The month in review: Regional NSW
By Herron Todd White
The Illawarra property market has continued to progress well into the new year and continues to record strong sales activity due to the continued low interest rates.
Demand is still outweighing supply in many areas and the low interest rates are creating a competitive market environment. Agents are advising that many properties are selling for asking or above asking price, often prior to auction. The most difficult process for agents at the moment is obtaining listings to sell. Moreover, there are no real signs that certain sectors of the market are beginning to soften and slow. Competition between buyers is strong and often recent sellers are finding it hard to secure a new property that matches their expectations in
terms of quality, location and price.
When the market softens, as we know it will, it’s often the unique rural residential and top end properties that historically are the ones that will be hit the hardest. It’s also the popular in vogue suburbs where the boom cycle is being experienced that is affected most.
Buyers are currently paying a premium for these suburbs, most notably older renovated homes located close to the beach and Wollongong CBD. Valuers are also noting that investors are paying top price for new units in the Wollongong CBD where some are using their super funds to acquire the purchase.
Modern new duplex homes in Flinders and Shell Cove are also achieving strong sales as buyers are paying high prices for obtaining new properties in these areas. These sale prices might not be achieved in the future once the home is no longer in new condition.
With more large unit residential developments planned in the Wollongong CBD in the near future and an abundance of supply in the new estates of Flinders, Shell Cove and Brooks Reach Horsley, these sectors may feel the effect once the market softens. There are not many poor performing suburbs at the present time, indicating how good market demand actually is.
The best performing suburbs in the Illawarra area at the moment appear to be in the north, starting at Fairy Meadow, Towradgi and East Corrimal but we are also seeing more top end sales in the northern beaches around Thirroul. In the south it’s the established suburbs of Shellharbour, Windang and Warilla that have achieved significant increases in value. These, together with Kiama to the south, experienced a serious uplift in prices in the past 12 months.
More and more we are seeing investors entering the market and pushing up prices often at the expense of first home buyers, who are slowly being pushed out of the market for standard dwellings close in. Investors are also using their superannuation to purchase property.
Overall we see a steady 12 months on the horizon, buoyed by low interest rates. We do however caution that if unemployment increases in the area, growth will certainly be pulled back and from our experience and observations over a number of property cycles, it is the upper end property values that get hit hardest.
The Southern Highlands residential property market has seen a strong start to the year, with keen market activity closer in to the town centres of Bowral, Moss Vale and Mittagong in the $750,000 to $1.2 million bracket, which has been trading briskly with short selling times. Buyers are a mix of retirees coming off larger land holdings within the district, or from Sydney and Canberra as well as families moving within or into the area. The preference is for smaller blocks within close proximity of established infrastructure. For the year ahead, we anticipate this trend to continue. The rental market in the Highlands has increased over the last 12 months and remains brisk.
There continues to be solid demand for vacant land and house and land packages throughout the Highlands region. New construction is mainly concentrated in the Renwick-Mittagong precinct and on the outskirts of Bowral and Moss Vale with new house and land packages in the $450,000 to $650,000 range. With the historically low interest rate environment we would expect this trend to continue for the current period.
The prestige upper end of the market (over $3 million) is best described as fragmented, albeit with an increasing number of sales being recorded in the region over the past six months, driven in part by purchasers from Sydney and vendors meeting the market. These properties typically comprise larger land holdings of 10 hectares plus located on the outskirts of the townships, appealing to the rural residential lifestyle market.
The market in the regional city of Goulburn was stable throughout 2014 and we expect it to remain steady throughout 2015. The Crookwell Village and rural residential property markets have also been stable and we predict these markets to also remain steady throughout 2015. The rental market in Goulburn declined slightly over the course of 2014 as some tenants have returned to the Canberra area.
The Dubbo residential property market continues to remain strong after recent interest rate reductions. There is still strong demand for residential property up to $400,000 from both investors and owner occupiers and strong demand for vacant residential land. Medium density and unit developments are still very popular and selling within shortened marketing periods and often prior to advertising.
