Regional NSW

The Smartline Report – October Edition

The month in review: Regional NSW

By Herron Todd White
October 2016

Southern Highlands
The Southern Highlands residential property market continues to see strong activity from local and out of region buyers. The most active market is close in to the townships of Bowral, $700,000 to $1 million, median $771,0004 (+13% 2015), Moss Vale, $450,000 to $700,000, median $508,000 (+15% 2015) and Mittagong, $550,000 to $800,0001, median $605,000 (+14% 2015), where agents report a severe shortage of listings. Buyers are moving to the Highlands from greater Sydney, North Shore and the Hills District in particular, seeking a lifestyle change with accompanying economic benefits. Pleasingly, an increasing proportion of purchasers are owner occupiers and families. Properties will be a mix of modern well appointed, well maintained renovated older style dwellings. The emerging precincts on the outskirts of townships such as Bingara Gorge (Picton), Renwick (Mittagong) and Darraby (Moss Vale) are also trading at a brisk pace, with price points from $550,000 to $900,000 where improvements will be modern and contemporary.

There is an increasing amount of property across the Southern Highlands in the $2.5 million plus category, primarily the rural lifestyle market, (ten hectares plus) that can remain on the market in some instances for up to two years. These properties are generally located outside the main townships in the hamlets of Exeter, Bundanoon and Sutton Forest and are thinly traded, with purchasers more specific as to their requirements, eg equestrian facilities, house and guest accommodation, landscaping or water being some of the selection criteria.

Southern Tablelands
As with the Highlands, there is now a mix of property types in the Southern Tablelands, Goulburn region. The traditional well located older homes are still sought after, however there has also been a push for modern family homes. Land releases are continuing in North and West Goulburn and land sales are increasing in the new and modern residential estates including Belmore Estate, Merino Country Estate and Mistful Park Estate. The most active market is the $200,000 to $600,000 sector, median $350,000 (+5% 2015). There is also good activity in construction of new homes. Goulburn is rich in heritage architecture and there is good renovation construction activity in these older character homes.

The main buyer profile is Sydney based investors tapping into their equity as well as tree change purchasers from Canberra. In general the region is enjoying a strong level of sales activity, although the top end properties ($1 million plus) are trading at a slower pace then the sub $750,000 market.

The residential property market in Newcastle and The Hunter over 2016 has exhibited mixed performance throughout the different areas of Newcastle, Hunter, the Upper Hunter and Port Stephens. These locations are in substantially different stages of the property cycle, which could overall easily be described as two speed. Considering our patch as a whole however, it is the upsizer who is dominant, this being the hard working, 30 to 40 year age group with not enough room in the current home to accommodate the new exciting addition to the family.

Let’s start with Singleton, which is still experiencing declining prices with little to no positive change expected in the near future. There are very little to no investors prepared to lose money, nor could they easily obtain finance if they wanted to. Agents have commented that purchasing in the area is limited to a needs only basis with their vendors accepting losses. Purchasers are upsizing at a discounted price point due to the over supply of property within the market. The price point for a typical 4-bedroom, 2-bathroom home ranges between $400,000 and $500,000.

Suburbs surrounding Maitland including Chisholm, Thornton, Gillieston Heights and Clifftleigh are experiencing a substantial increase of new residential housing development. This market is seeing a combination of investors competing with first home buyers who can still obtain their grants for newly built residences. On average a typical newly built 4-bedroom, 2-bathroom property would be within a price point of between $500,000 and $600,000.

Port Stephens has a more specific type of purchaser, with higher rates of investors and holiday accommodation. This area is also experiencing high demand for land for new residential development. Agents have stated that purchasers are looking for properties that can be knocked down due to the limited amount of new land available.

The price point which is most favoured within the Newcastle patch is the 30 to 40 age group of second home buyers and upsizers. This demographic of families is purchasing their next home within the price point of approximately $500,000 to $700,000 which will purchase the extra bedroom and second bathroom within the desirable 20 minutes of the Newcastle CBD. Specifically it is the well performing suburbs of Hamilton, Mayfield, Lambton, Adamstown and Charlestown where capital growth for 2016 is between 5.3% and 10.5%. There is a combination of factors as to why this price point and demographic is the most active, which also goes hand in hand with why the Newcastle property market is at peak levels. Investors are continuing to experience difficulty entering the market due to lending restrictions, even though there is confidence in property growth. First home buyers are having very little success securing a property as the lower end of the market is also in high demand from the same 30 to 40 years age group of buyers who have the skills and experience to extend and renovate.

NSW Mid North Coast
This month we are looking at the areas of the residential market that are the most active and slowest on the Mid North Coast.

With the federal election now over and an interest rate drop of 25 basis points in August, the property market in Port Macquarie has again shown signs of gaining momentum. Real estate agents report that they are scratching the bottom of the barrel for listings.

