Regional NSW November 2017

The month in review: Regional NSW

By Herron Todd White
November 2017

Southern Highlands Property Update

The Southern Highlands encompasses the main townships of Bowral, Moss Vale, Mittagong and Bundanoon with associated transport and social infrastructure. On the outskirts of the townships are the villages and hamlets of Hill Top, Yerrinbool, Colo Vale, Robertson, Berrima, New Berrima, Exeter, Burrawang, Penrose, Willow Vale, Alpine, Balaclava, Renwick, Wingello, Sutton Forest, Avoca, Fitzroy Falls and Balmoral Village.

The rental market in the townships comprises a mixture of local families who may have sold in the area and are yet to buy or build a new home and families who have moved into the region and are getting a feel for the area prior to committing to purchase. Rentals can range from $550 per week for a basic 1980s, 3-bedroom home in Mittagong to around $1,300 per week for an executive residence in Burradoo located close to the major secondary schools in the region.

Across the villages, there has been a resurgence in the rental market, with villages located close to the freeway such as Colo Vale and Hill Top leading the charge. Rents for new 4-bedroom dwellings in Hill Top are now topping the $500 per week mark. Typical tenants in these locations are service workers, be they hospital, education or police employees.

Southern Tablelands Property Update

The rental market in Goulburn predominantly caters to service workers, who would in the main be employed by the hospital, police force or correctional centre. Rents range from $300 per week for an older style 3-bedroom dwelling in town to $550 per week in the newer 4-bedroom accommodation redevelopment precincts of North Goulburn. Above this price point the market thins out very quickly.

NSW Mid North Coast Property Update

The major townships in our region are made up of many diverse types of rental accommodation ranging from high rise units, townhouses and villas through to residential houses.

Focusing on the major centre of the region, Port Macquarie, we see a wide range of tenants, including university students, singles, double income no kids, families and pensioners.

Over the past 12 months construction of residential homes has increased substantially, especially in the outer areas with many more families moving to Port Macquarie due to the facilities, lifestyle and affordability of housing compared to the city areas. Investors have also taken advantage of these new dwellings by purchasing close to facilities and renting them accordingly. The most notable area is that of Brierely Hill which is within close reach of the Charles Stuart University. The University was built prior to any student accommodation being constructed and there are many houses within this area that are shared by university students. Some of these properties return a rental of between $400 and $800 per week with the astute investor taking advantage of the lack of student accommodation and renting each room for $200 per week.

Recently large accommodation facilities have been constructed, so it will be interesting over the next few months to see if the above mentioned rental follows the easing trend.

Thrumster is also an area of high tenanted dwellings, located within close proximity of the Pacific Highway, with new home prices considerably cheaper and no maintenance required compared to the older dwellings within the inner parts of Port Macquarie.

With construction of new dwellings being so strong, demand for rental properties has eased somewhat in the outer fringes with some properties having to lower their requested rentals to gain a tenant.

Rental demand within the inner circle of Port Macquarie has remained solid, with rental prices starting to stabilise, consistent with the increased investor activity seen over the past 12 months in the area.

Rents can range widely; for instance an average 2-bedroom unit within walking distance to town may range from $250 to $400 per week, depending on location, unit style, age, common facilities, views etc, whilst the average 3– to 4-bedroom home will rent from $450 to $600 per week, again depending on location, etc.

All in all rental returns have generally eased over the region and the investor needs to assess the specific locality when purchasing an investment property to ensure a good return.

Albury-Wodonga Property Update

The Albury-Wodonga region has a solid and broad local employment base for a regional centre. Both Albury and Wodonga benefit from being located on the major transport route (Hume Freeway) between Sydney and Melbourne, with transport logistics a large industry. In Albury other large employers include two university campuses, Asahi, Seeley, Joss and ATO. In addition to Mars, Visy and three ADF bases, Wodonga is the gateway to north east Victoria, an increasingly popular holiday destination for worn out city folk (especially the lycra wearing crowd). The Murray River brings the two towns on the border together and creates tourism employment and higher local government jobs with two councils operating. Unlike metropolitan areas where supply and affordability are key drivers for the rental market, employment and regional growth are top of mind in this region.

