Regional NSW March 2018

The month in review: Regional NSW

By Herron Todd White
March 2018

Lismore / Casino / Kyogle

The middle ring of the residential property market within Lismore City and the surrounding rural towns of Casino and Kyogle is primarily defined by price point and property type (i.e. detached houses).

This is usually identified within Lismore City by affordability to the market place for first home owners and investors. Typically, this includes the bulk of the action in the suburbs of Goonellabah, East Lismore, Lismore Heights and Lismore Central where the middle ring price is around $300,000 to $400,000 for detached houses. Girards Hill is a bit more exclusive due to the heritage flavour of the suburb which can see price levels reach $400,000 plus. Both South Lismore and North Lismore are somewhat lower in price level due to obvious flood issues, however well presented and renovated highset homes are now breaching the $350,000 plus ceiling.

Both Casino and Kyogle have a middle ring price range in the region of $250,000 to $350,000 for detached houses.

This sector performed admirably (particularly within Lismore City) throughout 2017 with strong interest showed by first home buyers and investors. Rental demand also improved which drove rental levels upward (much to the unabashed glee of investors).

Heading into 2018, the middle ring sector is likely to continue to benefit from the low interest rate environment with demand to remain relatively steady and rental demand positive. However, it will be interesting to review this once the much touted interest rate increases (which various real estate commentators have been postulating) towards the end of the year.

Opportunities for middle ring will typically be houses that require some form of renovation which, if done well and within budget, can push the price level into the next bracket. These opportunities are not restricted necessarily to certain suburbs as long as they are acquired at the current market level in their as is condition, i.e. don’t pay over the odds.

As with any sector and as well publicised by local real estate agents, the challenge is the current limited listing stock. As Lismore City grows outwards into the recently created residential estates, we are likely to see new build development which may encourage owner occupiers to upgrade and thereby release their hold on their existing homes to the other players in the real estate market such as first home buyers and investors for the more moderately priced middle ring stock. However, there could be some lag before this happens as most builders are run off their feet to meet new build demand.

Finally, the prospects for this sector over the next ten years appear to be relatively positive.

Ballina/Byron

The middle ring is not specifically defined by proximity to a CBD on the North Coast, as lifestyle factors such as proximity to beaches, views and location play just as much influence as proximity to a town or regional hub. The middle ring performed strongly throughout 2017 as a lack of stock created an upward trend in value levels. Early indications in 2018 is that this trend is expected to continue. The middle ring throughout the coastal areas remains owner occupier driven. Again the lack of supply has meant that rental demand remains strong. Long term prospects for the middle ring within Ballina Shire may be influenced by an over supply of land in Ballina Heights and Lennox Head and the ability of Ballina Shire Council to keep up with strong population increases by providing services.

In the Byron Shire Local Government Area, the middle ring for this particular market would include suburbs such as Ballina, Lennox Head and even Tintenbar in the rural residential market. As the central CBD of Byron Bay continues to be the apple of everyone’s eye, price points continue to rise, forcing purchasers in the northern regions of New South Wales to look at surrounding suburbs for price point reasons.

The middle ring sector of the market throughout 2017 and start of 2018 was strong and continues to be strong with significant rises in value. This price rise is mainly due to a lack of overall stock in the market place in these localities. Properties within this middle ring are spending less than seven days on the market and in some cases are not even making it on to the market (being sold prior to the marketing campaign).

The prospects for 2018 are considered to be strong as market forces such as low interest rates and high employment rate continue to be a strong influence.

The rental demand in the middle ring sector of the market is also very strong, as younger families are choosing these particular areas over Byron Bay as the central CBD rental rates continue to soar.

The suburb of Ballina still creates an excellent buy in opportunity in the middle ring sector of the market as it has a relatively lower price point and is close to many services including two large shopping centres and many coastal beaches. Price points are so much more appealing than those of Byron Bay, Lennox Head and other coastal resort towns.

The prospects for the middle ring sector of the Byron Shire market appear to be very positive over the next ten years.

