The month in review: Regional NSW
By Herron Todd White
NSW Central Coast
A Changing Region
Our region is of one the recipients of the state government’s vision of the future. By Proclamation on 12 May 2016, our region’s two councils become one. No longer do we have a Gosford City Council and a Wyong Shire Council – we now have a Central Coast Council.
We are one.The friendly rivalry, banter, oneupmanship and finger pointing between our former councils is no more. The models tell us to expect strength and huge savings for our region as a single council. We must give thanks to our state’s government for saving us. And we didn’t even ask.
The northern end of our region has seen a rise in the median value of around 4.7% since the year started and around 9% over the past twelve months. Activity in Woongarrah, Hamlyn Terrace and Wadalba typifies the market sentiment and we notice that a majority of sales are occurring in the $500,000 to $600,000 range. Demand for new housing continues from last year with house and land packages being well represented. Prices have been rising with packages (4-bedrooms, 2-bathrooms, 2-car garage on small blocks) regularly being purchased in the early to mid $500,000s. From what we can see, the distribution between owner-occupiers and investors seems to be fairly even. Yields are estimated to be around the 4.5% mark at present.
We have been seeing more $700,000 plus sales in Woongarrah and Hamlyn Terrace, which we attribute to demand driven by those exiting the Sydney market. When looking at data provided by CoreLogic RPData though, the median value for Woongarrah at present is $540,000 which is down on the previous two months and indicative of the slight volatility of this specific market. The increase in developer sales indicates there is some jostling between developers in these areas as they secure sites for ongoing development.
When we think of barometer suburbs, those which are a good indicator of market sentiment, we often take a look at Budgewoi. It has at times found itself on the top ten default suburbs in New South Wales. A look at CoreLogic RPData statistics shows us that sales in Budgewoi have increased for the past two years, but slowed for the first half of 2016 and this is a telling statistic.
Still at the northern end, the beachside suburb of The Entrance is known for its volatile unit market in previous property market cycles. Statistics tell us that sales volumes are up, but interestingly, the median value has been quite steady overall.
High end sales at the northern end of the region can be translated to mean those properties sold in excess of $1.3 million and there have been a few. A majority of these sales are beach or lake front properties, but we say the first half of 2016 is yet to see the sale of a trophy property.
Over a number of years, the northern end of our region has seen ongoing development. Much of this activity has been the Warnervale Release Area with timing of development keeping pace with the will of the government, the availability of funds and mood of the people within it. Foreign investment has played a large part in activity in recent times, but this has slowed considerably in response to pressure being applied to lenders.
There has been a lot of activity in the property market at the southern end of the region, particularly when looking at approvals for new units.
It is estimated that around 245 units have been approved this year in and around the Gosford CBD. Approvals have been granted over the past several years for several thousand units in the Gosford CBD and while highly unlikely that all of these will be constructed, it will only take the simultaneous commencement of several large complexes to put considerable pressure on the local market. Anyone looking at buying a unit in Gosford should be aware of this.
Once again though, the slowing of foreign investment is likely to have an effect on the local market and generally speaking, real estate activity has been up and down. In speaking to real estate agents, it is apparent that while their buyer databases are expanding, securing new property listings is their biggest challenge. Some are indicating that the lack of stock coming onto the market may be an early sign of the market slowing and while this could be true, our valuers are still seeing an encouraging number of instructions for sale properties.
According to CoreLogic RPData, there has been a rise in the median value of close to 7% over the past six months. Where some parts of the region may have slowed, the same cannot be said for the peninsula areas of Woy Woy, Umina Beach and Ettalong Beach. Sales rates have been reasonably consistent and prices still appear to be on the rise. It is now becoming a regular occurrence for $900,000 plus sales here and we wonder how long this part of the region can continue on this path and what will happen when it does eventually stop.
We think those looking to break into the market at the southern end of the region should take a good look around the Wyoming, Lisarow, Kincumber, Bensville and Empire Bay areas. These are still comparatively affordable areas with potential to benefit from the rising market. Most of these areas have older development, but if trends seen in what have elsewhere become popular suburbs, then we consider some of these suburbs could be the ticket. Asking prices in any of these suburbs are generally starting in the low $400,000s for older style dwellings in need of a makeover, with partially renovated or dressed for sale properties in the high $400,000s and mid $500,000s.
