Clarence Valley Highlight Report l Q1 2012

Local Area Characteristics

The Clarence Valley Local Government Area (LGA) is located along the northern coastline of New South Wales and offers a diversified landscape for its residents, from 80 kilometres of beach frontage to the many tributaries into the Clarence River. According to the Australian Bureau of Statistics (ABS) the most recent Estimated Residential Population for the Clarence Valley as at June 2010 was 52,592. This equates to an increase of 1.1 per cent over a twelve month period, the 65th strongest growth of 152 Local Government Areas in New South Wales. The majority of residents within the Clarence Valley live as a family household (at 71 per cent), while 29 per cent live as a non-family household (sole or shared accommodation). Of the total dwellings just over 86 per cent of dwellings are considered to be a separate house, with six per cent units and five per cent townhouses. A high 47 per cent of all dwellings are fully owned, with a further 28 per cent in the process of being purchased (mortgaged), leaving just 25 per cent of the market available for rent.

The suburb of Grafton is the commercial hub for the regional community within the 2460 postcode. This area is located close to the border of New South Wales and Queensland, 345 kilometres south of Brisbane and 640 kilometres north of Sydney. This locality is easily accessible from the north and south via the Pacific Highway, which runs through the Grafton CBD, while the Gwydir Highway provides access to major road networks and communities inland of Grafton. The region is also serviced by the Grafton Airport, with flights running from selected airports within New South Wales. For the purposes of this report, the Greater Grafton Area encompasses the suburbs located within the 2460 postcode.

Located 60km to the north-east of Grafton, the Greater Yamba Area is famous for its excellent fishing and perfect year round climate, which makes it a popular holiday destination for interstate travellers. The towns are situated on either side of the mouth of the Clarence River and are surrounded by pristine beaches, boasting excellent surfing and camping conditions. To the south of Yamba in the suburb of Angourie, one of the best surf breaks on the eastern sea board can be found, as well as some incredible views of the Yuraygir National Park. For the purpose of this report the Greater Yamba Area includes the suburbs of Yamba, Iluka, Wooloweyah, and Angourie.

Future Development and Infrastructure
The Clarence Valley currently has a number of infrastructure developments either proposed or under construction. The estimated total value of investment proposed for the region is just over $394million. Future investment into development and infrastructure in the region will attract potential residents and ensure long term economic growth for the local economy.

The most significant projects under construction or proposed include;

Pacific Highway Upgrade This is an upgrade to the main highway from Hexham to Tweed Heads. The impact to the region will be substantial with the ease of access improving through multiple lanes and urban bypasses. This will not only allow for improved trade schedules, but also entice growth in tourist numbers. With a total overall project value of $2.2billion, it is easily the biggest investment to pass through the Clarence Valley region. Current key features are:
Ballina bypass- construction completed
Brunswick Heads to Yulgun- construction commenced
Coffs Harbour bypass- preferred route determined
Warrell Creek to Urunga- environmental assessment submitted
Banora Point Deviation- construction commenced
Woodburn to Ballina- project deferred

Clarence River Crossing
Investigations are underway to identify a preferred route option for an additional bridge of the Clarence River at Grafton. The project is estimated to cost between $40 $80million with community consultation in progress. Funding is yet to be allocated to the project.

Dolphin Blue Apartments
This proposed project will cost an estimated $175million and is in the feasibility stage. The site has been sold and the developer is considering various options. Initial plans include:
Residential ring road into residential component
Construction of 2 x 4 storey residential flat buildings containing 55 units
Strata subdivision of residential flat buildings
Construction of 6 tourist facility buildings including tourist accommodation or serviced apartments
Basement car parking for 212 vehicles
Retail Shop
Recreational facilities (tennis court)
Commercial premises
Business premises (spa or beautician)
Refreshment room (cafe / restaurant)
Hotel (pub)
Conference / assembly facility

Grafton Base Hospital

Construction has just been completed for Stage One of the redevelopment of an emergency and surgical services wing in the existing Grafton Hospital. At a value of $19.2million, the project has taken four years from conception to completion. Stage Two is set to commence construction in June 2012 and will include a $7million X-ray department and six orthopaedic beds (with a value of $3million), a new kitchen and refurbishment to pathology.

Grafton Library

Early planning has started for the construction of a new $8 million library to be located in Grafton. The project is currently in the concept stage, and is estimated to be completed by March 2014.
Greater Grafton House Market

In the six months to September 2011, the Greater Grafton house market experienced a noticeable 6.5 per cent softening in the median house price to record a final median house price of $261,750. The March 2011 half year period recorded a median price peak of $280,000, which may have perhaps been sustained into the most recent six month period had the region not endured the devastating floods that transpired in January 2011. A closer analysis of the implications surfacing from this natural disaster has revealed that the three months leading to January 2011 registered a total of 107 transacted sales and a median price of $280,000, compared to 82 transacted sales and a median price of $265,000 in the three months to March 2011. The evidence suggests that the incidence and extent of the floods have had an impact on both sales activity and price growth in the months following to date. With that said, the prevailing median house price is not a result of an isolated event, but a combination of diminished business sentiment, poor consumer confidence and steady increases to interest rates experienced in the year to September 2011, all of which have contributed to vendors diluting price expectations to meet the market. However, observing the stability of the long term growth trend illustrates a more accurate representation of the house markets actual performance. The ten year average annual growth rate for Greater Grafton was an exceptional 8.1 per cent per annum attributed largely to the resilience of the local market during the economic downturn and a rather buoyant median price that ensued.