Clarence Valley

The median price in Grafton, Maclean and Yamba has increased over the past 12 months with sales prices remaining relatively affordable compared to nearby cities and larger regional hubs. We have seen the majority of sales occur in this middle ring, while the prestige or higher end market has shown a slightly slower increase in capital value over the same term. The popularity of this segment of the market continues to maintain momentum with the highway upgrade increasing rental returns and sparking investor interest. Consequently, investors and owner occupiers alike continue to be active players in the market with the only noticeable difference in requisites being the likelihood and cost of maintenance. For instance, larger rural residential lots are less desirable for investors and rental returns are not as strong due to the required upkeep of the lots and distance to centres.

Properties that comprise the middle market are usually standard dwellings on residential lots and vary from circa 1930s colonial dwellings to modern brick homes.

In the long term, it is considered likely that this market may stabilise when construction of the new Pacific Highway concludes and economic activity also decreases. However, with the market remaining affordable, rental returns being historically steady and proximity to desirable beach localities, it is unlikely that we would see a dramatic downturn in the market.

Coffs Harbour

Being a regional coastal location, Coffs Harbour does not share the same land characteristics as major populated locations with defined inner and outer rings, but rather town and country which is only separated by a five to ten minute drive in most cases. The middle ring may be defined as the suburban strips between the beachfront and rural residential suburbs. These areas are where we see high volumes of activity appealing to first home buyers trying to get a foot in the market, investors and upgraders seeking a larger family home. Not surprisingly it is this market where we see the mid value ranges being achieved. House values on average range from $450,000 to $650,000 with units in the $250,000 to $450,000 bracket.

Buyers in this bracket can expect to purchase good quality five to 20 year old 3- or 4-bedroom, 2- or 3-bathroom homes on varying size sites within one to three kilometres of the Coffs Harbour CBD and local beaches. Standard new project style 4-bedroom, 2-bathroom homes range between $500,000 and $600,000 in the smaller central Coffs estates and southern suburbs of Bonville and Boambee East. Homes in the more modern upmarket estate known as The Lakes at North Boambee Valley (two kilometres from the CBD) start at around $600,000 for new 4-bedroom, 2-bathroom homes.

Traditionally the established areas south of Coffs Harbour at Boambee East and Toormina were the more affordable localities offering accommodation ranging from modest 3-bedroom, 1-bathroom homes to the larger 4- or 5-bedroom family dwellings of five to 30 years of age. These localities were seen in the past as less desirable compared with Coffs Harbour (eight kilometres north), however recent market evidence has shown these areas have increased in popularity and value with median house prices catching Coffs Harbour. This is primarily due to the location factors such as being close to the Pacific Highway for access north and south and within two to three kilometres of the popular Sawtell Beach and shopping precinct. The major shopping centre at Centro Tormina is underpinned by K-Mart, Woolworths and Coles. Schools include primary and public high schools plus nearby St Joseph’s College and Southern Cross University.

This market sector was a strong performer in 2017 with average increases in the order of 5% to 30% in some cases. It is the more affordable end of the market where we see the most pressure. Rental values have also increased with strong levels of demand and balanced supply. It is interesting to note that based on median statistics from realestate. com.au, since 2011 the median house price in Coffs Harbour has risen from $350,000 to $477,000 whilst rental yield has declined over this period from 5.2% to 4.4%. Increased prices have eroded returns and coupled with the low interest rate climate, is seeing investors prepared to accept lower returns.

The Coffs Coast area has a geography which allows the middle ring a far better lifestyle than the city dweller, generally located within five kilometres of the beach and easy access to services, schools and shopping. It is these lifestyle factors which appeal to a range of buyers from first home owners, investors and upgraders. This market will only continue to grow over the coming years due to population migration and improved road infrastructure including the long awaited Coffs Highway bypasses which hopefully will get the green light in the coming years.

NSW Mid North Coast

This month we will look at properties that sit between the inner and the outer areas of the main Mid North Coast town of Port Macquarie.