When we talk about trophy sales at the southern end of the region, we are generally referring to sales above the $4 million mark. There were a few noteworthy sales towards the end of the 2015, but to date in 2016, it has been a bit quiet. A modernist home with great views at Killcare designed by Casltespeake Architects sold in April 2016 for a reported $4.55 million and a renovated lakefront property on a double block at Wamberal recently sold for $4 million. We have also been made aware of a beautiful horse property with a magnificent house being sold for around the $6 million mark.
It has been a reasonably quiet first half of the year for high end sales, but a much different story in the $2 million to $4 million range with a number of sales occurring in this space. This includes sales of small rural residential and beachside properties.
NSW Mid North Coast
This month we are having a mid year review looking at how the Mid North Coast is tracking.
The Mid North Coast area is continuing to experience increases in sales activity of residential properties and in turn rising values. This trend has somewhat eased for the higher price bracket properties, however the lower price properties have continued good growth throughout the first half of 2016, often with multiple purchasers competing for the same dwelling or unit.
The recent interest rate cut to 1.75% will not only make homes more affordable, it should also enable easier access to housing finance for first home buyers, which will in turn assist the momentum for growth throughout the lower to medium price bracket in 2016. This interest rate cut comes at an opportune time when an impending election often slows down the property market with uncertainty being a key factor.
The higher value, prestige and rural property markets in the region remains steady. There have been more sales numbers and values have increased slowly, but the limited demand continues to keep values steadier than the lower end residential properties.
Looking at Localities:
Port Macquarie has seen good growth with sales often occurring at or close to full list price after minimal time on the market which indicates that the market is still strengthening. Older style dwellings close to town are favoured by purchasers and the outer fringe suburbs are favoured for new dwellings with higher than average construction occurring.
The rental market has eased slightly in 2016 with some of the large infrastructure work coming to completion compounded by a large amount of dwellings being sold to investors for rental purposes during late 2015. Fuelled by the recent opening of the Charles Sturt University campus, investors have been trying to get ahead of the game and have their newly constructed villas, duplexes and dwellings with granny flats fully rented prior to construction of a recently proposed onsite student accommodation complex.
For Port Macquarie the growth should continue throughout the remainder of 2016 with the continuation of the upgrade to the Pacific highway, commencement of Kmart development and pending further infrastructure development throughout the local area.
Port Macquarie’s close neighbours have also seen benefits with purchasers and tenants looking to these areas to meet their needs and ease financial stress. These areas include Lake Cathie, Bonny Hills and the Camden Haven areas. While capital growth is somewhat variable between areas, good rental returns are being achieved.
Larger inland town centres such as Wauchope, Taree and Kempsey have shown signs of price levelling for the first half of 2016. However new subdivisions within these areas are still experiencing good vacant sales and construction activity, indicating that the market in these areas is moving.
Further south, Forster and Tuncurry are more closely linked to the Sydney market with a longer lag time due to the large amount of holiday accommodation. These areas remained stable when other Mid North Coast areas took off over the past few years, but they are now making up for lost time with significant increases in demand and sale numbers over the past 12 months. This has, in turn, seen values rise, with this market activity now extending into the prestige and higher value residential and rural residential market which is an indication of a strong rising market and continuing confidence in the area.
During the Christmas and New Year period it wasn’t clear how things would pan out in 2016. While the market was rising prior to then it seemed to plateau with no sales standing out to indicate any movement. What has become clear since then is that values in the larger centres of Orange and Bathurst have shown upward movement, particularly for well located central properties, sometimes with an eye for redevelopment. Such sales give valuers an insight into underlying land values in developed areas where often there are no sales of vacant land.
In the suburban areas around Bathurst there are land developments occurring in Kelso and Windradyne. House blocks in these areas have typically been
selling for $180,000. This is an increase from sales one to two years ago which typically saw blocks go for $140,000 to $150,000. Building costs have generally remained steady which is more in line with low inflation and limited growth in labour and material costs.
There have also been strong sales for central properties that are either established or for redevelopment. 319 Lords Place, Orange is a circa 1900 renovated federation home with 4-bedroom, 2-bathrooms, detached garage and carport, on a 1,015 square metre block which sold for $825,000. Just as important to note, CoreLogic RPData shows that this was the listed asking price and the property was on the market for only 36 days.
