The Entrance Property Watch Q4 2011

The following report is the result of an investigation into the house and unit markets of The Entrance and surrounding suburbs, located in the Wyong Local Government Area (LGA).

Area Characteristics
Located on NSW Central Coast approximately 60 kilometres north of Sydney and bound by Tuggerah Lake and the Pacific Ocean, the Region is easily accessible via the Sydney Newcastle Freeway (M3), the Pacific Highway and the Entrance Road, with regular rail services to Sydney and Newcastle. The Region is renowned for its water activities and the channel between the Tasman Sea and the Tuggerah Lake. The Entrance is a popular destination with tourists and locals alike, combining modern conveniences such as shopping and hotel accommodation with impressive scenery, all within a one and a half hour drive from Sydney.

The Economy
The two consecutive interest rate cuts in 2011 were largely a reaction to the grim economic situation around the globe, now also filtering into the Australian economy. Although some parts of the economy are robust, the majority of businesses feel the effects of a weak consumer confidence and tightening lending criteria. Despite its natural beauty, The Entrance has long suffered from the lack of a major industry in the Region, impeding on population growth and economic activity. In recent years the Regions housing market has been directly affected by the post Global Financial Crisis (GFC) increase in interest rates and by the limited credit provided by lenders.

The Rental Market
Despite slow growth in prices, the rental market in The Entrance Region continued to tighten in the 12 months to September 2011, with an increase in rent prices across all dwelling types. An indication of the market is evident by the decline in the Central Coasts rental vacancy rate from 2.1 per cent in May 2011 to 1.7 per cent in October. The median rental price for a two bedroom unit in the Wyong LGA closed the September quarter at $270 per week, representing a 12 month growth of 3.9 per cent. For the same period the median rent for a three bedroom house increased 6.7 per cent to $320 per week. The long term trend recorded over the past five years indicates consistent growth in rental prices, equating to 6.8 per cent per annum for units and 8.4 per cent per annum for houses. The Most Active Suburbs Table suggests that The Entrance Region normally achieves higher rent prices than those of the LGA. Not withstanding the uncertainty around the housing market, the increase in rental yields led by lower unit prices is likely to attract investors back into the market.

The Entrance Region House Market
Over the past three years growth in house prices within the Region was closely linked to record low interest rates and government incentives. The House Sales Cycle graph shows a positive response to the stimulus measures introduced by the government in 2009. With the increase in buyers confidence and income, a 14.1 per cent increase in the median house price of was evident between December 2008 and December 2010. The market met softer conditions in the first half of 2011 to close the June 2011 six month period at a median price of $360,000, equating to flat growth from June 2010. Activity declined from the peaks of June 2009 but held firm against the December 2010 six month period. The 419 transactions recorded in the first half of 2011 represented a decline of 23 per cent from the June period in 2009 and 3.9 below the June 2010 figure. The Price Point Chart recognised that most houses transacted in the $300,000 to $349,999 price bracket, accounting for 24 per cent of sales, with a further 19 per cent recorded in the $350,000 to $399,999 bracket. At the affordable end 30 houses (7 per cent) sold for less than $250,000, while toward the high end 10 per cent of houses sold for $550,000 plus.

A resale analysis revealed that houses achieved an average annual capital appreciation of 2.8 per cent per annum, with an average holding period between sales of 5.3 years.

In the 180 days to the end of November 2011 there were 444 houses on the market. This figure represents a balanced market between supply and demand, given the average five year sales activity of 440 per six month period. Fifty one houses were advertised to be sold at an auction, equating to 11.5 per cent of the total stock. In the six month period to December 2011 the average discount for houses in The Entrance Region equated to 6.1 per cent. A two bedroom house recorded a median advertised price of $310,000, with a three and four bedroom house registering an advertised median price of $349,999 and $532,500 respectively.

The Entrance Region Unit Market
Unit prices have been adversely affected by recent mortgagee sales, which is reflected by the increase in activity at lower price brackets between 2004 to 2009. The median price for units in the Region closed the first half of 2011 at $300,000, stemming from the sale of 170 units, villas and townhouses. The Unit Sales Cycle Graph shows a strong but short-lived increase in median price and activity in 2009, followed by three periods of softer conditions. The median edged lower in the 12 months to June 2011, registering a 0.2 per cent decline from June 2010. Activity declined 6.6 per cent from the June period in 2010 and 18.7 per cent from the peak of 2009, with a marginal advance from the second half of 2010. A price point analysis revealed that most units transacted in the $250,000 to $299,999 price bracket, accounting for 21 per cent of sales, with the adjacent brackets or $200,000 to $249,999 and $300,000 to $349,999 recording 17 per cent each. A trend analysis of the share of sales in each bracket over the past 10 years indicated that the share of transactions below $300,000 more than doubled in size from 29 per cent of the market in December 2004 to 61 per cent in June 2009, but declined again to account for 48 per cent of total sales in the first half of 2011.