Kempsey LGA Property Watch Q3 2011

This report analyses the Kempsey Local Government Area (LGA). It highlights the characteristics and performance of the house, rural and rural residential markets within the region.

Area Characteristics
The Kempsey LGA is located in NSWs Mid North Coast, approximately 345 kilometres north of Sydney and 400 kilometres south of Brisbane. The Kempsey LGA is a rural region, where farming, tourism and the service industries are the main drivers of the economy. Recreational facilities include the Kempsey Golf Course and Caravan Park located in South Kempsey and the Warwick Park Racecourse in West Kempsey. The region is accessible via the Pacific Highway and by the Sydney to Brisbane Country Link railway line. Air travel is supported by the Port Macquarie Airport which is a 45 minute drive south of the Kempsey town centre. There are 29,442 residents living within the LGA, with the majority of the population concentrated in and around the town of Kempsey, and in a number of coastal communities.

Rental Market
The NSW Department of Housing data shows a limited private rental market in Kempsey, amounting to 16.6 per cent of all dwellings. It is interesting to note that rural regions such as Kempsey tend to have a lower proportion of private rental stock than more densely populated regional centres, such as Coffs Harbour. The shortage in supply explains the increases in rental prices in recent times. The Departments June data shows the median rent for a three bedroom house in the LGA was $250 per week representing an annual growth of 8.2 per cent. However, the median advertised weekly rent for the six months to July 2011 equates to $260 for a three bedroom and $280 for a four bedroom house. Most properties for rent are located in West Kempsey, followed by Kempsey and East Kempsey. This indicates a concentrated rental market around the regional centre of employment.

House Market
Detached houses represent the majority of dwellings in the LGA, with the localities of Hat Head and Smithtown comprising of 100 per cent detached houses. Higher density dwellings can be found in Crescent Head and East Kempsey where houses represent about 83 per cent of the market, and South West Rocks where 78 per cent of dwellings are houses.

Growth returned to the market in 2008 and continued over the next two years despite an overall fall in activity. The median house price equated to $263,250 in March 2011, representing a 12 month growth of 1.3 per cent, with a long term growth of 3.2 per cent per annum recorded over the past five years. However, given the average inflation rate of three per cent recorded over the period, the real growth in median price is only marginal. Activity has been trending downwards over the past five years, with the March 2011 six months figure of 114 transactions being the lowest activity in a decade. Activity declined 22 per cent from March 2010 and 34 per cent from March 2009, where a stimulated market yielded strong sales activity and increase in the median price.

A resale analysis was conducted to ascertain the actual capital gains achieved by vendors who exited the market during the six months to March 2011. It revealed an average capital growth of 4.9 per cent per annum, and an average holding period of five years and five months between resales. The Capital Growth graph reveals a diminishing growth for vendors who exited the market over the past five years, with the 2011 average capital gain representing half of the 2007 gain.

Rural Residential Market
Rural residential properties have a land size between 2.5 to six acres (about 10,120 to 24,280sq m). These properties are characterised by their location ( normally closer to a town centre) and may be either in or out of an estate development. These properties are favoured by owners seeking to live on larger lots and will not normally be suitable for upkeep of animal or for commercial rural purposes. Activity declined from 23 transactions in March 2010 to 15 in 2011, slightly below the long term average of 18.5 transactions per six month period. Most lifestyle properties transacted at the $300,000 to $399,999 price brackets, accounting for 40 per cent of sales for the March half year in 2010 and 2011. The smaller price bracket of $200,000 to $299,999 decreased from six sales in 2010 to two sales in 2011.

A resale analysis for rural residential properties revealed an average capital growth of 3.8 per cent per annum, and an average holding period of seven years between resales. A possible explanation for the lower capital gains is the limited market for rural residential properties in the region compared to houses on smaller lots.

Rural Market
Rural lots will generally be larger than six acres are found further away from town centre. Depending on the carrying capacity of the land and type of improvements, they enable owners to run an agricultural operation on the land, with improved type of soil, adequate rainfall, and good water allocations leading to a greater carrying capacity, in turn increasing the viability of the land and ultimately the value of the property. The Sales Cycle graph indicates an overall decline in activity since March 2008, with the six months to March 2011 recording the lowest activity for the past 11 years with 41 transactions. A price point analysis was conducted to ascertain the different price brackets within the Kempsey LGA rural market. It revealed that most transactions occurred in the $300,000 to $399,999 bracket, accounting for 39 per cent of the market. The lower bracket of $200,000 to $299,999 equated to 27 per cent while toward the top end two properties sold above $600,000. The most active localities over the past two years were Kundabung and Collombatti, each recording five transactions in 2010 and four in 2011. The Rural Sales graph ranks the 10 most active suburbs in the March half year over the past three years. It shows that 20 to 39.9 acre properties dominated the Kundabung market while larger lots transacted in Collombatti, accounting for 75 per cent of total sales for the locality. Smaller properties of six to 9.99 represented only a small part of the market, while properties with an area between 10 to 19.9 acres made up the majority of sales in Dondingalong, South Kempsey, Crescent Head and Euroka.