The month in review: Regional NSW
By Herron Todd White
The Southern Highlands residential property market has been increasing in both volume and price activity since late 2014. We saw a noticeable increase in activity by investors in 2015. The Highlands property market is heavily influenced by the Sydney property market with many buyers relocating from Sydney to the region. Now that Sydney has slowed and softened, the Highlands market, while currently still increasing, is also anticipated to slow.
The Southern Highlands features many older style homes that are well located near the town centres of Bowral, Mittagong and Moss Vale. Villages such as Robertson, Burrawang and Bundanoon also feature many older character homes. Heritage can have varying protective restrictions on the dwelling. The most minimal is a heritage conservation area, which protects the façade of the home and is the least restrictive. There is also a heritage classification of local significance, which protects local dwellings of importance to the local council area. A local heritage classification or heritage conservation area are not considered to be detrimental. Usually the older homes offer beautiful period features and were high quality builds. These older character homes are generally highly sought after both in terms of these period features and good locations. The main architectural periods evident are Federation, the inter-war (eg. California bungalow) and postwar. Generally, renovating older homes can really increase the capital value, especially for properties that are well located near town and city centres.
Once the Heritage restrictions become more onerous such as regional, state or national heritage significance, the broad market appeal is reduced. This is mainly due to the high cost of renovating these homes. Examples of these restrictions may be sourcing 100 year old timbers or engaging highly skilled tradespeople who specialise in intricate carpentry methods that match the architectural period.
The Southern Tablelands region residential property market is also starting to increase again. There is still Sydney investor activity and some Canberra commuters fuelling this positive trend. There have been good land sales and new home construction activity in the new and modern residential estates on the fringe of Goulburn, including the Belmore Estate, Merino Country Estate, Run-o-waters, Snowgums Estate and the Mistful Park Estate.
Goulburn, Australia’s first inland city, is rich in heritage architecture with many period styles including colonial, Victorian, Federation and postwar. There are also good examples of Federation and California bungalow period homes evident in the smaller villages and townships of the Tablelands.
NSW Central Coast
Situated between the Sydney and Newcastle regions, the Central Coast region is known to offer a lot to its residents and visitors. Some of Australia’s best beaches are here along with other waterways, natural areas, affordable real estate, great shopping and schools – the list goes on. In short, it’s a great place to be.
The one thing missing from the region however is an abundance of heritage properties, buildings, dwellings or places of interest. We seem to have overlooked this by comparison to the regions north and south of us. Of course the region is not devoid of heritage listings, but it isn’t top of mind or the life purpose of some.
There are no rows of listed workers cottages on cobble stoned streets, suburbs filled with fine examples of Victorian or Edwardian dwellings and harbour foreshore districts etc. In fact, in preparing this submission we had to dig through the council websites in search of heritage listings.
Of course there are plenty of listings (we can say that now), but they are scattered across the region and to be honest, this region would be out of place sitting at the big table were a serious discussion to be had on heritage listings. Some might say the under representation or lack of preservation is a bit shameful when considering the region’s role in the development of New South Wales – others would disagree.
Styles and architectural movements are to be found in the heritage registers and when tracing the recent sales of these properties, there does not seem to be any quantifiable differences in the prices paid or not paid for them.
Across the region, heritage listed dwellings broadly fall into the older waterfront or near waterfront areas, rural residential markets or around the older transport interchanges and original business centres. They can range from the basic fisherman type dwellings, workers cottages or original homes on the remnants of the estates of our pioneers.
When tracing the sales of these properties over recent years, it seems to us that the sale prices achieved for heritage properties are determined by the location, asking price and property condition. In other words, the characteristics of the heritage listed property market mirrors that of other property markets – it’s about value to the buyer and seller. Instances will no doubt exist though of buyers securing a heritage listed property at any cost to satisfy a pursuit or purpose or those purchased at bargain prices, but we are unable to identify any recent examples and this may be further evidence that the market for heritage listed properties behaves in ways similar to other market segments.
NSW Mid North Coast
In the main mid north coast town of Port Macquarie, there are very few heritage properties remaining. Although Port Macquarie is one of the oldest settlements outside of Sydney, extensive growth and redevelopment during the 1960s and 1970s resulted in most of these centrally located and beachside heritage style dwellings being demolished and redeveloped. This is also evident in most of the other coastal towns along the mid north coast.
The inland towns in the region, notably Wauchope, Kempsey and Taree have managed to keep many of their older style heritage homes intact.
These homes have remained in good demand as they are generally centrally located and close to services. They are highly sought by tenants (due to their central location) and receive good weekly rents, however for investors, this good demand is tempered by the additional maintenance costs associated with older homes.
Along the mid north coast there is only a very small percentage of dwellings with an actual heritage listing. These properties are generally sought by owner-occupiers who wish to live in this style of dwelling and are prepared to continue with the upkeep required, which can be considerable in some cases.
