Residential

Residential
Month in Review
February 2015
Sydney
2014 was a year that provided continued strong
growth across a wide sector of the Sydney market,
with record breaking sales and blink and you’ll miss it
marketing periods. We believe that 2015 will continue
this trend to some degree but not at the rates seen
previously, with the key factors being strength of
demand and volume of supply.
Opportunities below $1 million
Below the $1 million mark, we believe that a focus on
low maintenance dwellings and units will continue
due to an ageing population wanting to downsize and
time-poor owners desiring not to have large blocks
to maintain. This is evident with new estates on the
fringes of Sydney metro providing blocks starting
from 200 square metres, particularly evident in
newly released community planned estates in the
south-west growth corridor including Leppington and
in the north-west growth corridor in Marsden Park.
Areas to keep an eye on are suburbs surrounding
Parramatta which will continue to be developed
as Sydney’s second CBD. Strong and continued
investment is planned in Parramatta over the next
decade with the surrounding suburbs set to also
enjoy the benefits of this investment. Examples of
this include Westmead for units, as they provide a
lower entry point than a similar product in adjoining
Parramatta while having a close proximity to the CBD
and strong infrastructure with the hospital precinct
and rail and bus interchange. Adjoining the CBD to
the east, Harris Park which is within walking distance
of Parramatta infrastructure, is dominated by low
rise 1970s units that are ripe for renovation.
Suburbs to look out for in 2014 will be Penrith and
Seven Hills. These and their adjoining suburbs are
established suburbs with typical single residential
development that have lower entry points and
limited stock available. Benefits include proximity
to established transport hubs, employment and
shopping facilities.
First home buyers and investors may also be
interested in the development within the southwest growth areas such as Gregory Hills, Oran Park,
Catherine Fields and Leppington. For sub $600,000,
buyers can enter these markets and acquire a
4-bedroom, 2-bathroom family home for lower than
the median house price in Sydney, which is currently
over $800,000. The upside for this region will be the
construction of the second airport in Badgerys Creek
and surrounding employment and commercial areas
as a result.
With our crystal ball in hand we believe the western
Sydney property market in 2015 will continue to grow
but not at the rates seen in the past 12 to 18 months
with property professionals keeping a close eye
on interest rates, consumer confidence and supply
levels.
$1 million to $3 million
2014 was a year of high growth particularly in areas
in the north-west of Sydney such as Castle Hill,
Cherrybrook, North Rocks and Carlingford. House
prices in the $900,000 to $1 million plus market saw
above average levels of growth. This was mostly
due to the low interest rates, increased demand, a
lack of supply and the actual commencement of the
much anticipated North West rail link. The question
remains of how sustainable this growth in values
will be. We believe these suburbs will continue to be
popular with families as they have the fundamentals
of quality local schools, new transport hubs and
established shopping precincts. Australian Property
Monitors indicates that the median house price for
Cherrybrook is $980,000. We believe this will rise to
in excess of $1 million in 2015.
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Overview
As we head into the New Year, there are plenty of
property operators waiting with baited breath to
see how their local residential markets play out. To
help relive the anxiety, our specialists have fronted
up with their hit predictions on what lies ahead for
markets in 2015. It’s a ready guide on the drivers and
sectors worthy of your time and consideration.
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Month in Review
February 2015
Another section of the Sydney
property market that could see
an increase in demand this year is
lifestyle acreage on the fringes of
the metropolitan area.
Traditional acreage locations are planned in some
locations for urban consolidation and this in turn
has pushed that sector of the market that wants
the lifestyle of acreage living further afield. The
Hawkesbury and Camden regions in particular are
considered to be locations that will benefit from
urban sprawl in the nearby growth zones. The
Hawkesbury has the added attraction of the river
and with planned upgrades to the Richmond and
Windsor bridge crossings, the appeal to purchasers
will strengthen. Quality residences with facilities for
horses, sheds and arable land are still available for $1
million to $2 million.
Prestige Residential $3 million plus
The prestige residential market in Sydney is generally
considered to comprise those properties with values
in excess of $3 million. These properties tend to
be located within the eastern suburbs and eastern
beaches, lower and upper North Shore and northern
beaches, and include some waterfront localities in
the southern suburbs and the larger rural residential
estates to the north-west of Sydney.
Traditional prestige residential localities across the
Sydney metropolitan area showed an increase in
transaction activity during early to mid 2014, with
some weakening in sales volume towards the end of
2014.
Given that there has been some gathering
momentum in transaction volumes in this market
sector with a corresponding reduction in stock
levels and an array of super prestige trophy homes
transacting, we expect 2015 to show a maintained
cautious optimism and confidence in the prestige
market and further tempered recovery.
With possible further weakening of the Australian
dollar and the possibility of additional interest rate
cuts, there may be increased demand from overseas
purchasers, including expat purchasers, and further
interest from local high net worth buyers.
We feel that the $3 million to $5 million end of
the prestige market has strong appeal to those
purchasers seeking to trade up into the prestige
market and should perform well in 2015, buoyed
by low interest rates and the possibility of further
interest rate cuts, as well as the ongoing strength
and demand in the traditional residential market sub
$3 million.
Prestige apartments in the CBD may be subject
to further competition in 2015 from a number of
developments to be sold off the plan, although
further strengthening in the empty nester market
may offset any impact of this increased level of
competition.
Canberra
The median prices as at December 2014 for standard
residential ($552,000) and medium density
($415,000) housing in the ACT have remained steady
over the past year. In both cases the volume of
sales remained volatile but decreased to a total of
1,609 sales for the last quarter. Long term averages
indicate circa 2,070 sales per quarter.
The supply of established property available to
the market is approximately 2,150 dwellings as at
January 2015 compared to almost 2,250 dwellings
a year earlier. The precincts of Molonglo and
Gungahlin continue to be the primary source of
greenfield land to the Canberra residential market.
In line with the draft ACT Planning Strategy, the
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Opportunities exist within established areas. For
example, a new estate to be known as Shearwater
Landing at Greenhills Beach is soon to be released
with vacant lots expected to sell for between $1
million and $2 million. Given the scarcity of new land
releases in the Sutherland Shire, the close proximity
to Cronulla beaches and cafes and the strong sales
results of completed homes in the adjacent estate,
the demand for these properties is expected to be
very strong. A number of beachfront reserve lots in
the estate are expected to be so highly sought after
that they are to be sold by auction.
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Month in Review
February 2015
Near record low interest rates and low
unemployment levels have resulted in continued
strength in the ACT economy and property market,
particularly the residential sector. Despite market
uncertainty in the lead up to the September 2013
Federal election and the subsequent restructuring
and downsizing of the Australian public service in late
2013 and early 2014, the ACT property market and
the broader economy have remained resilient.
The impact of Mr Fluffy asbestos contaminated
homes and the eventual removal of these properties
from the market will have a positive effect on the
broader ACT economy. Accordingly, demand for
residential property is set to increase.
Given current stock levels both for sale and rent,
softening dwelling commencement numbers
and increased demand levels, we anticipate the
residential market in the ACT to tighten over the
short term with prices to firm. Small segments of
the market, including units along the Flemington
Road corridor in Gungahlin and properties situated
in less sought after locations or providing inferior
accommodation, are expected to remain soft.
Illawarra
On the back of a very strong 2014 where the Illawarra
real estate market exceeded expectations, January
2015 continued this trend with a strong start. We
predict that this will continue until at least mid 2015
and after that, continued growth although at a
slower rate. Local real estate agents are bullish that
results in 2014 will be replicated in 2015, with many
claiming that the past 12 to 18 months strength is
simply the catch up that was needed. Whether that is
true is debatable. In our view we can simply attribute
the strength of the local market to one thing – a
continued low interest rate.
Major infrastructure such as GPT’s new Wollongong
CBD shopping centre, West Keira and the
Shellharbour Marina will be beneficial to employment
prospects in the area and keep investors in the
market. This will be felt principally in off the plan
sales of new units in and around the CBD and vacant
land in Shell Cove and Flinders.
The current Government rebates offered for
purchasing vacant blocks and building or buying new
homes will also see large subdivisions such as Brooks
Reach Horsley continue to show growth and keep
developers playing a positive role in the market.
As mentioned previously, the continued buoyancy in
the market in 2014 across all residential sector types
was largely due to near record low interest rates,
but a strong local economy with relatively good job
prospects also provides a base.
For 2015 to continue the same trend as 2014, interest
rates must remain relatively low. These low interest
rates are crucial for investors, first home buyers
and also renovators and extenders to maintain
confidence.
Buyers and lenders should also be cautious about
not extending themselves in this low interest rate
period to avoid financial stress when interest rates
inevitably do rise.
The employment climate in 2015 in the Illawarra
will also be a key factor in helping to determine the
strength of the local market. Employment security
in the mining and manufacturing sectors is still
uncertain.
Overall we predict the market to continue its strong
growth at least for the first half of 2015. In the latter
part of the year, we believe sales will slow and we will
no longer see a seller’s market but rather a steadier
environment.
Tips for best localities are much the same as always…
inner northern suburbs up to Bulli offer the best
value for money in our opinion and postcodes
such as 2519, 2517 and 2518 rate highly. Look for
flat blocks, beach and train access. Sea views are
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suburbs of Coombs, Moncreiff, Kenny, Wright and
Lawson as well as Kingston Foreshore, Greenway
and Flemington Road are scheduled for release of
dwelling sites in 2015 and subsequent years.
