The month in review: Regional NSW
By Herron Todd White
The Illawarra residential property market has continued its strong growth through 2014 to date.
Local real estate agents advise that they are experiencing one of the best first six months in over a decade with many properties selling above reserve or asking price. Record low interest rates combined with a limited supply of properties on the market have contributed to this.
Both the bottom end and top end of the market are seeing capital growth. Units, houses and rural properties are all selling. Auctions are the flavour of the day and if this method doesn’t suit the vendor, marketing is generally on the basis of “offers over …” as it is increasingly difficult for agents to price properties in this buoyant market.
As in other sectors, we are seeing prices in new residential unit complexes in Wollongong and vacant parcels of land in the new estates of Shell Cove, Flinders and Brooks Reach Horsley also showing appreciable rises in the past 12 months.
Many of the new unit complexes are selling off the plan even before any construction has begun.
Investors are keen to purchase new units as a result of low interest rates while also benefiting from government incentives.
First home buyers are snapping up vacant parcels in these new land estates and also benefiting from low interest rates and government incentives. Overall the fierce competition between investors and first home buyers, combined with the low interest rates and the limited supply of properties on the market, is driving prices upward. Sydney buyers are entering the market more and more as they are driven out by the hot-house prices of Sydney.
Although confidence is still high in the market as it was at the beginning of the year, from our conversations with both vendors and purchasers sentiment is that the current level of market activity is bound to slow down soon. Some local agents and valuers are predicting the market to ease towards the end of the year, despite interest rates remaining low. Supply in all areas is increasing as tends to occur when confidence is high and this tends to regulate prices. This will result in more properties on the market, longer selling periods and auction clearance rates declining.
The areas that have seen the most growth are generally those where buyers and lenders should be most cautious. Some areas south of Wollongong have experienced a substantial increase in value over the past 18 to 24 months for instance and may be pegged back in any price correction scenario. As always the top end will be the most susceptible to any slowing in the market. Another sector that has suffered in the past when things go awry is the beach house.
Buyers offloading the beach house to ensure they can keep up the mortgage payments on the principal residence is a situation we have seen before in this coastal region.
Unemployment is still high in the region with talk that both extractive and manufacturing sectors have some redundancies to go. This will also affect confidence and impact on prices.
The Southern Highlands residential property market has seen a marked increase in activity in both volume and price over the past twelve months.
There has been a noticeable increase in activity by investors; interestingly, rental levels are steady to slightly increasing. The increasing price trend is very strong at the lower end of the market, up to $800,000. Properties in the up to $1.5 million price bracket are also trading more briskly. 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 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/extension activity in the well located, older style and character homes within the townships of Bowral and Mittagong. The increase in prices has been at a steady rate and not as a spike in pricing, so we consider these increases to be sustainable and should continue over the next twelve months. The upper end of the market has bottomed, albeit there is still some caution evident, but we are now starting to see an increase.
The Southern Tablelands region is steady. Goulburn has seen steady to increasing trends over the past five years and has now plateaued. There have been good land sales in the new, modern residential estates in Goulburn, including the Belmore Estate, Merino Country Estate and Mistful Park Estate. There is good construction activity of new homes being built. The market in Crookwell is also steady.
The rural residential property market (two to 100 hectares in land size) is steady throughout the Tablelands.
NSW Mid North Coast
This month we are having a mid year review looking at how the Mid North Coast has performed so far in 2015.
During the latter part of 2014 we noted increases in residential sales activity and rising values in the larger towns throughout the Mid North Coast region.
This trend has continued in the first half of 2015, with the record low interest rates continuing to fuel these markets. These increases have been predominantly in the low to mid range of the residential market with
increasing sale rates and slowly increasing values.
The higher value prestige and rural property markets in the region remain relatively slow. There have been more sales numbers but fairly stable prices and there remains a continuing oversupply of product available for sale and limited demand combining to produce generally static values. We expect this to continue
for the remainder of the year, with higher value properties and rural residential properties increasing at a slower rate.
Looking at localities:
Port Macquarie has seen sales often occurring at or close to full list price after minimal time on the market which indicates a rising market where potential purchasers do not wish to be left behind.
A lot of this pressure is coming from investors. With a currently very tight rental market and low interest rates, these properties are often positively geared.
The rental market has tightened significantly in 2015 due to the infrastructure work underway in and surrounding the town including the Pacific Highway upgrade and the construction of the Charles Sturt
University, with rents increasing rapidly and almost no vacancies. This stress on the Port Macquarie market has seen neighbouring areas benefit as purchasers and tenants look to smaller surrounding towns to meet their needs. These areas include Wauchope, Lake Cathie, Bonny Hills and the Camden Haven areas.
Further south, Taree has seen sales rates and values slowly increasing but to a lesser extent than that of the larger regional towns, with rentals up but less demand. After a stagnant market for the past three years, the surrounding areas including Old Bar, Wallabi Point and Harrington are finally seeing improved activity and slowly increasing values. Most of the new estates have seen increased sales of vacant land with increased prices and this is flowing through to the established dwelling market.
Forster and Tuncurry are more closely linked to the Sydney market with a longer lag time due to the large amount of holiday accommodation. But it is starting to pick up as demand has increased and has seen
prices start to increase as available stock is depleted. A few higher end units and holiday units (over $500,000) are starting to sell, which is an indication of a rising market and more confidence.
Only recently in Bathurst an auction of vacant residential allotments in a Council owned subdivision was held where 42 out of the available 57 lots were sold. Demand for new properties remains strong among owner-occupiers and investors alike. Land prices have shown some increases as the availability of potential residential land around Bathurst becomes limited subject to significant investment in services, particularly water.
Numbers at open houses are solid and sales activity remains steady to strong in Bathurst and Orange.
The reduction in interest rates has likely helped to maintain values and market activity. These are positive signs at a time when the economy is arguably not performing as well as it could. It is particularly encouraging news for Orange which has stabilised from a peak in 2014 which was due in part to a local mining expansion. Realestate.com is listing 261 properties for rent and 924 for sale in Orange which is indicative of a continuing buyer’s and renter’s market despite the increased activity.
There are also some signs of a two-speed situation with some smaller localities not performing as well. Sales periods in surrounding villages remain longer than average, particularly for properties over $400,000. This is consistent with potential employment concerns developing outside of the major centres which are experiencing the majority of the population growth.
Down down, prices are down. Coles has it right when you refer to the current state of the Upper Hunter property market, in particular Muswellbrook. Due to a downturn in mining activity in the region the
market is on the decline after the 2012/2013 financial year peak.
RPData reports 245 residential sales of less than one hectare, between $200,000 and $600,000 in the 2012/2013 financial year. Using the same parameters the 2013/2014 financial year reports 137 sales and
the current financial year to date is 48 sales. The decline in the number of sales correlates to the vacancy rate, rents and value.
Based on our internal assessment rents have declined up to 20% and property values up to 12%. Unfortunately the floor of the market has not yet been established with mortgagee in possession sales
continuing the decline as investors feel the squeeze from high vacancy rates.
The most hit property type appears to be the new builds on small land areas with small floor plans. Older larger properties appear to be holding their values better.