The rental pool for the region is predominantly 3- to 4-bedroom, 2-bathroom, 2-car detached houses with a mix of established and new stock available.

In Wodonga, there has been a significant level of construction across multiple subdivisions, with local and out of town investors driving this demand. The new stages completed have increased supply of new stock and rents have softened in this segment for this reason. Rental returns have also softened in the established dwelling market due to the lift in market values for these dwellings, with investors very active in this segment and also many first home owners attempting to keep and rent out their first home when they upgrade. The construction of new housing stock is set to continue and generates a lot of employment, the backlash being higher supply and possible further softening of rents and higher vacancy rates.

In Albury the diversity of rental stock is higher although returns are often lower than Wodonga with stronger capital growth. The Albury new housing stock supply is also high from a construction boom centred mainly around Thurgoona and parts of Lavington and similar softening is likely, with the Albury rental market having the seasonal adjustments of student turnover each year for a proportion of houses.

The common thread across the region in terms of the rental market is the affordability of purchasing housing stock and a diverse range of investors seeking different investment goals from the regional property sector. The area has proven itself to be good value for investors, tree changers, retirees and young families. The good news for the future is that the perception of Wodonga as the poor cousin to Albury is fast evaporating; with the investment in public infrastructure and new retail developments now completed, Wodonga is catching up. The highest rental for each area shows this. The highest rental advertised on realestate.com.au for Albury is $670 per week (3-bedroom, 2- bathroom, 2-car, older character dwelling in terrific location) and for Wodonga $700 per week ( 2-bedroom, 2- bathroom, 2-car, executive modern townhouse in a central location).

Bathurst/Orange Property Update

Rental properties make up a minority of the market. The rental markets tend to ebb and flow in correlation with changes in the local larger industries such as mining, health, education, and Race Week in Bathurst. Investors have in the past been lured to local property developments on the strength of the rental market at a given time only to find the situation to be more fluid than expected.

At present the demand for units has decreased with agents reporting a higher than average number of units available. Rents have been outpaced by capital values over the past year as investors have been willing to take a lower return. Demand for rental properties overall is steady.

Most rental properties are between the $280 per week and $380 per week mark. A modern 4-bedroom brick veneer can be rented for $420 to $440 a week. Rental assessments above $500 are somewhat hypothetical as there is very little evidence to support such a figure; however the capital value of the property and the quality of accommodation would dictate this to be its potential.

A recent change has been an increase in the number of new developments which have a main dwelling, often 4-bedroom, 2-bathroom with an attached or detached granny flat often with 2-bedrooms. This is a flexible option in a number of ways and is adding to the stock of properties likely to be made available to the rental market. This was a popular option around Albury a number of years ago and seems to have spread to this area. Anecdotally it seems that the number of granny flat developments has also increased in line with higher density options in Bathurst and Orange and a shift in living requirements etc. While developments in the late 1980s to early 1990s can often be signified by the oversized main bedroom and compact second, third, and fourth bedrooms, more recent developments seem to have responded to the fact that children are staying or returning home for longer, multiple generations are living together or people would like to live and also make an income out of their single holding.

Northern Inland NSW Property Update

In the northern inland of NSW rental markets are driven by various factors, plainly, this depends on your locality, supply and demand and local economic drivers.

The economic drivers in many smaller NSW northern inland towns are largely driven by the rural and mining and resource industries, however in towns such as Armidale, a high tertiary student population drives a large proportion of rental incomes. In Tamworth, the region’s largest economic hub, rental incomes are driven by industry diversity, a larger population base and it’s fair to say rental yields fluctuate less in Tamworth than in other town in the region. In locations such as Muswellbrook, Aberdeen, Narrabri, Boggabri and Gunnedah, the mining and resource industry is highly influential on local rental demand and as expected, demand for rentals fluctuates depending on the economic conditions of the industry.