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Month in Review
February 2015
In the southern areas, Shellharbour and Kiama are
our picks. Shellharbour Marina is well underway and
will really boost this seaside village, particularly now
that the new train station has opened at Shellharbour
Junction. Kiama is a well preserved seaside location
with relatively low rise development and that special
village feel.
Southern Highlands
After several subdued years, the Southern Highlands
and Wollondilly residential property markets have
both started to improve. Over the past 18 months,
this increasing trend in prices is most apparent in the
lower price bracket (under $1 million). The market
for properties under $700,000 is increasing briskly,
with short selling times. There has been marked
increases in both volumes and values in all of the
towns and villages of the Southern Highlands. Our
conversations with local real estate agents also
confirm that the enquiry rate is up and the market
is increasing. For the year ahead, we anticipate this
increasing trend to continue. The rental market in the
Highlands had increased and is now steady.
We note that there are further planning revisions in
2015 proposed for release by Wingecarribee Shire
Council that will allow for further density in town
centres. This should see an increase in medium
density development in towns like Bowral, Mittagong
and Moss Vale. This will lead to more villas and
townhouses that are relatively close to the town
centres. There has also been an improvement in rail
services to Sydney over the past 12 months.
There has been good demand for vacant land and
for new properties throughout the Highlands region.
New construction is mainly in Renwick-Mittagong and
on the outskirts of Bowral and Moss Vale. There has
been an increase in investor activity generally. We
also expect these trends to continue in 2015.
The middle of the market ($1 million to $2 million
price bracket) is also increasing and this should
continue throughout 2015.
The prestige end of the market (over $2 million) is
steady and some caution is still evident in buyers. If
properties are priced correctly, then they will sell. If
vendors’ expectations are excessive, longer selling
periods apply until the vendors eventually meet
the market. We are expecting this sector to remain
steady in 2015.
Southern Tablelands
The regional city of Goulburn has been stable
throughout 2014 and we expect the market will
continue to be steady in 2015. Crookwell Village and
the rural residential property market have also been
stable and we predict that these markets should
remain steady throughout 2015. The rental market
in Goulburn has actually declined slightly as tenants
return to the Canberra area.
Newcastle
How is 2015 going to look from a property
perspective in the Hunter? The biggest news in town
is the truncation of the rail line into the centre of
Newcastle from Wickham. Lots of divided opinions
on this one although at this point in time, traffic flow
through Newcastle appears quicker, but a sample
size of January school holidays is probably not long
enough to adequately tell.
In this column we have picked a couple of suburbs
to highlight from various perspectives. First up is
Wickham which is a vibrant up and coming suburb
that if compared may resemble the hip suburb of
Brunswick in Melbourne. With its industrial history
you can find terrace houses intermixed with older
warehouses and the addition of some funky cafes
and boutique retail stores could really make this
area thrive. We have seen good growth and strong
demand for residential property in this location
and coupled with a relatively tight rental market,
we foresee further growth. The ever expanding
University of Newcastle has a second city-based
campus in the construction phase expected to be
completed by 2016 which could only help with growth
prospects.
From a straight investment perspective Jesmond
and Birmingham Gardens still offer plenty of upside.
There is continued strong demand for rentals within
Birmingham Gardens as the close proximity to the
main campus of Newcastle University allows students
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becoming less valued than proximity to shops,
schools and transport.
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Month in Review
February 2015
Nelson Bay is a strong getaway destination for
families and is enjoying sustained patronage from
retirees downsizing from larger city homes to a
more sustainable beachside dwelling. After many
years of negative growth and over representation
of mortgagee in possession sales, 2014 was a year
of growth and increasing returns. We expect this to
continue into 2015 with ongoing low interest rates
expected. This is welcome news for home owners in
the Bay area after years of wondering when it was
gong to be their turn.
We have spent a fair while highlighting the Singleton
situation and we haven’t seen any signs that will
change our commentary in the short to medium
term. Mines significantly scaled back investment in
2014 cutting jobs and costs, which trickled through
to the entire economy in and around the town.
This has increased the pressure on people seeking
employment and speculation of further cuts is high.
A vast amount of the population living in these
suburbs is employed within the mining industry and
if these job cuts continue we could see an adverse
impact on the housing market out in theses rural
areas. We have seen rental rates fall significantly and
have also witnessed discounting of prices in order to
achieve a sale.
NSW Mid North Coast
This month we will look forward to what is in store
for the property market in 2015 along the mid north
coast.
Last issue, we reviewed 2014 and how it affected
our region and we noted that the region was
experiencing increases in both values and sale rates
during the later half of the year.
Continuing low interest rates will fuel the residential
market across the mid north coast and we expect
that these increases will continue throughout the
first half of 2015, especially within the larger coastal
towns throughout the region.
We expect demand to continue to rise in these larger
regional centres, although perhaps at a slower rate
than the last few months of 2014, and values to
continue to increase over most market segments in
varying degrees.
The current increase in demand and a lack of listings
or stock available in the low to mid segments of the
market will continue to drive up values as purchasers
compete for properties.
The higher value prestige and rural property
markets in the region remain slow, with a continuing
oversupply of product available for sale and limited
demand combining to produce generally static
values. We expect this to continue over the fist half of
the year.
The investor market will continue to be strong
during the fist half of the year, with low vacancies
and good competition to lease properties resulting
in increasing rents, which have in turn increased
investor returns and made the lower to mid value
range properties good value for investors. These
properties are often positively geared due to the
current high rentals.
At the start of 2014 we were more optimistic for the
year than we had been in previous years and for 2015
our optimism continues.
Dubbo
The Dubbo residential market appears to be
steadying as we commence 2015 after a period of
strong growth in 2014. Low interest rates combined
with low vacancy rates saw an influx of investors to
the Dubbo property market last year which pushed
median house prices to a record high of $290,000
and median unit values to $220,000 (source: RP
Data).
A large number of vacant allotments was also sold
off the plan as demand for new housing construction
skyrocketed in 2014. Many lots are due to settle
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to live within walking distance but still have the
independence of living off campus. The demand for
rentals in this area could be expected to continue
to rise with the expansion of the University and the
appeal of the cosmopolitan nature of the city. This
can only mean upside for values in the short to
medium term.
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Month in Review
February 2015
There has been strong demand
for median density properties and
estates such as La Dolce (opposite
Orana Mall) which saw strong
demand from professionals and
investors in 2014.
It is expected that more medium density subdivisions
will come onto the market in mid to late 2015
to accommodate increased demand for these
properties.
Uncertainty surrounding interest rates and potential
increases in 2015 may contribute to a steadying of
the residential market for established dwellings.
After the rapid increase in values throughout 2014,
it is quite possible the Dubbo residential market is at
or near its peak. Vacancy rates have increased from
1.5% at the start of 2014 to around 2.8% towards the
end of 2014. This can be attributed to an increase
in available rental properties due to the influx of
investors last year. Although this rate is still low, new
housing construction set to increase again in 2015
will further ease the pressure on the rental market.
Only time will tell which direction the Dubbo market
will head in 2015, but if interest rates do increase
we will most likely see a plateau of values across
the residential sector and an increase in property
listings.
Tamworth and Northern NSW
Some thoughts for 2015...
Overall steady as we gain market confidence again
after a flat period driven by drought. In our mining
affected areas such as the Hunter Valley, there is
further potential to fall as the rental vacancy remains
high and more desperate investors try to sell or
are sold up. In the Gunnedah and Narrabri areas,
the market is strongly influenced by mining and
agriculture, however mining in this area has remained
stable over the past 12 months and it appears that it
will continue to do so throughout 2015.
The middle to higher price bracket in the
residential and rural residential markets is slow
and opportunities to buy will arise as buyers in this
market are limited. Stay away from mining affected
regions and stay in the big centres such as Armidale
and Tamworth for the safest bet for 2015.
Continual growth and expansion is expected in
residential development, large service centres with
board industries and services. Consumer confidence
in the agriculture sector will also return if it continues
to rain.
Hunter Valley prices in both the residential and rural
residential sectors are declining and transactions
are minimal. The best buy would currently be rural
residential as the miners have dropped out of the
market and prices have reduced, creating a buyer’s
market. Residential is still an uncertainty as prices
continue to fall. The Hunter Valley residential market
would be a no go zone with an over supply and
potential for the market to continue to fall. In general,
the higher end of the lower price bracket is often a
trap with poor to average quality new builds. Pushing
though to the next price bracket often pays its way in
the end.
Bathurst / Orange
There is an air of enthusiasm in the central west
as 2015 will see the celebration of the 200th
anniversary of the proclamation of Bathurst.
Bathurst is known as the gateway to the central
west and is the oldest inland settlement in Australia.
Activities over the year can be found on the Council’s
website (http://www.bathurstregion.com.au/
event/2015/1/).
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early in 2015 so we expect to see some significant
new housing construction in the early part of the
year. The Council-owned Keswick Estate has been
popular with investors, currently having the cheapest
available land suitable. Maas Group Properties
who acquired the Southlakes Estate development
have also had record numbers of sales off the plan.