Therefore demand within the Port Macquarie township mainly between the market range of $350,000 to $450,000 for 3-bedroom older houses, 2– to 3-bedroom villas and new dwellings within the outer suburbs close to the university have been hot, hot, hot with sales being achieved either prior to advertising or within days afterwards.

Recently we have noticed that property prices have started to become inflated as buyers compete for properties. This has spurred sales of vacant land within the outer suburbs of Port Macquarie and in the small surrounding villages with many new subdivisions close to being sold out prior to being registered.

Subdivisions at Crestwood, closer to Port Macquarie, are seeing higher priced and higher quality dwellings being built on these lots fuelling the outer subdivisions such as Sovereign Hills and Lake Innes where a more reasonably priced lot and dwelling can be achieved.

We have also noticed an increase in construction of dual occupancy style dwellings. These generally comprise a 3-bedroom, 2-bathroom dwelling with an attached 2-bedroom, 1-bathroom flat for the owner’s parents or as a separate rental.

We suspect that this momentum may continue for some months, especially with the Christmas holiday season still to come.

A quick RP Data search shows that around three quarters of all residential sales are between $300,000 and $500,000. We would expect a correlation between this sale price and the average income in the area. The majority of home-owners are able to service mortgages at these prices. The size to which dwellings can be built is determined by this limitation in relation to the cost of construction. In this bracket properties range from slightly dated 60 year old 3-bedroom, 1-bathroom dwellings to modern brick veneer 4-bedroom dwellings with an en suite. At $500,000 such a dwelling could comprise over 200 square metres of living area alone. A new limitation is then reached in that there is a point when a dwelling can be too large for practical purposes. That corresponds with why the majority of properties at $600,000 or more comprise small acreage.

At the moment anything under $300,000 is being snapped up as soon as it is available. The reason that there are not as many sales in this price bracket is because fewer become available. Likewise although new dwellings continue to comprise a large percentage of sales, this is influenced by the lack of listings that are currently becoming available in established areas. This would also skew the areas of higher activity, but not necessarily the level of change in value. This is further influenced by the personal circumstances of purchasers determining the time frame available to allow location to be as important a determinant as the need for accommodation.

Coffs Harbour
Coffs Coast district has a fairly low economic base with a limited amount of high paying work available. As such the majority of the pressure for property is on the affordable sector being sub $500,000. At this price pint the majority of purchasers are investors and first home buyers or to a lesser extent people locating to the area. Rental demand is high which translates to strong rental returns making Coffs Harbour an attractive place for investors.

Typically Coffs has been a fairly transient community which is why rental demand is high. Recent major infrastructure upgrades primarily centred around the Pacific Motorway to the north and south of Coffs has seen a steady influx of road workers over the past five to ten years. These workers are transient and slowly moving away from Coffs Harbour currently working to the north on the Corrindi Beach to Ballina upgrade and south at Warrell Creek. Although this demand is slowly shifting away the planned Coffs Harbour bypass which is expected to start some time in the next five to six years will see these workers returning and increasing pressure on future rental demand.

What do we expect to buy for under $500,000? Increasingly less for your money, however the median price for a home is currently around $430,000 which buys you a 3- to 4-bedroom home probably in the ten to 40 year age bracket located within good proximity of beaches, schools and all major services. There is a vast array of properties available for sale within the Coffs Coast region however more affordable localities can offer the same type of property for less. For example, for the same 3- to 4-bedroom home in Nambucca Heads to the south, you will be looking to pay around the $330,000 mark.

Conversely the slowest price point is the prestige market ($1 million plus) which is dependent upon high net wealth individuals. These are limited in the local market with prospective purchasers generally coming from Sydney or out of town. The difficult global economic conditions over the GFC period resulted in a reduced number of buyers seeking properties in this value range and location.

There are positive signs that the market has turned upwards for prestige property with improved conditions over 2016. Sales activity for residential product between $1 million and $1.3 million increased although property over $1.5 million is still thinly traded with selling periods in excess of 12 months generally expected.

This market improvement is being experienced in the more traditional sought after beach locations such as Sawtell, The Jetty, Diggers Beach, Korora, Sapphire Beach and Woolgoolga. We note this market is dependent upon the greater economic conditions throughout New South Wales and more specifically the metropolitan markets at the time of sale.

Whilst Lismore City caters for all potential buyer types, the vast majority of sales activity appears to be located within the $250,000 to $350,000 price bracket.

The primary reason for this is that it appeals to not only the first home buyer but also the savvy investor. Generally speaking the gross rental yields for a single residential house or unit would barely register 5% for properties above $400,000. However, within the $250,000 to $350,000 range, we start seeing better returns, particularly if current mortgage lending rates stay below 4% for the medium to long term.

