NSW/ACTProperty Report – January 2014

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NSW/ACT – Property ReportJanuary 2014

National Overview

This quarter we look around the nation to identify affordable properties with the potential to deliver healthy long term gains suitable for first home buyers and also investors. If there is one word that could sum up the key driver for growth, it would have to be ‘infrastructure’. New road / rail links are bringing affordable outer suburbs closer to city centres and employment hubs. New hospitals or tourism precincts are creating jobs. These are valuable factors that will underpin long term capital gains.

ALL ABOARD – NEW RAIL LINKS LET SUBURBS REACH FULL POTENTIALThe inner Sydney property market looks set to be transformed by a number of new light rail systems. Key areas to benefit include the inner west’s Dulwich Hill and Kingsford in the east.

The construction of South West Rail Link is likely to underpin growth in the first home buyer belt of Sydney’s south west, with suburbs like Elizabeth Hills, Gregory Hills and Oran Park well placed to reap the rewards.

For investors with a speculative leaning, suburbs with proximity to Brisbane’s proposed Underground Bus and Train (UBAT) link could offer long term capital growth. The connection is earmarked to run from Dutton Park in the south to Victoria Park in the north, though it’s worth stressing the project is only a proposal at this stage.

ROAD LINKS BRING OUTER SUBURBS CLOSER INThe duplication of Adelaide’s Southern Express Way – due for completion in mid-2014, will vastly improve commuter access to Adelaide’s south. Suburbs like Seaford, Seaford Rise and Port Noarlunga South all offer significant lifestyle benefits and the new road link should bring capital growth to the region.

NEW COMMUNITY INFRASTRUCTURE CREATES OPPORTUNITIESMelbourne’s Broadmeadows is a classic example of an uncut gem for investors. House prices start at the low $350,000s, yet the suburb is located just 16 kilometres north of the CBD. A major investment in community facilities is expected to enhance the area’s appeal.

For investors with a speculative leaning, suburbs with proximity to Brisbane’s proposed Underground Bus and Train (UBAT) link could offer long term capital growth.

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NSW/ACT – Property ReportJanuary 2014

For investors with a five year timeframe, the additional employment generated by the Queensland’s Sunshine Coast University Hospital (due for completion in 2016) should support property values from Caloundra to Maroochydore.

CONSIDER NEIGHBOURING AREASFaced with affordability challenges, it can pay to look at areas where neighbouring suburbs have experienced strong price growth. This is especially true in the Perth suburbs of Parkwood and Lynwood, which remain priced below $500,000 while adjacent suburbs are commanding price tags in excess of $650,000. When suburbs share the same infrastructure facilities, notably transport links, there’s a good chance that price growth will ripple outwards.

A FINANCIAL HELPING HANDIn a number of locations, first home buyers are being encouraged to consider new builds with the enticement of additional state government support. This is especially the case in Tasmania where the recently inflated First Home Builder is seeing buyer interest grow in suburbs along Hobart’s eastern shore in particular Old Beach, Howrah, Tranmere and Oakdowns.

Brendon HulcombeCEO - HERRON TODD WHITE

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NSW/ACT – Property ReportJanuary 2014

New South Wales

The introduction of light rail links will be a key factor underpinning growth in Sydney’s inner suburbs though the south west growth corridor has plenty of potential. In the ACT, increasing supply of inner city units could extend the timeframe for noteworthy capital growth.SydneyOPPORTUNITIES FOR FIRST HOME BUYERSThe inner Sydney property market offers limited opportunities for first home buyers with a budget below $650,000 however older 2-bedroom units should show good growth over a ten year horizon. These units often require modernisation – a cost that should be factored into purchase budgets.

In the Hills district, Castle Hill offers affordable 2-bedroom units. The suburb offers generous retail facilities, an express bus to the city and construction has commenced on a future rail link connecting the district with the CBD. With relatively few units in the area, demand for this type of dwelling is likely to remain robust.