This estate is most popular with families due to its
artificial lake and parklands features. Dubbo’s newest
subdivision, Huntingdale Estate in the city’s south
west, has also begun its marketing plan in 2015 with
lots starting from $180,000.
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Month in Review
February 2015
The end of the mining boom will continue to affect
the local area, although the effect will not be on
a par with the highly publicised boom and bust
scenario of some mining towns. The economy of the
central west is diverse and the overall population
is expected to continue to increase. The broader
economy is expected to be sluggish in 2015 and this
is the likely scenario for the highly interdependent
local economy. This will be due to non-mining
economic activity such as construction and services
being unable to fully replace the broad employment
opportunities and profitability of mining in the short
term. Construction of new dwellings will continue at
a similar pace to the past few years and 2015 will be
the year when price signals that determine future
construction will reach the industry.
Overall 2015 will swing slightly in favour of the buyer,
but with no expectation that the bottom will fall out.
With interest rates at a record low and forecast to
fall even further from 2.5% to possibly 2%, liquidity
will remain good and will encourage first time buyers
and investors into the market, although with reduced
expectations of return and capital gain.
Leeton
How our markets will travel in the area in 2015
will relate closely to what is happening within our
local economies. Activity in the residential market
will reflect what is happening in the employment
market. The ability to keep your income or earn
more of it will have a larger impact on the housing
market than interest rates. Vacant land prices and
modern 4-bedroom homes in Griffith are likely to
experience upward price pressure as stock levels in
the Collina area dry up. Tidy, entry level properties
below $150,000 in Leeton and Narrandera are also
likely to lift due to competition from investors looking
for bargains and first home buyers. New home
construction will increase but the majority of houses
will be smaller and cheaper than the region has
historically experienced. Caution should be exercised
by those looking at house and land investor packages
in the area. Land is still being purchased well above
its current market value, so ensure you do your
homework.
Lismore
The residential market for the 2015 year ahead is
expected to remain relatively steady with continued
improvements in consumer confidence and sale rates
which occurred throughout the 2014 calendar year
(especially for coastal based localities within the
Byron and Ballina Shires). However, the residential
market for the year ahead in the Lismore, Richmond
and Kyogle Shires is expected to remain relatively
subdued with softer consumer confidence and sale
rates.
The ongoing low level official interest rates will likely
to continue to have a steadying impact on the overall
residential market throughout 2015.
It is difficult to see a significant change for the
coming year of 2015 for the residential/rural
residential real estate markets of Lismore, Richmond
Valley and Kyogle Shires with continued reticence
likely to be expressed by investors and home owners
despite record low level interest rates. This activity
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Unfortunately it is unlikely that the property market
will see the same level of enthusiasm over the next 12
months. Demand and prices appear to have peaked
in Orange in early 2014 and numerous Bathurst
vendors are failing to achieve their asking prices that
they may have based on a trajectory from previous
price growth, albeit with minimal reduction in price.
Properties that benefited most from the flattening
of market segments in the times of higher demand
are expected to experience the most effect as the
market segments return to more historical norms
of relative willingness on the part of purchasers
to buy at a given price. Such a property might be
one offering basic amenity that was attractive as
an investment when rents were higher, that is now
subject predominantly to the owner-occupier market.
Another property type that will also be affected are
small rural residential properties of limited aesthetic
appeal around mining areas. Evidence suggests there
is more than an average amount of such properties
on the market. This shift will continue to be partly
attributable to the state of employment in the local
area.
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Month in Review
February 2015
There are no significant LEP changes expected
for the coming year with all the respective local
authorities of Byron, Ballina, Lismore, Richmond
Valley and Kyogle now governed by new LEP’s and
DCP’s as per the NSW Government edict.
Within the Lismore and surrounding village localities,
older residential stock will struggle to sell for
anywhere near their prior purchase price of three
five years ago.
New residential building stock for first home
buyers (together with stamp duty exemptions and
other incentives) & “upgraders” will depend on the
availability of vacant land. The current supply of
vacant residential lots within Lismore, Richmond
Valley and Kyogle will become more limited in the
short to medium term.
The general residential markets for the Yamba,
Ballina and Lennox Head regions are expected to
remain generally steady following on from improved
rates of sale and slight value increase throughout the
2014 calendar year. As with the Lismore, Casino and
Kyogle markets, if properties are competitively priced
they will continue to sell.
The Byron Bay residential market during 2014
(and in particular the past six months) has been
performing strongly with increased rates of enquiry
and resultant sales. The increased volume of sales
has generally been concentrated in the lower and
middle market price point segments; however, there
has also been good activity in the prestige sector
as well. We are now seeing a shortage of stock with
some properties presently being marketed receiving
multiple offers. This is resulting in continued upward
pressure on prices in this market sector. However, the
buyers will remain well educated and properties will
need to remain realistically priced.
There are considered to be potential capital gains to
be made within the township of Mullumbimby due
to the affordability and price point of the residential
product compared to the more coastal based areas.
The most difficult market for 2015 will continue to be
the larger rural residential properties and farmlets
within the Lismore, Richmond and Kyogle Shires. The
increase in “costs” to maintain such properties will
be a pertinent factor.
In summary, we expect the residential property
market for Lismore, Richmond Valley and Kyogle
Council areas for 2015 will continue with a period
of softening activity and confidence despite the
low interest rates. However, in contrast the coastal
localities within the Byron and Ballina Shires will
continue to remain steady and will be dictated by
available stock levels. Current sale rates for vacant
land will continue resulting in continued building
activity.
Coffs Harbour
2014 saw the market bottom and the start of the
recovery from the proceeding four to five year
decline following the Global Financial Crises in late
2008. Consumer confidence has returned to the
market place driven by low interest rates, change of
government (Sept 2103) and a strong rental market.
The start of 2015 will continue
to see the market characterised
by higher enquiry and sale rates
primarily centred within the
affordable sector (sub $500,000)
of the market which will filter
through to the mid to upper price
bracket.
More promising signs in the upper price bracket ($1
million plus) have been seen with several beachfront
properties having sold and selling agents reporting
renewed interest from the Sydney and out of town
markets. The possibility of an interest rate cut in
early 2015 would only add to the growing consumer
confidence.
The northern beach suburbs between Coffs Harbour
to Woolgoolga including Sapphire Beach, Emerald
Beach, Moonee Beach and Sandy Beach traditionally
have been stable markets and we expect these
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is expected to continue with predominantly macro
economic factors having a dampening impact upon
general market confidence in bricks and mortar.
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Month in Review
February 2015
To the south of Coffs Harbour the townships of Valla
Beach, Valla, Urunga, Macksville and Nambucca
Heads will continue to see increases in rental and
sales activity in the short term due to the ongoing
highway upgrade between Warrell Creek and Urunga.
The pick of these areas is Valla Beach which has
already seen demand outstrip supply for rental and
sales stocks with values expected to increase into
2015.
We note the road works are ahead of schedule and
are due to be complete in mid 2016 which will see this
demand fall to more traditional levels.
The rural residential market continues to remain
stable with increased activity for the well located
properties close to Coffs Harbour such as Boambee,
Bonville, Karangi, Upper Orara and Bucca and
typically within the lower to middle price ranges.
Rural properties in secondary locations or at the high
end of the market segment are still showing signs of
subdued market activity with longer selling periods.
The notable ‘blueberry’ expansion of 2014 which has
seen several $1 million plus sales in recent times sees
no signs of rebating with selling agents reporting
good interest from growers for land which has
suitable characteristics for producing blueberries. We
note this has forced up land values in some localities
such as Bucca with traditional rural residential
purchasers having to compete with the blueberry
producer for the land. We caution the continued
demand and high value level of this classification of
real estate is contingent upon commodity prices and
the viability of the Blueberry industry into the future.
Traditionally agricultural sectors such as this are
risky over the long term.
In short the Coffs Coast market is relatively stable,
does not experience significant shifts in property
values and is underpinned by a relatively low socioeconomic base.
There is no surprise that it is this affordable end of
the market sector we are seeing the most activity
with prices firming and selling periods shortening.
We consider this market will continue to improve
throughout 2015 and possible price increases of 5%
to 10% may be seen if this demand continues whilst
supply diminishes. The upper end (700,000 plus)
and rural residential market will naturally increase in
activity as demand and confidence grows which will
result is more sales activity more so than increases
in values.
Residential
localities to continue to improve with the now
completed Sapphire to Woolgoolga highway upgrade
reducing travel time to the main service centre of
Coffs Harbour.
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Month in Review
February 2015
Victoria
According to REIV’s median house price index,
September 2014 revealed a $649,000 median price
for the city of Melbourne. Price growth was impacted
by buyer demand especially within Melbourne’s
middle suburbs as significant price increases were
recorded. Coburg has proven to be a suburb of
interest for 2015 as purchasers have been priced
out of suburbs such as North Fitzroy, Northcote
and Thornbury. A 16.7% rise for property in Coburg
was recorded over 2014 as the median house price
soared to $745,000, a $69,000 increase since
2013. Doncaster has shown recent improvement
as its close proximity to schools, parks, transport
and shopping led to solid capital growth of 11.9%
over 2014. The growth in these areas reflects an
increase in consumer confidence levels in the
market, as low interest rates and population growth
is proving to encourage buyer activity. As buyers
were priced out of the higher priced suburbs, they
sought more affordable options further out, but with
infrastructure such as schools and shopping. Noble
Park and Box Hill North have shown an increasing
popularity in auction results in recent months as
infrastructure plans to improve the appearance
and development of these suburbs is strongly
encouraged by their local governments.
