Newcastle June 2017

The month in review: Newcastle

By Herron Todd White
June 2017

We are at that point of the cycle where it’s a fine line between upsizing your current dwelling or simply staying put and adding value to your existing home with an extra couple of rooms. The option to stay and extend is attractive when you look at the savings you would make on the transactional aspect of moving to a new home. You save stamp duty, agent’s fees, finance charges and moving costs which on a reasonable home can be close to $100,000 in real dollars. Utilising that money on your extension can really kick start your plans.

The key driver of the Newcastle and Lake Macquarie markets at present is the lack of stock available; essentially the supply side is very low. When you have a low supply side, as long as demand is reasonable and constant, this can place upward pressure on prices. This in turn raises values and in many cases the price has increased enough to set a new benchmark level for your land.

The increased price of the underlying land may be such that it is economic to knock down your existing home and build a brand new house.

As an example, you may have purchased your home originally for $350,000 in 2005. Your house may be worth $650,000 now (not unreasonable here in Newcastle). Your underlying land value might be $450,000 which far outstrips your initial purchase price and makes building a brand new home where you currently live more feasible.

We note that builders’ prices and waiting periods are significantly up across the board which indicates strong demand for renovations and extensions. We often see builders’ trucks in quiet suburban streets clogging up both sides of the road with extensions and small building projects. Anecdotally the home renovation boom is very much the flavour of the moment with the number of renovation programs on TV indicative of current trends. At present, in strong localities it appears quite hard to over capitalise with sales seemingly attaining record prices on a weekly basis.

Will this continue?

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.