Newcastle Property Watch Q3 2013

Newcastle LGA Market Overview

This report investigates the residential real estate market within the Newcastle Local Government Area (LGA) and provides specific scrutiny of the inner city and middle ring markets.

The Newcastle CBD master plan announced by the state government in December 2012 outlines the vision for revitalising the Newcastle City Centre. Marked by the termination of the railway at Wickham Station, the plan prescribes a replacement of the existing railway line in the inner city with a pedestrian- friendly corridor. More recently a 99-year lease was granted over the Newcastle Port, with half the proceeds ($340 million) allocated to the replacement of the heavy rail line with a light rail. Improved access to the port is expected to encourage investment in the area which is already experiencing a growing retail and food culture.

Houses and units in The Newcastle area experienced a rise in activity and price since June 2012. The first half of 2013 recorded a total of 1,537 house and unit transactions, representing a 10 per cent growth from the corresponding period in 2012. The LGAs Sales Cycle graph revealed a steady growth in the median house and unit price since the Global Financial Crisis of 2008-2009. The increase in price was represented by an eight per cent rise in the median house price over the 12 months to June, while the middle unit priced rose 1.4 per cent to $352,000.

Enquiries came from first home buyer and upgraders, while investors experienced reduced rental returns as the supply of rental properties increased and tenants demand softened. The outlook for residential developments remains positive, with strong uptake of current projects likely to encourage further development in the medium term.

Newcastle Inner City Unit Market Overview The Inner City area encompasses the suburbs as north as Wickham and as south as Merewether, and bounded by the suburb of Hamilton South in the east. The construction of new developments in the inner city continued in the first half of 2013 with the development of Cooks Hills Eclipse Apartments (currently under way). In Newcastle the Tattersalls on Watt development is selling off-the-plan and is expected to commence construction in the last quarter of 2013. Sales of existing product climbed by four per cent from the 2012 June period; this trend is likely to continue in the final four months of the year. In the six months to June 2013 the inner city recorded 229 unit sales, with activity increasing across the largest suburbs including Newcastle, Bar Beach and The Hill, while activity in Newcastle West softened.

Investors and upgraders purchased in lower and middle price points, while first home buyers used mortgage rates below five per cent to enter the market. A recovery toward the top end of the market in the past four years led to a greater number of unit transactions over $900,000. The Unit Transactions chart pointed to the $900,000 plus price point accounting for 10.5 per cent of the market in the June 2013 period, compared to 4.8 per cent in June 2009.

The median price of a unit recorded a 5.4 per cent decline from June 2012, but maintained a 19 per cent growth since June 2009. The short term decline was the result of strong sales in the $300,000 or less price point which accounted for 26 per cent of transactions in the first half of the year.

Investors yields compressed as tenants moved into home ownership, leaving some properties vacant. The 2300 postcodes rental vacancy rate climbed to 3.7 per cent in July (up from 2.3 per cent in July 2012), while vacancy in the 2291 and 2303 postcodes remained below two per cent. Rental data released by Housing NSW confirmed the market moderation, with an overall decline in the median rent price of two bedroom units. With that said, single bedroom apartments in the inner city recorded a 19.4 per cent rise in median rent price from June 2012, closing the first half of 2013 at $345 per week. Not surprisingly, the inner city represented 50 per cent of single bedroom dwellings within the LGA.