Heritage dwellings range from 1840s cottages of rammed earth construction (often called pisé or cob) to Georgian, Edwardian and Victorian dwellings. Miss Trail’s House in Bathurst is part of the National Trust with original colonial pieces. Across the road is a modern dwelling built in 2004.
There is a consistently strong market for heritage properties in good structural condition. These properties may be listed as an actual heritage item, but a much larger number are captured within general heritage areas and may not be subject to the same regulations. Emotion can play a larger than usual role in making the decision to purchase a heritage style property. Many people are drawn to the architecture and aesthetics of a dwelling built in a previous time; others feel a sense of history. Valuers just want to know what people are willing to pay (but we secretly like these things too).
If such a property requires renovation, an emotional attachment can help to motivate an owner to outlay capital that may not be realised until perhaps the medium term. The cost to renovate, extend or build new in an older style can result in costs above the market rates to buy an existing heritage property in a similar condition. While increasing property values can catch up to the required value of purchase price plus renovation costs over time, the time frame can be uncertain. Throw in the potential problems and unforeseen costs that can occur with older dwellings and it makes renovating for profit relatively uncommon and more so a labour of love. The good news is that renovation activity in Orange and Bathurst is increasing, partly due to low interest rates, but with few of a mind to sell shortly after completion, the renovations need to be timeless and less indicative of current fashion which may date in the near future. Fewer capital gains in surrounding smaller towns make restoration less economically feasible in general and therefore less common.
Heritage area buildings are popular with tenants due to location, but it seems very few have been renovated to a high standard as the rental return to justify the cost may not be achievable.
When we talk about heritage property in Tamworth we talk about the Victorian style properties which are predominantly located in East Tamworth and parts of West Tamworth.
Price points vary greatly depending on location within suburbs and are often dependent on the land. Within East Tamworth prices generally start at around $450,000 and extend to millions for a large house, land and extensive renovations or site improvements. For a good condition standard Victorian dwelling, $600,000 would be expected.
Most buyers will look for double brick homes with modern interiors that retain the period features and charm. It is hard to over capitalise with renovations, however renovations that are too modern and cause the property to lose its period charm do not see the capital gain of those that retain the charm. A well executed renovation will see good gains.
Tenant demand for these properties is low compared to a standard modern dwelling, with a lower rental return also evident. Heritage property generally appeals to a smaller market due to its looks, often higher maintenance and higher price point. However there is still consistent demand and supply.
NSW North Coast
Byron Bay and Hinterland Region
Heritage listed properties in the Byron Bay and hinterland region are few and far between. There is minimal product in Byron Bay, however there are more heritage listed properties in the hinterland region, particularly in Bangalow and Mullumbimby. These include original homesteads on larger properties and original Federation and cottage style dwellings.
Heritage listed properties in Bangalow and Mullumbimby are held in high regard and when revamped and renovated, particularly maintaining the character of the property, can fetch a premium. In Bangalow, this can be between $800,000 to $1,200,000. Character is the main draw card for potential buyers and even for properties that are dated and require revamping, buyers are seeing the potential the character of the property can add in value, therefore adding a premium to these properties too.
Heritage listed properties in the Byron Bay and hinterland region are considered harder to overcapitalise on due to the premium that buyers are willing to pay for them. Revamping a heritage listed property in Bangalow would add substantial value to the property and therefore make it much harder to over-capitalise, whereas Mullumbimby would have higher potential to over-capitalise.
There is tenant demand for most listed properties in this region, however no premium is being paid for heritage listed properties as rental prices are in line with conventional style housing in the region.
Townships in the Clarence Valley that have heritage listed properties include Grafton with its Victorian era and Federation style homes and Maclean with its Federation style homes and cottages. Price points for heritage listed properties in the region vary. Arcola, a fully revamped Federation style property at 150 Victoria Street in Grafton sold for $895,000 in December 2013. At the other end of the spectrum, there was a reported sale in Maclean of a derelict workers cottage at 11 Argyle Street for $155,000 in June 2015.
Often in the Clarence Valley heritage listed properties tend to sit on the market for some time and can become derelict. There is little interest in renovating heritage listed properties due to the potential to over-capitalise which is very easy to do. The only real potential to add value to a heritage listed property when revamping is to purchase at the very low end, such as the Maclean property. However, added value after the revamp would not be extensive and there is still potential to over-capitalise.
Buyers purchasing heritage listed properties to revamp tend to be those who appreciate the unique character of the property, have the money to restore and tend to want to occupy the property. This is the case for 54 Victoria Street, Grafton which was originally a commercial office building. The current owners are converting the property into a residential house for themselves.
There is limited tenant demand for heritage listed properties and investors are not purchasing these types of properties.