The median price for a 3-bedroom detached house
in Seaford is $435,000 and $370,000 in Frankston.
The property prices in these two suburbs are
considered to be relatively affordable. The rental and
investment demand is strongly supported by close
proximity to public transport and amenities as well as
local employment opportunities. Seaford currently
generates an annual growth of 5.89% and a rental
yield of 4.06%. The annual growth and rental yield
for Frankston are 5.2% and 4.5% respectively. Both
suburbs offer promising future capital growth and
rental yield owing to the expected population growth
in the City of Frankston, their convenient locations
and infrastructure.
The outlook for the Melbourne property market
for 2015 appears positive in the short term, as
interest levels are sustainable and encouraging
greater investment in the market. A weak Australian
dollar at US$0.79 encourages a greater level of
foreign investment in the property market as the
affordability of properties strengthens and interest
on loans becomes more sustainable. Investors should
be conscious of macro market risks such as rising
unemployment, sluggish household income growth,
affordability issues and cost of living pressures
if interest levels fluctuate and population growth
doesn’t slow down. Modest growth is expected in
housing prices, especially for property in prime
locations and with a point of difference. The outer
eastern suburbs are strongly attracting buyers due
to their affordability.
Residential
Melbourne
There is a generally positive outlook for property
market growth in 2015 as the RBA has kept interest
rates at 2.5% for 16 months in a row and the inflation
rate is 2.3%. What this means for investors is that
the cost of borrowing money from mortgage lenders
is relatively cheap, leading to greater investment
and competition in the property market. According
to RP Data, since the beginning of 2009 Melbourne
property values have risen by approximately 45%.
Growth of approximately 10% in 2013 and strong
growth levels in 2014 were recorded according to
QBE. The RP Data Home Value Index results for
September 2014 showed a negative growth figure of
0.8% for the month, however this did not hinder the
quarterly growth from reaching 3.7% and 8.1% for
the year. The QBE Australian Housing Outlook 20142017 states that the high number of new dwellings in
the pipeline is likely to tip the market into oversupply
from 2015/16, leading to a rise in vacancy rates and
progressively weaker property growth.
PARC – Peninsular Aquatic Recreation Centre (Frankston)
30
Month in Review
February 2015
Westfield Shopping Town - Doncaster
Keast Park – Seaford
Ballarat
The residential market in the Ballart area will face
some hurdles in the coming 12 months. A recent
change of government in Victoria will see a decrease
in the amount of money the government will inject
into the economy as a whole; this will have a trickle
down effect to the residential property market.
The areas in the Ballarat market which will be
interesting to keep an eye on in the coming year will
the developing estates. Increasing infrastructure and
development in the Insignia and Lucas estates over
the past 12 months have increased there liveability,
amenity and overall appeal. As such the supply of
quality property in a close vicinity to the Ballarat
CBD has increased. The effect this will have on the
modern home market in other estate areas less
than six years old will be instructive as to the level of
demand in the area.
Of the inner Ballarat suburbs Ballarat East appears
to be comparatively affordable as compared to its
more fashionable neighbours Black Hill and Soldiers
Hill. The average dwelling price in the area is very
affordable at around $300,000 which includes a
reasonable block of land. The area is very close to
the CBD with attractive streets and many period
properties which would respond well to renovation. In
our opinion the area is ripe for gentrification.
Of the price points to be aware of it appears the $1.2
million plus market has stagnated. There have been
several prestige properties which have been on the
market since the commencement of spring which has
been unsuccessful in finding a purchaser. This market
has shown significant growth over the past 10 years
in a large part due to its affordability in comparison
to Melbourne prestige market. However as that
comparable affordability has dissipated so to has the
growth of the sector.
Horsham
The Horsham property market started 2014 with
a bang following a number of good years in the
surrounding farming district. The residential
property market was hot with buyers tripping over
each other at auctions and often paying above
market odds to secure a property. Later in 2014, the
market slowed significantly as the community waited
for rain to fill crops. The poor 2014 local harvest and
below average yields in the Wimmera is likely to see
the Horsham residential market above $250,000
ease in 2015 as local owner occupier spending slows.
Properties in the lower price bracket are expected to
remain commonly traded although at lower volumes,
and values are expected to remain relatively static
thanks to steady investment for rental returns and
first home buyers in this lower end market.
Properties within close proximity of amenities, the
hospital, river and shops are likely to be the best
performing in 2015.
Residential
Having said that the reserve bank it appears is now
considering decreasing interest rates, this perennially
has a positive effect on the property market as
an entirety. These two factors will be the fulcrum
upon which the market will sit for the coming 12
months. The stronger of the two forces will dictate its
eventual direction.
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Month in Review
February 2015
Developers have enjoyed relatively
short selling periods and higher
sale prices for those subdivisions
completed in 2014, and we expect
this trend to continue, mainly due
to a shortage of serviced lots on
the market.
This trend has been evident with both “in town
“subdivisions - containing average lot sizes of around
600 square metres to 700 square metres, as well
as rural residential subdivisions containing 4,000
square metre lots.
We have seen an increase in rents for both homes
and units during the past three to four years on the
back of a shortage of available accommodation, and
this trend seems likely to continue. Most agents are
reporting that their occupancy rates are in excess
of 99%, and that properties are being re-let within 1
week of becoming vacant. This will likely flow through
to further rent increases, which in turn would be
expected to keep investors attracted to our region
and underpin the market for the foreseeable future.
Gippsland and Latrobe Valley
Late 2014 showed an increase in sales activity,
however prices remained similar to 2011 and 2012.
The overall feel of the 2015 market is similar with
prices estimated to maintain at 2011 and 2012 values
with the possibility of slight increases. Traralgon
has seen a spike in residential development with
increased vacant allotments becoming available.
This has seen Latrobe land prices decrease in recent
years due to a larger supply. There have also been
some competitive building prices promoted in an
attempt to stimulate new home builds.
Rents remain strong throughout Latrobe Valley and
have increased in the Sale and Maffra areas due to
increased employment and higher demand. Sale is
worth watching with the possible expansion of the
East Sale RAAF Base and current development of a
gas conditioning plant at ESSO’s Longford site.
Coastal areas along the 90 mile beach including Loch
Sport, Golden Beach and Paradise Beach remain slow
to steady with a large number of vacant residential
allotments and houses on the market for extended
periods. However they are seen as quite affordable,
at $40,000 to $50,000 for a vacant block of land.
In summary, the market throughout Latrobe and
Wellington shires is seeing some real positivity and
increased market activity.
Early signs are showing that what we experienced in
late 2014 will be maintained in 2015.
Baw Baw Shire
The residential market around Baw Baw Shire is
expected to continue as it did in 2014 with stable
to minor increases in prices. Rural residential
properties have shown a minor increase of
approximately 0.5% to 1.5% in terms of resale prices
from the previous 12 to 18 months.
Some of the older pockets of Drouin, Warragul,
Yarragon and Trafalgar have been popular with
DIY home renovators with some properties selling
between $250,000 and $290,000.
Some of the new residential subdivision land in
Drouin appears to have stagnated in price and
volume sold, possibly due to oversupply.
During the latter months of 2014 within the Baw
Baw Shire there were two main forms of trading
up. First is the second home buyer who is seeking a
newer, larger, better equipped home on a residential
allotment. The second type is the move out of town
buyer, who is looking to occupy the acre block on the
edge of town or a larger outlying rural property. This
Residential
Mildura
In 2015 we expect to see a continuation of the
improved buyer activity that was evident in much of
2014, and see no reason why prices for mid range
properties should not continue to firm. This improved
activity is most noticeable for dwellings in the
$200,000 to $400,000 range. Buyers are continuing
to look past those properties in poor condition, and
the pool of buyers looking to spend over $400,000
remains relatively low.
32
Month in Review
February 2015
recent activity is expected to remain for the most
part of 2015.
As with 2014, the market in 2015 is expected to
remain stable with potential for slight price increases
in the $350,000 to $400,000 range up to the $1
million plus rural residential market as locations
such as Warragul, Drouin and Neerim South become
popular destinations for willing south-east Melbourne
buyers looking for more bang for their buck.
In the latter months of 2014, house prices in the area
remained fairly stable although sales seem to be
increasing slightly which would suggest a continued
increase in early 2015 as consumer confidence
continues to rise.
of Bairnsdale, has seen increased house and land
packages being acquired. Sales within these estates
are expected to remain steady throughout 2015 as
building companies offer competitive house and land
packages. Second and third home buyers looking
to upgrade make up the main market segment
purchasing house and land packages.
The preference for rural residential properties is also
expected to remain steady throughout 2015 in areas
such as Nicholson, Wy Yung and Eastwood.
East Gippsland
Similar to the Latrobe Valley, East Gippsland
experienced increased sales activity in the latter half
of 2014. Some months throughout the year were
stronger than others. It is envisaged that prices will
remain steady throughout 2015 while sales activity
increases slightly in line with consumer confidence.