In Bathurst, a recent sale of note is 212 Piper Street which sold at auction for $1.05 million. It is a 2,023 square metre site with a renovated compact 2-bedroom circa 1930 brick house. The property was marketed as a development site with potential for eight 2-bedroom dwellings. Such units in Lithgow have been selling for $320,000 which could potentially give a gross realisation of over $2.5 million. I have a feeling that this is a relatively sustainable growth trend which could continue for some time in this region.
The Clarence Valley has several major infrastructure improvements either planned or under construction, including the Pacific Highway upgrade, Grafton Jail and the second Grafton Bridge crossing.
The Pacific Highway upgrade is set to bypass Clarence Valley’s major regional hub of Grafton. Grafton is expected to remain the major regional hub as this is where the most housing and work is provided in the region. The passing traffic reductions will have an effect on the town.
The towns of Maclean and Yamba have had strong sales activity and have benefited from the Pacific Highway upgrade. Not only will the upgrade provide better access to these towns, the current work undertaken for the upgrades have created plenty of jobs.
The first half of 2016 has been positive for the Clarence Valley regardless of the infrastructure upgrades, however, the decline in the major city markets is starting to have a minor flow on effect. The capital city market decrease has reduced the prestige residential sales.
With further interest rate cuts, there is potential for an increase in value in the market, especially in Yamba where there is a shortage of residences on the market.
2016 has brought strong buyer activity in the $500,000 to $1.5 million range. There is especially strong demand for vacant land in the urban expansion areas which include Ballina, Lennox Head and Wollongbar in some cases land selling within days of stage releases.
The coastal areas are seeing sales steadying to becoming firm and a slight increase in the slower markets of Broadwater, Woodburn and Wardell.
With further interest rate cuts, there is potential for increased value in the market and remaining steady to strong for the rest of the year.
The residential market within Lismore has shown some minor improvement since the start of the year, aided by a low interest rate environment and
competitive mood between the main lenders. The rural towns of Casino and Kyogle have been relatively subdued in comparison with some brief flurries of activity but nothing overly significant.
We have noted a distinct lack of sales activity in the traditional 2-bedroom investment unit, particularly the older style brick and tile units constructed circa 1980s despite the low interest rate environment and relatively low price range i.e. $120,000 to $150,000.
The rural/residential market across the board in all three Council areas has remained relatively subdued with no significant increases noted in sale price compared to the beginning of the year, unless responsible renovation has been carried out i.e. not overcapitalised.
Possibly the hardest hit has been the remote rural bush block and the improvement 40 hectare rural lifestyle block with travel and maintenance costs becoming important factors to consider.
All in all, a relatively quiet six months.
The market on the Coffs Coast continues to remain strong on the back of record low interest rates and renewed consumer confidence which has seen values rise over 2015 and 2016.
The strong local rental market continues to be maintaining demand for lower priced homes and units (sub $500,000) while the mid to upper sections of the market have also increased in activity especially in the more traditional beach side localities.
The rural residential market appears to be making a comeback with noticeable increase in sales activity for the well located properties close to Coffs Harbour and typically within the $500,000 to $1 million price ranges. There have been several sales in excess of $1 million which have occurred with the most notable being a property in Boambee (8 kilometres south of Coffs Harbour) which sold for $2.275 million being an executive style residence with second home set amongst botanical style gardens on 1 hectare of land.
The upper end sector ($1 million plus) as always is limited in the local market by the amount of purchasers able to secure property of this value with prospective buyers generally coming from ‘out of town’ or interstate and dependent upon greater economic market conditions at that time.
Sales activity has shown an increase in the number of sales occurring at or in excess of full asking price which is indicative of a strong market where demand is greater than supply. We caution that these increased levels of demand may not be sustainable over the long term which may make the current market somewhat more volatile. Any increase in interest rates, decline in economic activity or decrease in market sentiment could see a softening in the market in the future.
The ‘blueberry’ industry continues to expand which has traditionally been centred on the regional town of Woolgoolga with expansion of this industry into more traditional rural residential localities such as Bucca to the north of Coffs Harbour and Boambee, Bonville to the south. Prices still being achieved for these properties are considered to be above sustainable rural residential values with premiums paid for land which has the characteristics for blueberry/ agricultural production such as permanent water, aspect, slope and cleared land.
In short, the market remains strong fuelled by continuing low interest rates, resurgence in development, strong rental returns (lower market sector) and continuing consumer confidence. The commencement of large scale Pacific Highway upgrade north of Corindi Beach to Ballina also serves as positive factor in terms of short term work opportunities; increased rental market and reduction in future travel times coming from Queensland.