newcastle property watch q3 2012

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www.prdresearch.com.au Your home of property knowledge Third Quarter │2012 NEWCASTLE Property Watch ® Apartments along Honeysuckle Drive - Newcastle’s premier entertainment precinct MARKET INDICATORS Change from Last Year Half Year HOUSE SALES HOUSE MEDIAN HOUSE RENTS UNIT SALES UNIT MEDIAN UNIT RENTS The indicators depicted above are based on the year ending April 2012. KEY HIGHLIGHTS The fall in activity has led to the contraction of the ‘aspirational’ buyers’ market and the increase in the number of cautious purchasers who are factoring in the risk of potential falls in capital values. Unit Rental yields of 5.1 to 7.2% are proving attractive to investors, who are targeting properties selling within lower price brackets. Newcastle LGA Market Overview This report aims to navigate through the historic and current market conditions of the Newcastle Local Government Area (LGA) and provide an overview of the outer and inner citys market conditions. A booming coal industry in the Hunter Valley has led to the strong economic momentum prevalent in Newcastle. The record trade throughput of the Newcastle port is driving the employment market in the region, with infrastructure investment in the City and the nearby Tomago areas positioning the region as one of the most robust in NSW. While demand for industrial and commercial properties is strong, the residential and retail sectors have experienced softer conditions in the past two years. However, recent land purchases by the state government set a brighter outlook for Newcastle CBD’s retail market and strengthen the long term position of the residential market. The LGA’s Sales Cycle graph reveals stronger growth in the median house and unit prices in the past three years, compared to the preceding period. This is largely attributed to the stimulus dispensed by the government over 2008 and 2009 in reaction to the Global Financial Crisis. Since the October 2009 peak, activity softened by approximately 30% for both houses and units, despite an increase in median price of 10.5% for a house and 3.3% for a unit. In the past 12 months the median house price declined by 2.6%, while the median unit price rose by 1.4%. The fall in activity over the past three years has seen the contraction of the ‘aspirational’ buyers’ market and the increase in the number of cautious purchasers who are attuned to the state of the housing market and are factoring in the risk of potential falls in capital values. NEWCASTLE LGA HOUSE & UNIT SALES CYCLE An analysis of days on the market was conducted to ascertain the liquidity of dwellings in the region. The study revealed an average of 91 days to sell a house in the Newcastle LGA, compared to over 118 days in the neighbouring LGAs. This figure increases to an average of 122 days for units, but remains favourable compared with 136 days or more for the adjoining regions. Graph prepared by PRDnationwide Research. Source: PDS $380,000 $339,725 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 0 500 1,000 1,500 2,000 2,500 3,000 2001 OCT 2002 APR 2002 OCT 2003 APR 2003 OCT 2004 APR 2004 OCT 2005 APR 2005 OCT 2006 APR 2006 OCT 2007 APR 2007 OCT 2008 APR 2008 OCT 2009 APR 2009 OCT 2010 APR 2010 OCT 2011 APR 2011 OCT 2012 APR Median sale price Number of sales Half year period House Sales Unit Sales House Median Unit Median

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This report aims to navigate through the historic and current market conditions of the Newcastle Local Government Area (LGA) and provide an overview of the outer and inner city’s market conditions.

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Page 1: Newcastle Property Watch Q3 2012

www.prdresearch.com.au Your home of property knowledge

Third Quarter │2012

NEWCASTLE Property Watch®

Apartments along Honeysuckle Drive -

Newcastle’s premier entertainment

precinct

MARKET INDICATORS

Change from Last Year Half Year

HOUSE SALES

HOUSE MEDIAN

HOUSE RENTS

UNIT SALES

UNIT MEDIAN

UNIT RENTS

The indicators depicted above are based on the year

ending April 2012.

KEY HIGHLIGHTS

The fall in activity has led to the

contraction of the ‘aspirational’

buyers’ market and the increase

in the number of cautious

purchasers who are factoring in

the risk of potential falls in capital

values.

Unit Rental yields of 5.1 to 7.2%

are proving attractive to

investors, who are targeting

properties selling within lower

price brackets.

Newcastle LGA Market Overview

This report aims to navigate through the historic and current market conditions of

the Newcastle Local Government Area (LGA) and provide an overview of the

outer and inner city’s market conditions. A booming coal industry in the Hunter

Valley has led to the strong economic momentum prevalent in Newcastle. The

record trade throughput of the Newcastle port is driving the employment market

in the region, with infrastructure investment in the City and the nearby Tomago

areas positioning the region as one of the most robust in NSW. While demand for

industrial and commercial properties is strong, the residential and retail sectors

have experienced softer conditions in the past two years. However, recent land

purchases by the state government set a brighter outlook for Newcastle CBD’s

retail market and strengthen the long term position of the residential market.

The LGA’s Sales Cycle graph reveals stronger growth in the median house and

unit prices in the past three years, compared to the preceding period. This is

largely attributed to the stimulus dispensed by the government over 2008 and

2009 in reaction to the Global Financial Crisis. Since the October 2009 peak,

activity softened by approximately 30% for both houses and units, despite an

increase in median price of 10.5% for a house and 3.3% for a unit. In the past 12

months the median house price declined by 2.6%, while the median unit price

rose by 1.4%. The fall in activity over the past three years has seen the

contraction of the ‘aspirational’ buyers’ market and the increase in the number of

cautious purchasers who are attuned to the state of the housing market and are

factoring in the risk of potential falls in capital values.