Properties within this circle are tightly held and sought after due to their proximity to amenities including local beaches, shopping centres and public facilities.

Regional NSW

The eastern localities along the beaches as always have proved popular and areas such as Shelley and Nobby’s Beach have seen good price growth, with many local residents opting to renovate existing dwellings rather than purchase elsewhere or build.

Dwellings within these areas are primarily 3- or 4-bedroom brick and tile dwellings with a single or double garage and range in age from the 1960s through to the late 1990s. Prices range from $500,000 through to $900,000 if renovated and well located or have ocean views.

While Port Macquarie as a whole has seen price growth, these beachside suburbs have shown greater capital appreciation than other Port Macquarie localities. Investors have also been active in these areas as they chase good yields with greater potential for capital growth than the outer fringes.

Whilst on the outer fringes we are seeing more of a stabilising market due to further subdivision development and new builds, allowing the purchaser more options. The additional works to Charles Sturt University and increasing student numbers to follow should see a tightening of the rental market in these areas.

In other Mid North Coast areas the trend seems to be similar, depending on the market forces for that particular area. Middle ring residences seem to be a positive purchase or a good option for investors and home owners alike on the Mid North Coast, however we caution any potential purchasers to conduct their due diligence prior to purchase.

Southern Highlands

As mentioned in previous editions of the Month in Review, the market up to $1.5 million generally remains liquid across the Southern Highlands. The middle ring is defined more by price point up to $1 million than proximity to the townships and villages of the region and includes Bowral, Moss Vale, Mittagong and Renwick. Typically at this price point, dwelling types are 3- or 4-bedrooms on land size from 500 to 1000 square metres. The rental market remains strong in the area, with stock shortage across the townships being common. At this price point, the majority of purchasers are owner occupiers, either Sydney or locally based. The outlook for 2018 is to see more housing stock coming on line with the ongoing development at Renwick and newly released precincts such as Retford Park (Bowral), Throsby Views and Moss Vale, which will add much needed capacity to the rental market.

According to Corelogic, the Southern Highlands and Shoalhaven region ranked second in the top ten national regional markets for capital growth for the 12 months to December 2017(http://datawrapper. dwcdn.net/EXj2P/1/?abcnewsembedheight=350). The outlook for the Southern Highlands with respect to sustained growth looks strong with the New South Wales Department of Planning having slated priority land release precincts (Wilton Junction) and civil infrastructure (Badgerys Creek) in reasonable proximity to the region.

Bathurst/Orange

The vast majority of home sales in the central west are between $300,000 and $600,000. First home buyers may typically look around the $300,000 mark which could keep repayments with a 20% deposit below $1,400 a month at current interest rates over 30 years. Broken down further, the total sales for the past six months for postcode 2795 (Bathurst and surrounding suburbs) are as follows:

$300,000 – $350,000: 51
$351,000 – $400,000: 66
$401,000 – $450,000: 58
$451,000 – $500,000: 52
$501,000 – $550,000: 31
$551,000 – $600,000: 17

(source: RPData)

Few sales under $400,000 are of new dwellings with the majority being established dwellings of various ages. Any new dwellings in this price bracket are typically a compact 3-bedroom home on a land area of less than 500 square metres. New 4-bedroom dwellings with around 700 to 1,000 square metres of land can now be typically found in the $450,000 to $550,000 price bracket. Most units go for under $400,000.

In regional areas, the geographical distance from the CBD, otherwise known as the shops, has an impact, but it’s not as strong an influence on property prices as for say Sydney or Melbourne with their density of employment and available services. What matters more is the quality of development surrounding a particular property and the market demand for locations based on other factors such as the aesthetic appeal or social considerations. No property is an island (unless it is an island) which is the basis for positive covenants in new developments to maintain a certain price standard. Similar surrounding property prices can be attractive to purchasers seeking an area with other people of similar means. Modern floor plans and building techniques are also attractive. Whilst there are developments where house and land packages exceed $600,000 with larger land areas and minimum size build covenants, they are a minority of the market due to the median incomes in the area, or may not necessarily be everyone’s cup of tea even if money isn’t a factor. A lot can be said for:

  • a renovated older style house ten minutes walk from the shops such as 216 Rocket Street, Bathurst for $545,000;
  • a modern 2013 house on a quarter acre at 7 Parer Road, Abercrombie for $480,000; or
  • a circa 1960s house with original features on seven hectares of light bushland 15 minutes from the middle of Orange at 1,000 metres above sea level, with a good chance of snow, such as 50 Mount Lofty Road, Nashdale for $505,000.