The impact of a property being heritage can have both a positive and negative effect. If the heritage listed property is revamped and the original character is heavily featured throughout, then a premium will be paid. However, purchasers will not pay a premium just because the property is heritage listed; the property really needs to be exceptional.
The majority of the heritage style housing within Lismore City is primarily situated within close proximity of the CBD and in the popular suburb of Girards Hill.
Typically, such housing development is characterised by timber clad homesteads built circa late 1890s through to the 1930s. Complete with high ceilings, timber fretwork, picture railing and polished timber floors, the overall impression one can get from entering these treasures is one of awe (if done right!).
The popularity of Girards Hill can, in part, be attributed to Lismore City Council’s designation of these areas under various heritage conservation areas.
Some may view this as a negative. However, sales evidence over time has indicated that to the like minded buyer or owner occupier, the heritage factor is a resounding positive. Sure, there are maintenance issues associated with older style timber clad homes compared to modern brick and tile product, however to the heritage enthusiast, these older style dwellings and associated maintenance costs are well received in the market place.
For tenants, the main draw card of Girards Hill is its close proximity to the CBD and shopping facilities, parks and schools.
One of the key elements to consider when purchasing older style homes in these heritage conservation areas, particularly dwellings that need a bit of TLC, is that any major internal or external renovation will likely have to meet certain criteria and require close monitoring of the local Development Control Plan (Chapter 12) and Schedule 5 of the Local Environmental Plan. The language of Council is rather strong in matters relating to maintaining the heritage character of the area and give very little wriggle room to negotiate.
However, it is precisely these restrictions that have helped maintain the suburb as a purveyor of fine craftsmanship. Let’s face it, these buildings were constructed to stand the test of time with extensive use of hardwoods and strutting, unlike the cheaper pine products of today.
Providing the renovations are not over-capitalised, well renovated, large heritage homes in Girards Hill are able to attract prices in excess of $400,000 with small but quirky homesteads achieving circa $300,000 to $350,000. Throw in a pool and extensive landscaping and some of these turn of the century homes can reach $500,000 plus. In summary, there appear to be more positives than negatives associated with heritage style homes within Lismore. This makes the valuation task all the more important, that is, to ensure like is compared with like in ascertaining a market price, because a pear can never be an orange.
To quote the local council, “Heritage consists of those places and objects that we as a community have inherited from the past and want to hand on to future generations. The heritage of NSW is diverse and includes buildings, objects, monuments, Aboriginal places, gardens, bridges, landscapes, archaeological sites, shipwrecks, relics, bridges, streets, industrial structures and conservation precincts. The Coffs Harbour area is relatively young compared to many other areas of the state, however Coffs Harbour’s heritage includes many of these elements.”
While these elements do exist the market for heritage homes within Coffs Harbor is thin with limited product available compared to older established regional and metropolitan localities. To find the more classic heritage style you would have to venture into the rural areas and townships. Here heritage means colonial of mostly timber construction around the turn of the century with character features including VJ timber linings, bull nose verandahs, high ceilings, pressed metal ceilings, fretwork, ornate cornices, ceiling roses etc.
The one locality of note which features many properties with this form of architecture is the picturesque township of Bellingen, located 35 kilometres south-west of Coffs Harbour. This area is very popular with Sydney and greater metropolitan buyers looking for the green change. These purchasers are specifically after character homes close to the town centre with prices ranging from $450,000 to $750,000. The majority of these heritage listings are local ones which do not have as great an impact on the ability of the owner to undertake renovations or improvements although any improvements would require the normal council approval.
Analysis of sales evidence within central Bellingen indicates that premiums are being paid for period style homes if located within a heritage conservation area or marked as a general heritage item especially if there is a story or name associated with the property. These sales reflect a higher than normal added value for the improvements due to the character nature and heritage appeal.
Any renovation work undertaken to these properties will come at a higher cost and the ability to recoup these costs on re-sale will depend on the greater economic environment at the time of sale and the quality of work undertaken. Regional localities tend to suffer from the lack of high paying work available and limited number of local purchasers able to secure property above $650,000, and are therefore more reliant on out of town purchasers. Once the cost of the heritage home has gone over this level the buyer market thins and the ability to recoup the cost diminishes. In short one would not take on this type of project for the financial rewards; rather it is an emotional exercise aimed at preserving the character and living the history of the property.
Rental returns also are not commensurate with the cost associated with these homes as again the greater economics of these regional areas dictate a lower income base and ability to afford rents above $450 per week. From a valuation perspective we acknowledge that premiums are attached to character homes which often come with heritage listings and for the most part supported by sales of similar type properties. Heritage listings are not seen as a negative, although valuations undertaken for mortgage security purposes will incur greater risk comments alluding to the extra cost associated with these types of homes and limited buyer market once value levels exceed local market tolerance.