A number of recent residential subdivisions, such
as Shannon Waters Estate on the western fringe
Residential
Overall, 2015 in the Baw Baw Shire (West Gippsland)
residential area is expected to remain stable with
the potential for slight increases in prices and sales
activity.
33
Month in Review
February 2015
Queensland
Buyers shouldn’t expect Brisbane to perform
like Sydney – it just doesn’t. We’ve had our years
of 20 per cent growth but it’s highly reliant on
interstate and overseas migration as well as strong
employment prospects and general economic good
times.
Our cheaper buy-in prices are, however, attractive for
those looking to get into a capital city, so there’s still
plenty to offer here. Overall, we’re saying Brisbane
property owners should expect to see the number
of sales and other general activity to continue along
the same lines established by the end of 2014.
Translation - look to our long term averages and
you’ll be about right for 2015.
New construction is expected to be buoyant for both
house/land packages and units. The building industry
is being touted as an employment savior that can
pick up the slack of mining industry layoffs, after all.
In terms of suburbs on the go, the “ripple effect”
appears to be well underway. Inner and near-city
suburbs saw attractive gains in 2014, so it’s time for
suburbs further out to start shifting as affordability
close in becomes more of an issue. Mid to outer
suburban areas are now experiencing a pickup in
buyer demand, or more specifically, entry level
property within these locations. Investors are
certainly keen to stay ahead of the wave of course,
and there’s interesting infrastructure underway
to help drive gains. The train line extension to the
Redcliffe Peninsula is a case in point. For this reason,
try looking a bit beyond the currently growing mid
ring suburbs if you want to shore up equity gains
this year. Those affordable markets should put on a
respectable performance over the coming year.
As for the inner city hotspots, they seem to have hit a
sustainable level of price growth that should continue
over the next 12 months – once again long-term
averages are your guide.
Our strongest caution for those looking to invest in
2015 is to watch out for unit stock. Specifically poorly
designed investor grade product - there will be a
lot of it coming on line and if the developer’s only
thought is to offload end-product quickly without
considering their project’s ability to maintain value
over the longer term, then those who buy are in for
grief. Overall, buyers need to be conscious that this
market is experiencing significant uplift in supply
over the next one to two years at a time when the
vacancy factor has already increased and interstate
migration is still languishing.
This could keep the overall market relatively honest
because there’s potential for the new unit supply to
draw on the suburbs to some extent plus new house/
land construction.
Until the time comes when the
southern states see the light and
interstate migration kicks back
in, expect modest gains from our
Sunshine State capital.
Toowoomba
The growth demonstrated in sale prices in
Toowoomba over 2014 looks set to continue into
the early stages of 2015. However, there is rising
speculation surrounding the longevity of this
upswing.
While the Toowoomba residential market has
traditionally benefited from its location as the
gateway to the Surat Basin, the reduction in
mining activity and low energy prices may lead to a
stabilisation of values in the residential market. This
volatile industry activity aside, the hype surrounding
the Brisbane West Wellcamp Airport and the
proposed Toowoomba Range Bypass Road is likely to
Residential
Brisbane
Last year was healthy. About six per cent across
the board with inner areas doing better, but outer
suburbs not so well. Overall though we are a capital
whose recent property history has been relatively
unhealthy. Apart from post-GFC hangover, our 2011
flood and other moments of failing to fire meant
many expected a hot, hot run in 2014. It didn’t quiet
pan out that way, but there is positive momentum
that lays a foundation for 2015.
34
Month in Review
February 2015
At the beginning of 2015, Toowoomba’s median price
point of $350,000 remains attractive to owneroccupiers and investors alike. The sub $450,000
segment of the market is expected to continue to
represent the broadest segment of market activity in
the coming year.
Suburbs such as East Toowoomba, Middle Ridge,
Kearneys Spring, South Toowoomba, Mount Lofty,
Darling Heights and Rangeville are expected to
record more stable growth than new developments
across the western suburbs based on a history of
gradual capital growth over the past ten years and
the reliability of the established schools and other
desirable attributes in these suburbs.
Since 2010, the volume of prestige
sales of over $1 million has
increased by 12.5% in line with the
firming consumer sentiment. This
also looks set to continue in 2015
at a similar rate.
At present, the demand for new investor product,
that is new units and houses, is at a proportionate
level to the supply. However, it is not known how
the non-traditional lots, such as small land parcels
less than 400 square metres, will reabsorb into the
re-sale market. This has resulted in limited local
demand and the potential for an oversupply of this
type of untested product in the future. Without the
influence of owner-occupiers, the amenity of these
estates can deteriorate over time.
In 2014, the Toowoomba property market
outperformed recent years in terms of value growth.
With a slowing resource sector, there may a slight
slowing in the market towards the second half of
2015.
Gold Coast
The general feeling on the Gold Coast is that the
residential market will steadily build momentum
throughout 2015 after a fairly strong 2014. In 2014
we saw a significant increase in market activity as
well as an increase in value levels in most market
segments. We can only hope that interest rates do
not increase significantly this year.
Looking at the southern Gold Coast, the strongest
performing properties are houses in well located
suburbs such as Burleigh, Palm Beach and Miami in
the under $700,000 price range as well as duplex
units (with no body corporate fees) priced under
$500,000. These properties are expected to perform
above average throughout 2015. Detached houses in
the under $500,000 price bracket in other suburbs
such as Tugun, Bilinga and Elanora should also
perform well in 2015.
In the Tweed, Casuarina is a suburb worth following
in 2015. The area has seen a significant increase in
construction over the past 12 months, with many
more houses to be built this year. Land values have
improved considerably over the past 12 months and
it will be interesting to see how the values of houses
fare once the majority of land has been sold and built
on. Construction on the Casuarina Town Centre is
due to commence any day now and we believe this
will be a major draw card for the area.
Units with high body corporate fees are the main
area of concern on the southern Gold Coast.
The suburbs to watch in the central areas of the Gold
Coast include Broadbeach Waters, Mermaid Beach,
Mermaid Waters and Robina. We have seen circa 15%
growth in some of these areas in 2014, especially
entry level waterfront houses in Broadbeach Waters.
This growth has been fuelled by new infrastructure
such as the light rail system, extensive renovations
to the Pacific Fair Shopping Centre and the buzzing
café and bar precinct under the Oracle building in
Broadbeach. In Robina the schools, university, train
line, stadium and shopping centre are attracting
young families. We believe that detached houses
in the $500,000 to $800,000 price bracket will
perform well in 2015 as many buyers will be looking
to upgrade from their previous houses.
Residential
sustain development activity and property enquiry in
the this sector, particularly from absentee investors.
35
Month in Review
February 2015
With the flood of new
developments on the Gold Coast,
there could be an oversupply in the
near future.
Looking to the northern parts of the Gold Coast,
Biggera Waters and Runaway Bay through to
Hollywell are the hot spot growth areas for 2015.
These areas are well located and developers are now
looking for in fill options in these established areas
where land values will soar over time. The main draw
card is the proximity to the Broadwater. This area
provides a good standard of amenities including
schools, recreation facilities and substantial retail
precincts, and is within relatively easy proximity of
the Southport CBD, Gold Coast Hospital and access
to the north and south bound M1 motorway and
electric rail. The suburbs cover a large geographical
area with mainly dry, semi-modern single unit
dwellings constructed between 1980 and 2000.
These properties are complemented by being
situated amongst some of the best canal estates
and canal housing of the Gold Coast. The streets are
generally wide and leafy with level topography and
very easy traffic flow. Allotments typically range
between 500 and 800 square metres providing ideal
young middle class family environments. These areas
are mainly detached dwelling suburbs with some
duplex units and even fewer unit developments. We
see the best advantage in detached dwellings for
lifestyle and predict better capital growth in this
market segment.
We would be cautious about some of the lesser
quality, developing estates in Coomera and Pimpama.
These areas are seeing large volumes of cheaper
stock being sold to investors, many of whom come
from interstate and appear to be paying a premium
for new product. We are also seeing very small lot
sizes in these areas, some as small as 250 square
metres. This product is relatively untested with little
to no re-sales to edify how this style of product will
be viewed by the local market.
Out to the west, the newly released stages in the
suburbs of Yarrabilba and Flagstone (Jimboomba)
are priced under $400,000 for a house and land
package, and represent good value for all sectors
of the market. As the estates of Flagstone and
Yarrabilba age, purchasers have the choice of buying
land and building or purchasing a one to four year
old home that is fully established for similar price
points. Both estates have options for less than
$400,000 total outlay. Alternatively, the entry price
for a 4,000 square metre property with an older
house is a similar cost within the established areas
of Jimboomba. This property type offers good value
for money and the opportunity to add value.
Investment properties are always an area of caution
and while the majority of suburbs within the Scenic
Rim are not investment driven, there are a number
of investment sales within the new estates. With a
decrease in lot size and sale prices remaining the
same, these sectors of the market are untested and
in the short term should be treated with caution.
Sunshine Coast
The Sunshine Coast property market finished 2014
pretty well with strong sale volumes for the year.
Fundamentals in general appear to be good with
the main driving force in the local economy being
the continued investment in the Sunshine Coast
University Hospital. The market continues to be
somewhat inconsistent from sector to sector.
