Infrastructure and mining make Hunter region a good place for investment
I’m often asked why I continue to focus my developing efforts in the Hunter region of New South Wales. Good question. It’s been nine years since we started working in the area, and I continue to be amazed at the research we uncover. When you are a developer you need to understand the dynamics of the areas you will invest in. As I’m sourcing sites and project managing developments for my clients, I need to be sure that the projects will be in the right locations. So I’ll explain a few of the reasons why the Hunter continues to be my shining star.
Firstly, the Hunter region is currently feeling the pressure from the much-publicised “lack of housing” situation in Australia. My agents are telling me the same story over and over. “Jo,” they say, ”We can’t get enough quality rental stock, hurry up and finish that development, would you!”
One of the reasons we are seeing rental markets in the Lower Hunter continue to tighten is the billions of dollars’ worth of infrastructure projects currently underway which is creating hundreds of jobs for both local and new residents. One three-bedroom house that Property Bloom renovated as part of the overall development a few months ago in Stanford Merthyr, a suburb in Cessnock, was purchased for $210,000 and was rented quickly for $325 per week to contractors working on the Hunter Expressway. The Newcastle Herald reports that there are 133 major projects worth $2.61 billion under way in the past year, with the majority taking place in the Cessnock local government area.
In Muswellbrook, Property Bloom has gained approval for dual-occupancy projects, and we are about to start building. Each time I update my feasibility the rental estimates increase. These clients will end up with close to an 8% gross yield and create a large amount in equity by developing in this town. Here, it’s the mining industry that is contributing to the desperate cry for housing, with employees moving to the town from all over Australia and even from New Zealand. Several mines are undergoing expansion in Muswellbrook. Contractors come to the area to work on the development works and then one the expansions are complete they will be replaced by full-time workers as the mines increase their capacity.
John Boyle of John Boyle Real Estate in Muswellbrook reports: “We have limited land releases available for the amount of growth in the area. This growth is mainly coming from construction employees who are working on infrastructure in the area and mining support and services.”
“We have only six homes for rent at the moment. Before the homes are completed, they have been rented. We need the developers to get a move on and finish their developments,” Boyle says.
This lack of housing is ticking all the boxes and bringing investors to the area, as they can see the potential growth destined for this area. BIS Shrapnel expects median house prices to rise a further 18% by 2014.
Leading Australian construction analyst Cordell Information reports there are 310 major civil projects in the pipeline for the region, with most of those planned for the Newcastle LGA. The boom is being led by Upper Hunter mine expansion and earthworks, major road and rail projects and BHP site remediation work.
With Maitland the fastest-growing inland town of NSW over the past few years, we are always looking for potential sites in this area. We recently found a 2,000-square-metre piece of land where we’ll be building six villas for our client. This area is earmarked by the council for ongoing growth, and Maitland has all the facilities you need in a town to support the fast growing population increase.
Todd Fisher from LJ Hooker Maitland says the lack of housing for current and potential employees is distressing. “I feel sorry for tenants, as there is a 1% vacancy rate. It is not unusual for us to have 50+ people at an open house. It is unbelievable,” Fisher says.
“The mining industry is bringing in a lot of new blood especially from Western Australia, Queensland and New Zealand.”
To top it all off, there is the most beautiful tourist attraction in the form of the vineyards and rolling green countryside that makes up the Hunter Valley. In addition to the wine industry, we see tourism growing substantially from the ongoing famous concerts in the vineyards, where international artists such as Elton John, Fleetwood Mac, Meatloaf, Dolly Parton, Rod Stewart to name a few come to perform. In addition there are spa, health and golf resorts and large five-star hotel chains that have launched into what was not long ago a bed & breakfast market.
For me, the main sparkle for this region is affordability. It’s one of the important factors that will drive the region in the short term, with a median price well under all our capital cities, the Hunter will continue to shine on.
Jo Chivers is director of Property Bloom, which manages property development.