newcastle property watch q3 2012
DESCRIPTION
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.TRANSCRIPT
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
6 A
PR
200
6 O
CT
200
7 A
PR
200
7 O
CT
200
8 A
PR
200
8 O
CT
200
9 A
PR
200
9 O
CT
201
0 A
PR
201
0 O
CT
201
1 A
PR
201
1 O
CT
201
2 A
PR
Med
ian
sale
pri
ce
Nu
mb
er
of
sale
s
Half year period
House Sales Unit Sales House Median Unit Median
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
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
6 A
PR
200
6 O
CT
200
7 A
PR
200
7 O
CT
200
8 A
PR
200
8 O
CT
200
9 A
PR
200
9 O
CT
201
0 A
PR
201
0 O
CT
201
1 A
PR
201
1 O
CT
201
2 A
PR
Med
ian
sale
pri
ce
Nu
mb
er
of
sale
s
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