellings as the demand for new dwellings remains stable to slightly increasing, consuming a constant supply of vacant land.
Existing dwellings are likely to remain stable to slightly softening with demand slightly decreasing. The rural residential market is predicted to remain steady to strong with limited new rural residential land available. Existing dwellings in established suburbs are likely to remain stable and will be a good entry point into the market. Vacant land is likely to increase as demand for new dwellings remains strong.
New developments are attractive due to the proposed infrastructure and amenities in some estates and regions. They are also an affordable option to have everything modern in a house without having to do costly renovations.
Older established suburbs circa 1980 to 1990 builds appear to be the more affordable bracket with their sturdy homes with dated interiors, lacking modern features and older style charm.
New subdivision developments without proposed infrastructure and amenities are being driven pricewise by those offering more, however these are often investor estates, filling the demand for new home rentals. Treat these with caution as an over supply on the market would negatively affect values.
New South Wales Far North Coast Lismore / Casino / Kyogle
The residential market for the year ahead in the Lismore, Richmond and Kyogle Shires is expected to remain relatively subdued despite slightly improved consumer confidence and sale rates over the 2015 calendar year.
The ongoing low level official interest rates will continue to have a steadying impact on the overall residential market throughout 2016.
It is difficult to see a significant change for the coming year of 2016 for the residential and 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 on general market confidence in bricks and mortar.
One area to keep a close eye on for 2016 is the affordable but modern detached duplex unit. Having a smaller foot print area, i.e. strata site, compared to the modern 4-bedroom, 2-bathroom, double garage home on 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 still possess a similar number of rooms and garaging on a smaller site and smaller open space by employing split level, part two-level or twostorey 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 yet still provide good quality improvements and living accommodation. It is now common place to note that most corner sites in new residential subdivisions are specifically targeted for this type of development. Even within existing residential areas, some property investors are actively seeking out larger residential properties close to the CBD, i.e. houses on corner quarter acre blocks (1,012 square metres) to carry out dual occupancy development of the existing residence rather than starting from scratch with freshly developed parcels of land in a new estate.
Generally, properties within the $250,000 to $350,000 price bracket are likely to be the main price brackets receiving most of the activity within Lismore City for 2016, whereas it would be slightly lower in Casino and Kyogle at $200,000 to $300,000. However, we do note an increasing supply of modern and semi modern homes in the $400,000 plus bracket for Lismore City, thanks in part to the development of the modern residential estates dotted within Goonellabah.
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 little have sold in 2015. This is likely to continue throughout 2016, however at affordable price levels of $125,000 to $175,000 (depending on whether renovated or not) and still generating 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 and to a minimum.
One area of caution is the traditional 100 acre hobby farm or rural lifestyle block in semi remote to remote localities. With the possible threat of increasing costs to maintain such properties and distance from the main centres, their popularity is continuing to fade. Already at the extreme end of the scale we have noted a significant fall (up to 50% in some cases) in market value for timbered, remote parcels of 100 acre lots with limited or no services over the past three to five years.
In summary, we expect the residential property market for Lismore, Richmond Valley and Kyogle Council areas for 2016 will continue with some assurance of stability. While 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 the banks’ rates.
Ballina / Lennox Head / Byron Bay / Mullumbimby / Ocean Shores
The 2016 year within the Ballina residential property market could go two different ways. The strong demand and quick turnover of 2015 may continue or it could slow down around the middle of the year. Interest rates are still low which is one of the driving factors of first home buyers and investors. If market conditions begin to slow with interest rate increases and a slowing Australian economy, we could possibly see a slump. This could force investors to sell which in turn would increase stock levels. However, with the new Pacific Motorway recently completed between Tintenbar and Ewingsdale, we could see a trend of Queensland buyers coming down into the Far North Coast and in particular the Ballina region.
If overall economic conditions remain unchanged, the overall market in 2016 will remain steady for the Far North Coast.
The property markets in Sydney and Melbourne reportedly slowed in the later part of 2015 which in turn will see the coastal resort towns of Byron Bay and Lennox Head remain steady and possibly ease towards the middle of the year (there is generally a lag). As these towns are generally driven by interstate lifestyle changers, the market conditions upwards of $1 million will be the first indicator that the market has eased.
The lack of stock and strong demand have resulted in the Byron Bay area having tremendous growth over the past 18 months, however economic forecasters and global uncertainty will have an impact.
The lower level or entry points circa $400,000 to $700,000 will remain steady and fare better than the prestige market due to the lack of housing and strong rental returns. Investors will still see opportunity in this price bracket.
2015 saw strong growth in most market sectors driven by increased consumer confidence due to continuing low interest rates, a strong rental market and infrastructure upgrades resulting in value increases.
2016 should see this market remain buoyant characterised by high enquiry and sale rates primarily centred within the affordable sector (sub $550,000) of the market which will filter through to the mid to upper price bracket. More promising signs in the upper price bracket ($1.5 million plus) have been evident during 2015 with several beachfront and rural properties selling in excess of $2 million and selling agents reporting renewed interest from the Sydney and out of town markets. The likelihood of interest rates staying low will only add to the growing consumer confidence.
The northern beach suburbs between Coffs Harbour and Woolgoolga including Sapphire Beach, Emerald Beach and Moonee Beach traditionally have been stable markets and we expect these localities to continue to improve with travel time to Coffs Harbour reducing due to the Pacific Highway upgrades.
The one beachside location where prices still appear cheap is Sandy Beach, where you can purchase an esplanade position (opposite beach reserve) starting at $550,000 and up to $700,000. This locality is traditionally considered a lower socio-economic 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, six kilometres to the north which will make this suburb one to watch.
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 as the highway upgrade between Warrell Creek and Urunga nears completion which will substantially reduce the travel time to Coffs Harbour. The pick of these areas is Valla Beach which has already seen demand outstrip supply for rental and sale stocks with values expected to increase in 2016.
The rural residential market remains stable with increased activity for 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.
In short, the Coffs Coast market is relatively stable and does not experience significant shifts in property values having a relatively low socio-economic base.
There is no surprise that it is the affordable end of the market sector that will experience the most activity with prices remaining strong and shortened selling periods. We consider this market will remain steady throughout 2016 off the back of the increased prices experienced in 2015.
Factors for long term growth within the region include lifestyle factors such as proximity to a number of quality beaches, transport including regional airport and upgrade of the Pacific Motorway (north and south), medical sector (an expanding segment of the market) and shopping facilities making them ideal for families and retirees. Continual population growth combined with a relatively diverse industrial base and growing health and education sectors means the area is not entirely dependent on tourism and sea changers, making it a less risky investment than some other coastal towns while offering the same lifestyle benefits.
Since 2014, the Clarence Valley residential market has seen an increase in demand for property, a reduction of supply and rising values for all residential property types. Generally agents have reported it a challenge to find enough stock for listing and are being proactive in sourcing listings. This region will continue to benefit from several key major infrastructure developments driving demand which include a proposed second Grafton Bridge crossing, Pacific Motorway bypass and second jail in South Grafton. Recently the old Grafton jail has been re-opened creating jobs. These projects are under way to varying degrees which is driving both investor and home occupier purchases and this interest in the region is expected to continue. The flow on effect of this large proposed infrastructure spending in the region is expected to have a stronger impact on nearby Pacific Highway upgrade towns such as Maclean and Yamba.