Due to an increase in housing supply, recent rental yields in Tamworth have softened and yields in the 5.5% to 6% range are generally expected. While in stark contrast from recent years, agents in mining towns such as Muswellbrook are reporting a recent tightening in rental supply due to improved economic conditions and mining activity. We are yet to see concrete evidence of an increase in rental yields within these mining and resource localities, however rental stocks have tightened in recent times. Armidale has seen a softening in rental yields driven by student rental demand and increased housing supply.

Supply of units and duplexes are small by comparison to larger capital city markets, however we have recently seen an increase in building activity of this type of accommodation, in particular an increase in duplex builds, largely driven by the investor market.

Weekly rental returns and quality of stock vary considerably in NSW’s northern inland. From small and remote rural lifestyle rentals returning $180 to $200 per week, to smart, heritage home rentals in East Tamworth and Armidale returning over $650 per week.

Supply and demand in the region is largely dictated by the health of the local economy and local industry, combined with macroeconomic factors and government policy influencing potential investor returns.

NSW North Coast – Lismore / Casino / Kyogle Property Update

The main regional centre of Lismore City on the Far North Coast/Northern Rives offers a wide diversity of property types within the city boundaries to suit the taste of any potential tenant.

One would think that within such a range, there would be ample opportunity to find a roof over your head.

However, the past six to nine months have seen rising rental accommodation demand along with dwindling availability of rental stock. Therefore, we are seeing relatively buoyant rises in rental rates across the board from the humble 2-bedroom brick and tile attached unit with carport to the modern 4-bedroom, 2-bathroom, dwelling with built-in double garage and established landscaping.

There does not appear to be any defining tenant mix where a particular segment stands out – with some first home buyers cooling their heels (thanks to more stringent lending criteria) in regard to dipping their feet into the property market to the more mature families simply looking for larger accommodation while they await their dream house to be built.

A similar situation is being experienced in the smaller rural towns of Casino and Kyogle, however they tend to lean towards the part of the population not in a position as yet to purchase property. Typical rental rates in these towns vary from $150 to $180 per week for a very basic 2-bedroom unit to around $400 to $450 per week for a modern 4-bedroom, 2-bathroom, double garage home.

Rent rates for Lismore City are generally consistent within the suburbs of Lismore Central, Lismore Heights, East Lismore, Goonellabah, South Lismore and North Lismore with the usual fundamentals having a bearing on the rental rate level i.e. quality of living space (renovated or original); proximity to town services such as shopping, parks, educational facilities etc; garage accommodation and quality of ancillary improvements such as pool, landscaping etc.

We are not aware of incentives being utilised to bring tenants in as the demand is already high; it’s just a matter of finding available units or houses for them!

Under this environment, landlords are in a relatively strong position. However, savvy landlords have learned to be content with a stable tenant and not risk losing a good tenant and in turn, may resist the subtle pressure or temptation to increase the rent.

Unfortunately, renters with pets (particularly large dogs) still find it challenging to find suitable accommodation.

Units

Typical rental rates range from $200 to $265 per week for a basic 2-bedroom unit with the upper end of the range being either part renovated, having large floor space or including secure garaging. There are a handful of fully renovated units breaking through the $300 per week level. Add a third bedroom and rates are looking around $275 to $375 per week with the occasional $400 per week sneaking under the radar.

NSW North Coast – Ballina /Byron Property Update

There is generally an under supply of rental properties across the coastal areas of the Byron and Ballina Shires. This can be attributed to several factors, most notably lack of supply of rental properties, a high percentage of transient residents (particularly throughout the Byron Shire) and lack of affordable property for first home buyers (potential purchasers are generally required to rent for longer periods in order to obtain a suitable deposit required to purchase a property or simply cannot afford an appropriate property at all).