NEWCASTLE LGA HOUSE & UNIT SALES CYCLE

An analysis of days on the market was conducted to ascertain the liquidity of

dwellings in the region. The study revealed an average of 91 days to sell a house

in the Newcastle LGA, compared to over 118 days in the neighbouring LGAs.

This figure increases to an average of 122 days for units, but remains favourable

compared with 136 days or more for the adjoining regions.

Graph prepared by PRDnationwide Research. Source: PDS

$380,000

$339,725

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

0

500

1,000

1,500

2,000

2,500

3,000

200

1 O

CT

200

2 A

PR

200

2 O

CT

200

3 A

PR

200

3 O

CT

200

4 A

PR

200

4 O

CT

200

5 A

PR

200

5 O

CT

200

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PR

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6 O

CT

200

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PR

200

7 O

CT

200

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201

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Med

ian

sale

pri

ce

Nu

mb

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sale

s

Half year period

House Sales Unit Sales House Median Unit Median

Page 2: Newcastle Property Watch Q3 2012

This report was prepared by PRDnationwide Research. Source: PDS, Housing NSW, REINSW.

PRDnationwide does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections

have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. PRDnationwide will not be liable for any loss or

damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Prepared by PRDnationwide Research © All medians and volumes are calculated by PRDnationwide

Research. Use with written permission only. All other responsibilities disclaimed. © 2012

Your home of property knowledge www.prdresearch.com.au

Research Analyst │Oded Reuveni-Etzioni P (02) 9257 0254 E [email protected]

PRDnationwide Newcastle │Principal Mark Kentwell P (02) 4926 0600 E [email protected]

HOUSE PRICE POINTS

Chart prepared by PRDnationwide Research. Source: PDS

SUBURB PERFORMANCE FOR

THE YEAR TO APRIL 2012

Table prepared by PRDnationwide Research. Source: PDS

AVERAGE CAPITAL GROWTH

HOUSES

Chart prepared by PRDnationwide Research. Source: PDS

Newcastle Inner City Market Overview

Property transactions in inner city suburbs represent the bulk of sales in the

region, with a strong performance compared to the broader market. A look at the

Sales Cycle graph points to a robust incline in the median house price from April

2009 to $472,490 in April 2011, before easing to close the April 2012 half year

period at $459,975. While the increase to the median unit price was more

gradual, it recorded a similar long term growth (3.4% per annum) to that of

houses over the past five years. The House Price Point graph indicates that the

decline in activity toward the upper end of the market is the main reason for the

softer median price, while an increase in sales volumes was recorded for houses

selling between $300,000 and $399,999.

Buyers in this price bracket are taking advantage of the decline in prices and

cheaper cost of finance to dispose their outer ring homes in favour of a superior

location or better quality accommodation. Unit rental yields of 5.1% to 7.2% are

proving attractive to investors, who are targeting properties selling within lower

price brackets. Despite a seasonal rise in the rental vacancy rate (1.7% in June

2012), the City’s high demand and short supply of quality residences further

reduces the risk to investors. The strong rental price growth of 6.1% for a three

bedroom house and 7.1% for a two bedroom unit brought the median rents for

the March quarter to $383 (house) and $360 (unit).

The growth of properties is best measured through the capital gains achieved by

individual vendors over a period. A house resale analysis carried out by

PRDnationwide Research revealed a strong average capital gain of 6.4% per

annum for sales between November 2011 and April 2012. This figure equates to

a doubling in price every 11 years. However, current estimates predict future

growth to be more closely aligned with growth in wages, equating to 3 to 4% per

annum. That said, a sustainable growth in income is expected to continue in

Newcastle, as the port operations expand and its close proximity to the Hunter

Valley keeps employment levels steady.

The Suburb Performance table includes the most active suburbs in the inner city.

The table demonstrates the difference in house and unit activity, with a softer

house performance and a rise in unit sales between the April periods in 2011 and

2012. The sharp growth in unit sales can be explained by buyers’ demand for

lower priced product and the low number of sales compared to houses, making

any change in activity more obvious.

NEWCASTLE INNER CITY HOUSE & UNIT SALES CYCLE

Graph prepared by PRDnationwide Research. Source: PDS

$459,975

$350,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

0

200

400

600

800

1,000

1,200

200

1 O

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Half year period

House Sales Unit Sales House Median Unit Median

Median

Price

Total

Sales

Median

Price

Total

Sales

New Lambton $459,000 69 4% -12%

Merew ether $650,000 61 -14% -22%

Hamilton $468,500 38 2% -27%

Adamstow n $382,000 35 -15% -35%

Merew ether $350,250 42 1% 0%

Cooks Hill $385,750 24 -1% 41%

New castle West $335,000 21 -6% 62%

Adamstow n $350,000 14 36% 17%

UN

IT

APR 11 HY Annual Change

HO

US

E

Suburbs

6.4%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Avera

ge c

ap

ital g

row

th p

.a.

Half year period

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Price point

Annual change in transaction numbers

Share of transactions