One signpost we look at is the rental market.
Managing agents report that vacancies remain low
with multiple applications for each property and
rentals firming.
The highest growth in sale volumes and values has
continued in the sub $500,000 housing market
which has transitioned into the higher value markets
Residential
The main area of concern is the new development
(off the plan) unit market. This market is typically
sold to investors from out of town and often does not
retain its value on re-sale.
36
Month in Review
February 2015
The prestige housing market has improved in the
entry end of this market (up to $1.5 million). Sale
volumes appear to be quite good but as you move
into the higher value level bands, buyers thin out.
These properties have to have something special
as there are a number of buyers who are buying for
position with a view to rebuilding what they want. All
in all, we believe the higher end market is a bit of a
steady as she goes proposition, with some good signs
of growth at the entry level.
There has been an increase in sales volumes in the
unit market, however this is very much location and
property specific. In some sectors, we’re seeing some
slight value increases, others flat and others again
showing some declines. Investment units remain
tough with high body corporate fees whereas larger
permanent living units have fared better. We believe
that this will continue and interestingly we note that
there are a number of new projects that are being
actively marketed.
When we look at the rural residential market, we still
believe that opportunities remain there given the
ability to purchase at below replacement cost. We
believe that this market will slowly recover.
Rockhampton
Generally we finished off 2014 with a low level
of sales activity and softening prices across the
region. The year ahead starts with a large amount
of uncertainty for most of our resource and mining
industries. Numerous industries are reporting
salary cuts, job losses and general restructuring and
downsizing.
Housing prices in Rockhampton City worth keeping
an eye on include the usual blue chip area such
as Wandal, Allenstown, Frenchville and Norman
Gardens for price points below $400,000. For the
better quality top shelf stuff, the suburbs of Norman
Gardens and The Range come to mind.
Gracemere is still feeling the effects of an oversupply
of new housing construction in the past two to
three years creating a significant rise in vacancy
rates and a drop in house prices. Lessons from the
past should be taken on board however it appears
this may not be the case with the new Livingstone
Shire Council. Although we encourage growth and
construction within the region, the recent approval
of the Pines housing development, one of the biggest
land releases on the Capricorn Coast to date, poses
a massive risk of delivering another Gracemere
scenario with supply likely to outweigh demand.
In summary, 2015 will more than likely be a very
challenging year with a lack of any obvious signs to
suggest a market recovery this year.
Mackay
Today I have the unenviable task of predicting the
year ahead for the Mackay property market. 2014
saw value levels across the Mackay region fall for
the first time in a very long time. Uncertainty in the
mining sector coupled with job losses, cancellation of
projects and general downturn in the coal industry
definitely had an effect on Mackay housing.
While house values are off around
10% to 15% (some pockets higher)
the rental market has suffered
even harder with rental values
down 30%, and vacancy rates
blowing out in excess of 8% to be
the highest in regional Queensland.
So what will happen in 2015? It kind of feels like
the day after or the hangover period. Sales activity
started to increase at the latter end of 2014, although
at reduced value levels. Local agents are reporting
early into 2015 that there is strong buyer enquiry out
there, however everyone is in search of a bargain,
putting further pressure on values.
Residential
in some areas ($600,000 to $700,000). We believe
this will continue with owner occupiers being able to
upgrade to more valuable properties. This upgrader
market has also been buoyed by the general uplift
in the local economy and greater security in their
incomes. Investors also remain active. There
continues to be concern with limited stock in this
sector and affordability. Buyers may have to look
further afield at this price level.
37
Month in Review
February 2015
Our take is that the market probably hasn’t quite
reached the bottom, although it seems (hopefully)
to be coming up fast. We think that on the back of
increased sales activity and reduction of stock, the
market may stabilise by mid 2015. It is difficult to
see any growth in values in 2015 without some big
momentum shift in the Mackay economy. If the coal
mining or associated services located in Mackay start
to increase, then this will have a positive effect on the
Mackay market. It is considered that no real recovery
will occur until the mining sector and coal prices
improve.
Hervey Bay
Completion of the expansion to Stockland Hervey
Bay and the new St Stephens Private Hospital has
increased confidence in Hervey Bay and helped to lift
its profile as a holiday destination now appealing to a
more broader market.
The sub $350,000 market is likely to remain the
most active sector with strong competition between
builders offering House and Land package deals. This
competition is likely to see little capital growth over
the next 12 months.
Property values may being to show signs of growth
in the $350,000 to $500,000 price range however
buyers are still seeking modern homes with good
ancillary improvements. Shorter selling periods
of up to three months are also expected as supply
begins to fall. The higher priced market is likely to
experience a period of recovery for the first three to
six months after falling throughout 2013 and 2014.
Similar to the sub $500,000 market, buyers are
looking for modern homes with extensive ancillary
improvements and good locations.
Rental vacancy is likely to remain low which will
continue to slowly lift rental rates. The sub $350,000
market remains attractive to investors with
increasing returns and tax benefits for new package
deal homes.
Unit stock supply has been gradually diminishing,
however unit values are still predicted to remain low
and affordable over the next twelve months.
The property market in Maryborough is expected
to remain stagnant, with uncertain employment
conditions keeping buyers cautious.
Emerald
Most of the mining towns in the Central Highlands are
still in significant decline apart from perhaps Dysart
which seems to have found a bottom in the range of
$80,000 to $100,000 for a basic 3-bedroom mine
home. Sales are turning over regularly to locals in
this range. This is off a peak of $450,000 for the
same home. All other towns are still dropping with
limited turnover and have not reached the level
where locals are willing to re-enter the market.
Emerald has been the least hit from the downturn.
On average Emerald is approximately 10% to 20%
back from the peak in early 2012. Values however
still appear to be dropping with mortgagee in
possession sales starting to increase and showing a
larger drop. A basic modern 4-bedroom, 2-bathroom
home is now selling at $290,000 from a peak of
$425,000. 2015 may be the year for a cheap upgrade
but with values still dropping we would recommend
waiting until mid year and reassessing unless an
obvious bargain comes along from a stressed vendor.
Gladstone
After a long period of significant market correction,
the declines in values occurring in the Gladstone
region are no longer as substantial and there are
early signs in some market sectors of stabilisation.
Sales activity has increased over the last few months
mainly due to the much more realistic values after
supply outweighed demand for most of 2013 and
2014.
The vacancy rate is currently sitting at 4.9%
(according to SQM Research) and has remained
relatively stable for the past three months. While
construction of new homes in modern estates and
Residential
It is difficult to get a gauge on the general Mackay
economy and therefore the effects it might have on
the Mackay property market. Anecdotal evidence is
mixed with just as many businesses saying they are
flat out as saying they are quiet and feeling the pinch.
38
Month in Review
February 2015
In 2015 we consider that capital values in most
market sectors will stabilise however the impact of
the declining construction workforce switching to
an operational phase associated with LNG plants is
yet to be felt and there is potential for further price
vulnerability when this occurs.
Townsville
A positive vibe surrounds the start of 2015 in the
residential property market with anecdotal evidence
from agents indicating good activity.
The year ahead is likely to be much the same as 2014
with economic factors such as high unemployment
and low levels of business confidence dampening any
prospects of short term property cycle movement.
We anticipate activity will be a little more positive
than 2014, however we consider it unlikely that this
will be reflected in any upward price movement. As
the year proceeds, we may see vendors not feeling as
much pressure to discount their asking prices.
There is still affordable buying in all sectors of the
residential market if you are willing to shop around.
Relatively speaking there is good buying in the
secondary and outer lying suburbs where there are
perceived social issues and the trade-off is between
value for money and these perceived social issues.
The unit market is likely to continue to exhibit
buyer resistance in the short term with high body
corporate and insurance costs and high rental
vacancy rates putting downward pressure on rents.
Over the course of the year, we expect this sector
of the market to stabilise as price points become
more attractive and rental vacancy rates and rents
stabilise.
The rental market spent most of 2014 in oversupply
but rental vacancies appear to have passed the peak.
Given that new unit developments under the NRAS
scheme have now come to a close, we along with a
number of property professionals are expecting the
market to progressively return to closer to normality.
Overall the year ahead remains cautious with
some positive early signs, however the overall
level of activity will be very much dictated by the
local economic factors such as unemployment and
business confidence.
Cairns
Cairns ended 2014 in a stronger economic position
than at the end of 2013. However the pace of its
economic recovery slowed during the course of
the year, affected by slower growth in tourism in
2014 compared to the previous year and continuing
weakness in the labour market. Job creation in
particular remains soft and unemployment higher
than the state average. Even though the mood
remains positive we expect relatively subdued
economic growth conditions to prevail during
2015. Commencement of the $400 million Nova 8
residential and commercial towers in the CBD, with
1,000 on-site construction jobs, will provide a much
needed contribution during the year.
House prices in Cairns have been creeping up over
the last three years and our expectation is for further
price acceleration during 2015 as the economy
improves and the amount of property for sale
continues to reduce. Potential vendors are already
hanging off to wait and see what happens to prices
over the next twelve months and this is compounding
the reduction in the amount of property available
on the market. The tight rental market and low
rates of new construction will maintain pressure in
the market and provide further impetus to market
activity.