Tamworth

The middle ring in the Tamworth area refers to the small outer lying suburbs of Kootingal, Attunga, Moonbi and Duri, as well as the middle price bracket of $300,000 to $500,000.

In relation to the suburbs, in particular Kootingal, there has been a noticeable increase in new subdivisions as well as an increase in prices for larger family homes. This is driven primarily by cost, with a near new 4-bedroom, 2-bathroom home setting you back less than $400,000, saving up to $50,000 when compared to similar homes in the inner suburbs. For example 3 Lily Close, Kootingal, a four year old dwelling sold for $356,000. This sector is driven by both investors and owner occupiers with investors chasing yields of 5% to 6% and owners (primarily first home owners) looking to get a foot in the door at a reasonable price.

When looking at the middle ring within the inner suburbs you are typically looking at older 3-bedroom, 1-bathroom dwellings (lower end) and 4-bedroom, 2-bathroom dwellings (higher end) that have been renovated. This market is typically driven by the owner occupier who is looking to get within a certain area, however investors are certainly active in the lower price bracket. Rentals in this market have remained stable over the past 12 months, with lower yields than those of the outer suburbs.

Over the course of 2018 we expect the outer suburbs to continue to increase in popularity as the market continues to rise in the inner suburbs. We believe that first home owners and investors will be the most active within this price bracket, with the low prices and good rental yields being the main driver.

Albury

The middle ring in terms of the Albury property market can be viewed as the middle price bracket of $350,000 to $480,000 and geographically spans every direction from the city centre, but is concentrated most heavily in Thurgoona, Glenroy, some parts of Lavington and North Albury, West Albury and the newer parts of East Albury. In Albury there is a great deal of choice in the middle ring in regard to type of housing stock with the predominant demographic being families. First home owners can choose an established home, even a character dwelling (from $300,000 to $400,000) or opt to build a new home with little change from $400,000 with increased land and build costs in the past 12 months. In pockets, such as near the hospital in East Albury or Charles Sturt University in Thurgoona, there might be higher investor interest in the middle ring price and location, although the middle ring in Albury tends to be higher priced than many potential residential development sites in less sought after locales.

Demand is driven by families starting out or possibly doing a modest upgrade or for new homes, demand from the same purchasers with the addition of some investors. The increased land and building costs in suburbs such as Thurgoona makes some of the daggier established homes good value with established landscaping and other ancillary improvements such as a pool or shed already in situ. There is renewed interest in Norris Park in Glenroy, Eastern View Estate in East Albury and the older, more upmarket areas of Hamilton Valley. These properties represent good value. Many of the solid 1980s homes could not be rebuilt for the purchase price and often are immaculate but dated, which is not hard to change. The 1990s are aesthetically more challenging but established gardens and an update can eradicate the pastel palette overload and with the tree lined streets of Central Albury and parts of North Albury now well and truly out of the middle ring price bracket, not everyone has the risk appetite for the renovator’s delight, with character and location more often priced into the asking prices. The middle ring still represents good value in our regional city and it will be interesting to observe the effect of continued new home growth and development in Thurgoona and how the remainder of the mid range areas perform. It’s all about trees in Albury, the bigger the better, so the middle ring has some in the established areas but the mid range price point also takes in greenfield estates. It takes a long time to grow trees. Young families have that time; the older families and retirees not so much. Given the patience and general awareness levels of the market, heading for the trees might just trump the shiny new houses in the long run. Might.

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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.