Sales activity during the six months to September 2011 registered a total of 188 transactions, representing a softening of 19 per cent in the level of sales activity recorded in the September 2010 half year period, and a single sale short of that registered in the March 2011 half year period. The decreasing sales trend since September 2009 is perhaps largely due to a diluted first home buyers market, resulting from a phasing out of the first home buyers boost, increasing interest rates and tighter lending covenants. The distribution of price points in the six months to September 2009 is perhaps evidence that the first home buyers contributed to a large proportion of total sales for the period. Product priced below $250,000 contributed to 48.6 per cent of total sales registered in the September 2009 half year period, compared to 38.8 per cent in the September 2010 half year period and 42 per cent in the September 2011 half year period. It is important to consider sales volumes for each period to fully appreciate the composition change of market participants. For example, 48.6 per cent of total sales registered in the September 2009 half year period represents 152 sales, whereas 42 per cent of total sales registered in the September 2011 half year period represents only 79 sales.

Greater Grafton Vacant Land Market

The Greater Grafton vacant land market experienced a substantial softening in median price growth in the year to September 2011, recording a final median price of $125,000 over the September 2011 half year period, $21,500 less than the peak median price of $147,000 recorded in the September 2010 half year period. The acute decrease in median price is perhaps a direct consequence of the floods experienced in January 2011, which has indeed depreciated the quality and therefore value of land susceptible to flooding. As such, the increased volume of affordable land is believed to have enticed opportunistic buyers into the market, underpinning the rebound in vacant land sales for the September 2011 half year period. Only four sales were recorded in the month of January 2011, contributing to a ten year record low of just 43 sales for the March 2011 half year period. Sales activity has since gained momentum, which is believed to continue at least until the end of 2011 as buyers take advantage of increased affordability, recent cuts to interest rates (0.25 per cent in November 2011 and 0.25 per cent in December 2011) and more favourable buying conditions. Affordable land combined with the NSW Home Builders Bonus introduced in 1 July 2010, is sure to entice first home buyers and investors back into the vacant land market.

Greater Yamba House Market

The Greater Yamba house market has demonstrated rather stagnant median price growth in the year to September 2011, to record a final median price of $405,000, representing a $5,000 improvement over the year. Having had endured the floods of January 2011, the evidence indicates no material impact to median price, rather subdued sales activity liken to that experienced during the economic downturn in 2008. The Greater Yamba house market has demonstrated a noticeable sensitivity to local economic conditions as expressed by the acute changes to sales activity and a mildly volatile median price over the past decade. A combination of vacant land scarcity, shortages of new housing supply and the relative unaffordability of the current housing market are perhaps the key contributors to the way the market has transpired in recent times. Over the past five years the Greater Yamba house market recorded an average annual median price growth of 3.3% per annum, which is credit to a resilient median house price in the years after the Global Financial Crisis of 2008. With that said, sales activity in the area, since the March 2008 half year period experienced a gradual decline with exception to both the September 2009 and March 2010 half year periods which benefited from government stimulus.

Sales activity during the six months to September 2011 registered a total of 49 transactions, the lowest number of sales recorded in over a decade. This level of activity represents a softening of 12.5 per cent from the 56 transactions registered for the September 2010 half year period, and is 35 transactions less than the five year average of sales recorded for the area. Observing the distribution of price points since the September 2009 half year period, it can be seen that houses priced within the lower price brackets have diluted over time, with the sub $250,000 market completely tapering off, with exception to one sale registered in the September 2011 half year period. Conversely, activity in the $450,000 and above market has been sustained, if not enhanced as a percentage of total sales, underpinning the prevailing median house price and the subdued level of sales in recent times.
Greater Yamba Vacant Land Market
The Greater Yamba vacant land market is quite small, and as such has implications to both sales activity and subsequent median price growth. For example, the median price since the September 2008 half year period has experienced severe fluctuations (ranging between $700,000 to $200,000 in consecutive half year periods), exacerbated by the lack of sales recorded for each half year period that ensued. Every half year period over the past three years to September 2011, has recorded below 15 transactions (with exception to 16 sales recorded in September 2009 half year period) which does not provided sufficient basis to determine a reputable median. In fact, the three year average number of sales recorded for the area was only 9 sales per half year period, well below the minimum of 15 transactions PRD Research requires to substantiate a credible and indeed reliable median price. The prevailing median price for vacant land is $285,892 which is culminated from only four transactions. Albeit, the seven years leading up the slump in September 2008 half year period demonstrated less volatility in median price growth on the back of large injections of supply in 2002 to 2003 and more sustainable supply thereafter.
The graph to the right illustrates an interesting aspect of the vacant land market. The graph provides insight to the shift in both the availability of and demand for specific lot sizes. For example, the September 2009 half year period shows increased activity in the sub 500m 2 market, which is perhaps an indication of the first home buyers segment outperforming the market on the back of government stimulus. Again, the lack of sales activity makes it difficult at best to give credibility to such presumptions, and as such should be taken with the proverbial grain.