Sydney’s south west growth precinct offers affordable house and land packages for less than $650,000. Suburbs like Elizabeth Hills, Gregory Hills and Oran Park may especially appeal to first home buyers. The state government’s First Home Owner Grant (New Home) and stamp duty concessions under the First Home – New Home Scheme make purchasing in these areas more affordable for first home buyers. Long term value growth is likely to be supported by new infrastructure developments including the widening of Camden Valley Way and the completion of South West Rail Link.

To the south, entry level houses in Engadine and Heathcote provide the best opportunities in the $550,000 to $650,000 price range. These properties generally consist of older style 3- to 4-bedroom homes on 500 to 600 square metres of land.

OPPORTUNITIES FOR INVESTORSValues in Sydney’s inner west will benefit from the newly constructed Inner West Light Rail Extension. Areas such as Dulwich Hill, Lewisham, Leichhardt and Lilyfield, which have previously lacked good public transport options, are likely to experience healthy capital growth plus high rental demand.

Sydney’s south west growth precinct offers affordable house and land packages for less than $650,000.

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NSW/ACT – Property ReportJanuary 2014

In the city’s east, units in Centennial Park, Kensington, Kingsford and parts of Randwick will also benefit from the South East Light Rail to Randwick and Kingsford (due for completion in 2020). With a buying budget of up to $650,000 investors in the area have a choice of modern 1-bedroom units and older 2-bedroom units.

Sydney’s south west growth corridor offers upsides for investors especially in the under-$650,000 market. The region has benefitted from significant infrastructure upgrades, and extensive employment areas make the south west a desirable location for young families, who provide a potential long term rental pool. With a budget of $650,000 investors could afford two 2-bedroom and 2-bathroom units in Penrith. With a combined weekly rental income of around $700 plus low strata fees, these types of properties make solid investments.

Regional NSWThe Illawarra Illawarra locations around Horsley such as Brooks Reach and Shell Cove have experienced strong demand from first home buyers with house and land packages available from around $370,000. The inner northern suburbs offer opportunities for investors with a budget up to $650,000. This area is close to major transport links, employment, shopping and beaches, and provides a strong and enduring rental market.

Southern Highlands First home buyers in the Southern Highlands are generally limited to older dwellings under $300,000. There has been active interest in new lots and Goulburn land values have risen around 20% in the past two years. Investors on a $650,000 budget should look to older style houses close to the main shopping areas for longer term growth.

Mid North Coast The strongest performing investment towns in the region have been in larger regional areas, predominantly Port Macquarie. Low to mid value houses ($275,000 to $350,000) along the coast have shown reasonable capital growth over the past 12 months and this is expected to continue into 2014.

Low value residential properties in the region’s non-coastal towns have seen buoyant demand from investors seeking strong rent returns. Yields of up to 7.5% are being realised in some cases however capital growth is limited.

Low value residential properties in the region’s non-coastal towns have seen buoyant demand from investors seeking strong rent returns.

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NSW/ACT – Property ReportJanuary 2014

The Hunter Generally speaking the Newcastle/Lake Macquarie residential property markets have been in a state of growth for the past six months. This is countered by a slowdown in mining activity and the near-completion of the Hunter Expressway (a large employer during construction), which has seen an increase in sales and rental stock in recent months especially in areas such as Maitland and Singleton. This has lead to a ‘buyer’s’ market in these parts of the Hunter.

Central NSWThe Bathurst/Orange region offers a diverse local economy and robust rural sector making it suitable for investors with a long term outlook. Improvements to the Great Western Highway are making the area more accessible to Sydney.

Albury/Wodonga also fits the bill for residential property investment with increases in government infrastructure and a rich and diverse range of services and facilities and proximity to many recreational areas.

ACT First home buyers are currently gravitating towards the outer suburbs around Gungahlin where new 3-bedroom dwellings are priced from around $400,000. Investors in these areas are experiencing rent returns of 5% to 6% for standard residential dwellings.

The inner unit market around Braddon, Lyneham, Kingston and City remains subdued due to recent increases in supply, though units along Flemington Road provide a good opportunity for first home buyers. Long term forecasts for these areas remain strong with demand expected to catch up to current supply. Rental returns are likely to remain around the 5% mark.

Rental returns are likely to remain around the 5% mark.

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