Interest rates aren’t a big determinant in the Cairns
market. Though lower interest rates help, the prime
influences on people’s buying confidence in Cairns
are the state of the economy, affordability and job
security. These will all contribute to drive property in
Cairns over the next 12 months.
Residential
new townhouse and unit projects has cooled over
the past several months, new product is still being
project marketed to investors. Vacant inner city units
and townhouses are considered to make up the bulk
of the above average vacancy rate.
39
Month in Review
February 2015
South Australia
This year we feel that this may play out in reverse
with a slow start to the year and an improved second
half.
Capital growth will hopefully
improve above 2.5% for 2015 but
it is difficult to see it exceeding
5%, however we remain optimistic.
We feel that it is critical that the interest rate remains
at current levels in order for our property market to
continue to improve. An interest rate rise at this time,
although probably not causing any decline in capital
value, may seriously impact on sales levels and cause
the market to stagnate. An interest rate cut on the
other hand would certainly be welcomed by current
mortgage holders, however our belief is that it will be
unlikely to stimulate the market much beyond what
we have already speculated.
As always we feel the greatest growth in the Adelaide
market is for dwellings rather than units. It is
expected that over time, growth in dwelling prices
is likely to outstrip that of units and the unit market
historically has been more volatile.
suburbs gains the benefit of these locations without
the associated price tag.
Locations close to the city are likely to continue
to benefit with increases in property prices. There
is a limited supply of properties available within
these established locations and constant demand
keeps upwards pressure on capital values. As a long
term investment, the land value alone should show
good solid growth, especially in light of some of the
proposed changes to zoning and the South Australian
government’s drive to increase population density
within the inner suburbs to limit urban sprawl.
The outer southern suburbs will continue to be
popular with first home buyers and investors
mostly due to affordability, however with the recent
completion of the duplication of the Southern
Expressway and extension and electrification of
the Noarlunga train line to Seaford, transport to
these areas has improved and certainly adds to the
appeal of the locations, along with their proximity to
excellent swimming beaches and local food and wine
regions. Continuing upgrades and new construction
of local shopping is in line with population growth
and this is all expected to result in increased demand
and improving capital growth.
An example of a suburb that we suggest may show
slightly increased growth this year is Broadview,
which is located less than five kilometres from the
CBD and slightly to the east of Prospect, which
remains a popular established suburb, with a high
street that offers an interesting mix of shops, cafes
and eateries and has a weekly farmers’ market.
Broadview itself was developed from the early 1900s
with most dwellings constructed since the 1940s
and is characterised by large allotment sizes and
character dwellings. In recent times there has been
some infill development and gentrification. The
median price of this location is around $450,000.
This price level is considered affordable and being
close to the prestige inner eastern and northern
Low levels of quality stock being presented for sale
appear to be holding the market back, especially in
the inner suburbs up to around seven kilometres
from the city. This was the case throughout most
of last year and it is difficult to understand exactly
why this phenomenon is occurring. However it is
expected that this will persist for most of 2015. It is
worth noting that on an individual property level this
is translating in well located, appealing properties
in the $500,000 to $1.5 million price bracket
selling quickly (usually in less than two weeks) once
released to market and potentially achieving a sale
price above expectation. However it is difficult to
understand why people seem reluctant to put their
properties on the market. Perhaps this is in part
Residential
Adelaide
We are predicting that 2015 will be similar in many
ways to 2014 when it comes to Adelaide’s residential
property market. Since reaching the bottom of the
property market during 2012 we have speculated that
our recovery will be a gradual improvement over time
that is set to persist in the short to medium term.
Last year the market showed early growth of around
5% in the first six months however this slowed in the
latter half of the year with annual growth ending at
2.5% for the 12 months.
40
Month in Review
February 2015
Again our prediction is that 2015 will be very similar
to 2014. We are expecting property that is not priced
to the current market to experience extended selling
periods, with buyers tending to be more discerning
and after what is perceived to be good value for
money.
Mount Gambier
We begin 2015 with more positivity than in the past
few years, with more stability and growth occurring
in 2014. This positive outlook is seen through the
extra investment within the region through the
local timber industry and also through the state
government’s support of the James Morrison
Academy of Music situated in Mount Gambier along
with funding of the new multi million dollar learning
centre at the local university campus.
The timber industry will see government funding
injected into four local timber mills throughout 2015
which is expected to help secure jobs through an
increase in production from new technology and
machines being installed.
from 2013 to 2014, we look to see 2015 house sales
numbers increase and stability in property values
continue.
The James Morrison Music Academy is a new
addition to the University of South Australia which
will take on 70 students per year with the aim of
building to 200 students by 2020.
The local university campus will see a multi million
dollar learning facility constructed which is expected
to provide positive flow on effects throughout the
region. The new learning centre is expected to
provide the opportunity for more university courses
to be offered in the future. This in turn could see an
increase in people travelling to and staying in Mount
Gambier to study.
The most popular price range for house sales is
within $200,000 to $250,000. This range is seen
as an affordable point to enter the market and
offers good investment returns. This price range
is expected to be the most popular in 2015 until an
increase in demand sees property values increase,
which is unlikely to occur this year.
An optimistic outlook is predicted for 2015 with the
continued growth in house sales numbers over the
past three years. With house sales growth up 20%
Residential
due to Adelaideans traditionally purchasing a new
property before selling their existing home or maybe
it is just part of the consolidation phase whereby
people are choosing to pay down debt. One thing
is certain, when driving around the streets of the
inner suburbs our love affair for home renovations is
apparent with new dwellings under construction and
extensions and upgrades occurring all over the place.
When weighing up the cost of purchasing (including
associated costs) against rebuilding, extending or
renovating, it appears that currently the latter may
be more cost effective or just easier than trying to
find the right property in the current market. It is fair
to say that with the current limited options available,
some potential buyers are feeling a certain level of
frustration.
41
Month in Review
February 2015
Tasmania
There have already been calls for the government
to increase and extend the FHBB grant program to
maintain economic and employment momentum
within the construction and real estate sectors. It will
be worth watching how government responds in the
near future given state budgetary challenges.
Should the economy continue to bubble along,
the scheduled staged reduction of the First Home
Builders Boost (FHBB) (at 31 December 2014 and
again in June 2015) is a potential pitfall for both
Tasmania’s property market, particularly within the
newly constructed first home buyer segment, and
construction industry.
With a further $10,000 reduction to the FHBB grant
after June 2015, suburbs to watch are those where
first home buyers have been active. Suburbs that
have experienced higher volumes of land sales
within a first home buyer price bracket in the south
include Tranmere, Old Beach, Howrah, Oakdowns and
Kingston. In the north they include Prospect Vale,
Newnham, Riverside, Legana and Perth. Premium
prices for newly constructed homes within this
market bracket were being achieved and it could
be expected that there may be pricing movements
post June 2015. It would also be expected that with
the significant reduction of the FHBB grant (from
$30,000 to $10,000 after June 2015) there would
be more activity within the established residential
property market at a first home buyer price level,
where investors and first home buyers compete.
After a lacklustre uptake of the $15,000 grant
available in 2013, the government boosted the
grant to $30,000 for newly constructed homes
in November 2013 until 31 December 2014 with
the intent of stimulating a flagging economy and
business sentiment.
As of 1 January 2015, the grant
has been reduced to $20,000 with
a further reduction to $10,000
scheduled for homes built after 30
June 2015.
The north-west property market should be
approached with caution due to declining
employment opportunities within this part of the
state which climaxed in the latter part of 2014
with mine closures. Economic data supports
this with government reports stating that while
unemployment rates are lowering in the south and
north they are increasing in the north-west.
It would appear that Tasmania may be starting to
crest a challenging economic period brought about
by global economic conditions and contraction of its
traditional industries. New opportunities to support
and grow its agricultural and tourism sectors such
as the proposed five new irrigation schemes are
brewing, promising an exciting and interesting future.
Tassie has already seen the scope of its traditional
industries constrict, something other Australian
regions are yet to fully grapple with.
Residential
Hobart and Launceston
2015 commences with a positive outlook for
Tasmania with improving economic data, particularly
in the south. Increases in employment participation
and retails sales, falling unemployment and relatively
stable inflation are all positive economic indicators.
42
Month in Review
February 2015
Northern Territory
While there has been steady population growth in
the greater Darwin area in recent years, investment
activity has been underpinned by high rental returns
from fly-in-fly-out and contract workers employed
on resource and infrastructure projects and by
(often subsidised) Defence personnel, resulting
in the highest rental yields in the country. 2013
and 2014 saw the completion of a number of unit
developments which were sold overwhelmingly to
investors and had the major project factor priced
into the selling prices. This has considerably eased
the rental market with demand having been met.
Although median unit prices have increased in inner
Darwin (up 10% year on year to $538,650), this
does not reflect a general upswing - rather the high
volumes of good quality new stock on the market and
the settling of sales negotiated in past years.
Sales of new dwellings (houses and units) and of
vacant land have also been bolstered by concerted
Northern Territory government policies targeted at
increasing the housing supply. Land releases and new
builds in Darwin’s northern suburbs and Palmerston
have proven more affordable due to smaller lot sizes
and subsidies have been provided for new home
purchases (and removed for existing homes). As a
result, 935 titles were issued in the greater Darwin
area in 2014, the highest number ever and a 38%
increase on 2013.