There is currently limited available stock for permanent rental properties in the central township area of Byron Bay. This is largely a result of the current strong demand for holiday accommodation (either through local accommodation agencies or Airbnb and the like). The lack of available stock and current net returns being achieved through holiday accommodation is resulting in high rental rates and reduced affordability in the Byron Bay township.

Generally speaking, rents commence around the early $300 per week mark for a basic 2-bedroom unit in Ballina, through to $1,000 plus per week for any residential product within close proximity of the Byron Bay CBD or beaches which is considered somewhat prestigious.

The current firm rental demand being experienced throughout the coastal areas of the North Coast is anticipated to remain strong, with the market weighted in favour of landlords for the foreseeable future.

It should also be noted that there are increasing numbers of property owners choosing to construct secondary dwellings or self-contained flats on their properties for the purpose of separately letting these areas and maximising returns due to the current strong rental levels.

NSW North Coast – The Clarence Valley Property Update

As a result of the inflated workforce residing in the area due to the Pacific Highway upgrade, the residential rental market has seen a considerable spike in price over the past 12 months with many rentals being priced per room for road workers as opposed to traditional home rentals.

Demand is generally consistent across the board in areas such as Maclean, Gulmarrad, Townsend, Harwood, Yamba, Iluka and surrounds for almost all property types, however demand for high maintenance properties such as large acreage or prestige housing has inclined steadily with appeal of this specific market segment being limited.

Rental supply is certainly outweighed by demand at present. This trend looks set to continue into the near future, in line with the progress of the Pacific Highway upgrade.

There are extremely limited rental properties available for sub $400 per week in these areas, however there are still properties for sale for between $300,000 and $400,000. Accordingly, rising rents have seen an uptake in purchases at the lower end of the market with people looking to remove themselves from the somewhat inflated rental market.

Coffs Harbour Property Update

When first discussing the rental market it is important to look at the main statistics or drivers for the locality. The Coffs Coast region has a diverse range of property available and typically has been attractive to families and the retiree market looking for the sea or green change and taking advantage of the lifestyle benefits. This is evident when looking at the three main lifestyle groups within Coffs Harbour as identified by realestate.com.au, being: older couples and families 16.9% (families, couples, extended families and single parents aged 55 to 64); maturing and established independents 12.9% (families, couples, extended families and single parents aged 35 to 44); established couples and families 12.5% (families, couples, extended families and single parents aged 45 to 54).

The main point to note of these demographics is the age brackets which range from 35 to 64 years of age representing 42.3%. Of interest, the sub 35 age bracket only makes up a total of 12.7%, comprised of: young families 1.8% (families, extended families and single parents under 35) and independent youth 10.9% (couples, singles and home sharers under 35).

Putting this into perspective, Coffs Harbour has a population of around 26,000 people and reportedly approximately 30% of its occupants are living in rental accommodation. Median rental value for houses is approximately $400 per week and units $320 per week with vacancy rates sitting at around 1.5%.

We are seeing itinerant workers as increasing players in the rental market primarily dominated by two sectors having vastly different needs and rental value levels required. At the lower end of the spectrum are the backpackers and overseas workers servicing the seasonal fruit picking industry which is centred around the Woolgoolga locality. This sector is characterised by cheap or budget accommodation typically seeing properties taking advantage of all rooms by maximising the number of persons able to housed. Typical rents are being paid per bed rather than per room and can be in the order of $100 to $130 per bedroom.

The second itinerant worker sector is the ever expanding construction industry which is seeing an influx of both the executive and labour force entering the rental market. This sector has a diverse range of rental needs ranging from the budget $300 per week to high end $650 per week and typically require fully furnished properties.

Generally rental demand in the region is steady with balanced supply, following similar trends and levels as other NSW regional coastal towns that have experienced increased levels of demand and property values over the past 12 to 18 months.

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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.