We have also seen some strong rural residential sales in early 2015 which could be attributed to the interest
rate reductions and increased affordability in this price bracket. A 25 acre property at 14L Angle Park Road, Dubbo sold at auction recently for $872,000 with ten registered bidders. This was a strong result and shows there is still demand for good quality rural residential properties with a reliable water supply. However there have been very few high cost sales for prestige residential dwellings and this price bracket (above $500,000) seems to have plateaued.
Properties with golf course frontage are still popular and highly sought after as are properties in Regand Park Estate. Interest rate reductions may increase demand in this sector in coming months but we have not seen any impact so far in 2015.
It is clear that even the major lenders have swung from a risk and caution approach to a profit and volume approach when valuers are being spruiked as potential mortgage referers. “Oh wait, I understand there may be a conflict of interest, but what about your partner, your friends… do you have a cat?” Sell, sell, sell! Interest rates have never been lower, but are the recent reductions in the interest rates seeing anyone beating a path to their door west of the Great Dividing Range? What if these graces being bestowed upon the public do not find traction? Will they be like a bride left at the altar?
Perhaps the last time there was a similar vibe from lenders was around 2008. Anecdotally however, the vibe among potential borrowers in the region seems to have become wary of the benefits of the linguistically plausible yet potentially flawed position of a high debt to income ratio. They may not be seeking to borrow as much as previously, if at all.
Grandmothers across the country have sensed the receptive ears of an audience once lost to easy money and are extolling the virtues of saving for that desired item rather than buying it on credit, although that’s an almost impossible feat to do for a house these days. Depending on your perspective they may be more damaging to the global credit economy than Mr V. Putin. So how does this translate to the property market in this neck of the woods?
Quite possibly it may be a case of who cares that the interest rate is now 2.25% and not 2.5% or 3% or 4%. It has been so low for so long now and experts are suggesting it will continue to remain low for some time to come, so why the rush? Speculative investment in residential property in this region is not anywhere near the levels in Sydney for example.
When there has been increased investment it has typically correlated to other factors such as employment, most recently experienced during the mining boom. Values also rose and have accordingly settled to levels more consistent with prior to the boom, along with levels of investment. It is interesting to note that interest rates were higher during that time than they are now. Speculative investment appears to be the main driver of the Sydney market at present with recent auction rates above 80%. This region is less affected by much investment from various sources and will continue to be dominated by the domestic owner-occupier
market, which is typically much more price sensitive.
Property values continue to be more aligned with traditional attributes such as location, size, quality of construction, utility and surrounding development, attributes which may be becoming less important considerations in the Sydney market.
This is because there are so many more options available to purchasers in this region. Shop around and you may be surprised what money can buy. But with interest rates set to fall even further, grandmothers across the country may yet face some stiff opposition from the temptation to buy, buy, buy!
NSW Mid North Coast
The latest interest rate cuts have again fuelled market demand in the residential sector, however this has yet to be converted into sales volumes. This is mostly due to the current lack of stock available for sale on the Mid North Coast rather than any hesitancy by prospective buyers. Agents are reporting strong enquiry and buyers are regularly competing for the same properties.
Our market has been bullish for several months now, although Christmas was its traditional slow period. We have noted in recent reports that both sale rates and values have been increasing across the regional centres including Port Macquarie, Taree, Forster/Tuncurry and Kempsey.
The lower rates have also increased consumer confidence. We continue to see investment properties and mid-value properties ($300,000 to $500,000) in high demand, with limited stock and rising rentals continuing to fuel investor demand. The lower interest rates will only fuel it further.
These historic low interest rates are continuing to increase demand across the residential market, albeit in the low to mid range properties ($300,000 to $600,000). The higher value properties and high end investment units and properties have continued to remain slower, although we are starting to see slight increases in demand and possible shortening of selling periods in these market segments.
As always, the danger of extremely low interest rates is how investors and purchasers factor in future interest rate rises. We feel that any interest rate rises are some way off and general market increases and increased rentals may somewhat offset interest rate rises and increased loan repayments in the future.In summary, we expect the latest interest rate cut to continue to fuel our market further and we remain positive and optimistic for 2015.