Median house prices in both Darwin and Palmerston
have stabilised to 2013 levels and there seems little
expectation of a rise in the short term. Continued
land releases and incentives should support demand
for new product from young families and upgraders,
particularly in Muirhead and the more upmarket
Palmerston suburbs like Durack Heights, Zuccoli,
Johnston and Bellamack. Proposed new unit
developments may continue to prove popular with
owner-occupiers, especially if they are affordably
priced. Good news for builders and purchasers. Not
such good news perhaps when it comes to selling
however. This has certainly dampened the market for
owners of existing stock hoping to sell or upgrade,
with land value plus renovation or construction costs
likely to exceed market value for existing properties
for a while.
And for investors? With a number of projects either
winding up or moving into less labour-intensive
stages, there was a reported exodus of workers
interstate in the latter half of 2014 due to seasonal
weather and labour requirements. The most recent
REINT publication reported a 4.7% vacancy rate
for units in inner Darwin and northern suburbs in
September 2014 (double the 2.4% recorded at the
same time in 2013, when the market was severely
stressed and bidding wars were taking place on
available rental stock) and 4.3% for Palmerston
units. House vacancy rates had also increased on
2013 levels. CoreLogic RP Data indicates a slight
year on year decrease in both house and unit rents
between December 2013 and 2014. Seems like a good
time for tenants to renegotiate lower rentals, before
the town fills up again!
All in all, it is likely to be a fair year for owneroccupiers who stay put and upgraders buying
something new. Stability too for the prestige and
rural markets, with different objectives and a longer
term view. Investors and owner occupiers looking
to sell in an environment of slowing demand and
increasing supply may need to research well and
price accordingly.
Alice Springs
The Alice Springs market is expected to be generally
flat with potential downward pressure on lower price
segments (sub $500,000) during 2015, while the
removal of the first home buyers grant for existing
property works through the market. There will be
a number of interesting goings on in the broader
market including the commencement of individual
dwellings in the new Kilgariff subdivision, the
commencement of renovation works to the Greatorex
Residential
Darwin
With the highest rate of economic growth and
the lowest unemployment rate in the country, the
Northern Territory seems to have the fundamentals
right for a continuation of the stellar returns
experienced by residential property owner-occupiers
and investors in recent years. Unfortunately (for
existing property owners at least), behind the
numbers the story is a little different, with subdued
growth a more likely outcome for most sectors.
43
Month in Review
February 2015
Building, the likely commencement of construction
at the old Bowling Club site on Gap Road, the South
Edge subdivision and the outcome of the public
exhibition of the Melanka site plans will be closely
watched by many.
The number of projects which
will be underway in 2015 is likely
to boost the local construction
industry which has had a period of
subdued activity.
In Tennant Creek we have seen a slowing in sales
activity over the last six months after an extended
period of strong growth. Given the rates of growth
over the last few years and the levelling out of
prices more recently we consider that the market
remains at or close to its peak. A softening of prices
is expected over the coming months due to lower
activity levels and the recent increase in supply of
land in the market which has increased residential
housing stock.
Residential
However, the increase in supply into the broader
residential market, particularly in the unit segment,
has the potential to place downward pressure on
prices.
44
Month in Review
February 2015
Western Australia
Growing first home buyer activity that helped kick
start the upswing appears to have peaked however
has now resulted in increased activity among tradeup buyers. This flow on effect appears to be reaching
the upper end of the market ($1 million plus) as
turnover of properties in this bracket increases.
As at January 2015, total listings for the Perth
metropolitan region were circa 12,050 (REIWA), an
increase from circa 8,500 recorded in June 2013.
The statistic is indicative of falling demand, which has
ultimately had a negative result on the median house
price for the previous quarter. Early indications are
that this trend will continue through the December
quarter’s results.
Caution will remain the buzzword for 2015. The
Perth residential property market experienced
strong fundamentals on the back of resource
industry backed demand. Perth’s population grew
exponentially as a result of the influx of workers from
both the eastern states and overseas. With the falls
in both iron ore and oil prices, most resource projects
are on hold. With no end in sight of a recovery in
prices, most companies have begun the task of
shedding their workforces. As a consequence, Perth’s
population is predicted to fall as workers search
elsewhere for work.
Overall there remains uncertainty surrounding the
health of the global economy, demand within the
resources sector and subsequently the medium term
effects this will have on the local real estate market.
Continued stability in interest rates may assist
to provide some stability to the Perth real estate
market through 2015, although we highlight that
recent statistics indicate the market to have peaked
early in 2014. In isolation and without the further
impact of a large scale external economic event, we
predict a declining market especially in the lower end
apartment market as a result of falling demand and
completion of stock already under construction.
South West WA
Agents in the main towns throughout the south-west
of Western Australia are reporting a stable level of
sales with a levelling out of values throughout the
lower and middle segments and a slight increase in
land values. The top end of the market continues to
be more problematic, with continuing weak demand
and is characterised by an over supply of properties
for sale coupled with a lack of prospective purchasers
in that value range. The rural residential market
has also slowed with the majority of the sales being
below $1 million and is also experiencing extended
selling periods.
Developers are responding to the lack of land
supply with further releases in Treendale, Millbridge,
Dalyellup, Provence, Vasse Newtown, Kealy and
Dunsborough Lakes which is likely to see the demand
supply balance improve.
The rental market has eased
slightly over the past 12 months,
however continues to be relatively
tight with low vacancies and
historically high rents putting
upwards pressure on the first
home buyer market and bringing
investors back into the game.
Smaller lot developments in the new subdivisions
have become popular due to their affordability and it
is anticipated that this will be a trend going forward
with a move away from large homes to smaller,
well appointed homes on small blocks, with limited
gardens and the ability to lock and leave.
The groyne realignment at Port Geographe in the
City of Busselton is drawing to a close and already
we have seen a considerable increase in values,
particularly for canal blocks.
Residential
Perth
The Perth metropolitan area witnessed a 3.9%
increase in the median house price during the 12
months prior to October 2014 as sales turnover rose
in both the housing and multi-residential sectors.
However, the median house price fell 1.8% from the
previous quarter indicating a softening in demand
generally across the market.
Overall the word on the street is that it is likely the
property market in the south-west for 2015 will be
45
Month in Review
February 2015
Esperance
Before looking at the crystal ball for the year ahead,
a quick recap on the year just passed may assist in
providing some indications for the months to come.
After a reasonably subdued start to 2014, market
activity improved towards the end of the year
although as a whole sales volumes were down on
previous years.
Volume in the sub $500,000
range was stronger in the first
half of the year with sales above
$500,000 finishing strongly in the
second half.
Values over all price ranges and property types
in the broader Esperance townsite have remained
reasonably consistent however selling periods have
lengthened compared to previous years.
The rental market saw increased vacancy with many
major projects in the town coming to an end and
workers relocating. In general terms, rentals have
reduced across all property types typically in the
order of $20 to $50 per week.
Vacant land sales remained stable with supply slowly
diminishing until a new estate was released mid year.
This has resulted in a minor decline in underlying
land values within the immediate vicinity of this
subdivision however in the broader area underlying
land values have remained consistent with the
preceding year.
So, to the year ahead. At the risk of sounding like a
broken record, much of the same is the prediction
for 2015. A number of properties over all price
ranges and property types are available for sale
however demand is also relatively stable within all
markets and regular sales are occurring. As with all
areas, accurately priced property is attracting sound
demand and typical selling periods are still less than
six months.
The market prediction for the smaller centres in
the broader Esperance region are more difficult to
gauge. Hopetoun, 200 kilometres west of Esperance,
has seen a substantial decline in values over the past
five years with a combination of excessive oversupply
of land, very low sales volumes and uncertainty for
employment in the region all contributing factors.
The land is slowly beginning to be absorbed and
improved residential values at present appear to
have stabilised within a typical range between
$250,000 to $350,000. Sales volumes are still very
low and there is a large amount of property available
on the market. It is likely that if sales volumes do
not improve there may still be some downward
correction to come as vendors who have had
property listed for an extended period become more
anxious to quit this market.
The small mining town of Norseman, 200 kilometres
north of Esperance has had an interesting 2014 and
will likely have an interesting 2015. Norseman gold
mine, the main employer in the town, went into a care
and maintenance program in June with most staff
laid off and the town largely emptied. This is on the
back of massively declining values since 2012 due
largely to uncertainty over the future of the mine.
Since July 2014 however, the volume of sales in
Norseman has exceeded nearly the whole of 2013
and first half of 2014 combined. Values are very
low with a 4-bedroom home in a generally good
condition likely to sell for less than $50,000 and
typical sales for older homes in varying condition
ranging between $20,000 and $40,000. It has
been suggested that Norseman provides the most
affordable housing in the country and this could
well be correct and be a reason sales volumes are
improving. As to whether any capital growth may
occur, it is unlikely until the local economy can
stabilise with either the current mine reopening or
new publicised mining ventures in the region gaining
some momentum.
Residential
slow. This is on the back of the Perth metropolitan
market slowing significantly throughout the last
two quarters of 2014 which historically has a flow
on effect to the south-west market. Nevertheless,
the market to date has remained relatively steady,
however is expected to weaken throughout the year.
46