Newcastle November 2017

The month in review: Newcastle

By Herron Todd White
November 2017

The rental market in Newcastle has largely been stable for the past few years. We haven’t seen the major increases in rental rates of some of the larger capital cities. Our path has been somewhat more gentle than severe. You could say that supply and demand have been somewhat in equilibrium over that time period, probably more so than the sales market, which has favoured sellers for the best part of three years now. With house prices in general rising, it’s quite surprising that this hasn’t fully translated through into the rental market. Part of the answer lies in the treatment of investors by banks. Investor loan rates have increased independently of standard mortgage rates, mainly as a curb on investor spending.

Owner-occupiers are in the ascendance and often able to pay more than the investors. It’s a balancing act for investors – they can’t get emotionally caught up in the moment as they are chasing a return and it comes down to mathematics. Owner-occupiers don’t let maths come into it if they love a property.

Incidentally there is also a third class – the flipper. This group is in it for the short term value-add proposition and moves on quickly to minimise holding costs. They play with a different set of drivers than the other groups. Key amongst them is the ability to add significant value easily. They would prefer not to deal with structural issues and almost exclusively look for varying degrees of cosmetic overhauls. Possibly a small extension or the addition of a deck is the farthest most will go. Key is time in and time out. Often these aren’t as lucrative as they appear after allowance for profit, holding costs, actual cost of the spruce up and selling costs.

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