Coupled with basement areas, it is not uncommon for property owners to retrofit the space into a self contained granny flat to generate a bit more coin (regardless of whether such improvements are Council approved or not!).

Dwellings and units in this price range are generally original or may have some minor cosmetic improvements, hence making the potential capital gain that could be gleaned from investing in a new kitchen, bathroom or even addition of an en suite if existing space permits) an inviting prospect whilst potentially improving the rental base.

Within this price range, one would expect to purchase a 3-bedroom, 1- to 2-bathroom, single or double garage brick and tile home in Goonellabah with potential rent from $275 to $375 per week depending on location, availability of services and general condition.

At $250,000 to $350,000 the range is simply seen as being affordable and a good starting point for a reasonable quality of accommodation. From that base, first home owners and investors can value add to the existing structure.

The slowest moving sector, particularly in the past three years, is the typical, unrenovated brick and tile 2-bedroom, 1-bathroom unit with carport, usually within a complex of three or four units. This seems rather peculiar given that the price range is approximately $150,000 to $200,000 and is still able to rent for around $200 to $250 per week. However, hidden costs such as an ill-managed body corporate and outstanding maintenance issues may give cause for concern.

Other reasons could be that first home buyers simply have higher expectations and want that 4-bedroom, 2-bathroom home with a double garage as their first home. It does happen. We have completed a number of To Be Erected valuation reports with first home buyers buying land for around $180,000 to $200,000 and then requiring a new build contract at $200,000 plus. Images of a chained millstone around the neck pop up in one’s mind when witnessing this paradigm shift.

Times have certainly changed since the 1950s and 1960s.

Modern, residential properties in the $400,000 plus price bracket are generally reserved for upgraders and there is reasonable demand.

In the rural townships of Casino and Kyogle, the favoured price range for investment property is lower at $175,000 to $275,000, but interestingly, the rental is higher as a gross yield percentage to the market value of the property. Similar to Lismore City, original 2-bedroom units within Casino and Kyogle are also hard to move with overall market value being relatively stagnant and even dipping throughout the year.

But then again, a Casino or Kyogle $110,000 to $120,000 unit is still able to attract rent of around $170 to $200 per week.

Lastly, the old adage of location, location, location still weighs in heavily in the eventual sale price achieved with convenience of location to shopping, schools and services contributing to demand for housing close to the CBD and local neighbourhood centres.

The Clarence Valley
The most favoured price points in the Clarence Valley are below $400,000 in Yamba and below $300,000 in Maclean and Grafton. Investors are the main buyer demographic for this price point and will tend to get a 1950s to 1970s refurbished dwelling. In Yamba, you would be looking at a dwelling located on a busy road.

These price points can be pushed up in Yamba from $500,000 to $800,000 for well located properties, however there will tend to be more of a mix of investors and owner occupiers. Grafton and Maclean will also push up to $450,000 for modern homes for investors and owner occupiers.

The slowest price for the region is the $800,000 to $1 million bracket in Yamba and anything over $450,000 in Maclean or Grafton. These will tend to be people moving up to the region from capital cities and there are also some professional couples purchasing in this price bracket.

The slowest price point depends on what is happening in the capital cities, however the locality of the area in relation to cities and local industries has the largest impact on the slowest price point.

Byron Bay and Surrounds
The most favoured price point in Byron Bay and Lennox Head is between $700,000 and $1 million where you will get a standard dwelling in Byron and good quality home newly renovated in Lennox. In Mullumbimby and Ocean Shores the most favoured price point is between $500,000 and $750,000 for a standard dwelling. The main demographic for this price point is owner occupiers who are a mix of local buyers trading up and people relocating from the major cities.

The main reason that this price point is so favoured is due to this bracket offering an affordable coastal living family home to middle income earners who want to enjoy the resort style of living.

The slowest price point in the region are for prestige properties priced $4 million and above. These properties are pretty much only available to the rich and famous and are owner occupied or kept as holiday accommodation. Although there are more transactions taking place at the moment, it is still a very thinly traded sector of the market and high volatility is associated with this end of the market.

The other slow price points are the secondary rural residential areas. The demographic tends to be local buyers, however due to being that little bit further away from the towns and airports, tends to be the reason they are in the slower price point category.

Ballina Shire
The most favoured price points in Ballina are between $500,000 and $650,000 which tends to be owner occupiers, particularly young families. You will get a standard dwelling in this price bracket which includes recently built houses. These are considered the most affordable dwellings in the location for families. Families priced out of this bracket in Ballina can move slightly further inland to Wollongbar where they can build a new standard home for between $450,000 and $550,000.

The slowest price point for the area is anything priced over $1 million. Although the area has seen a few good sales over the $1 million mark, transactions are limited. Professional couples are the most likely buyer group over this price point.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

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