Housing affordability and price growth prospects in Newcastle

GUEST OBSERVER

Those who find Sydney a tad rich don’t have to go too far to find major markets with greater affordability and good growth prospects.

Newcastle has a rising economy, a strong property market and appears to be settling into a sustained period of growth.

The city, about 160km north of Sydney, presents an appealing formula for property investors: relatively affordable prices, an overall solid growth record and major impetus from economic activity in and around the city.

It has delivered steady price rises over the past three years and in the past 12 months several Newcastle suburbs have recorded double-digit median price growth. There’s more to come, I think.

Key projects keeping the Newcastle economy strong include the CBD revitalisation, residential construction, upgrades to transport infrastructure and expansion of the Newcastle port.

Newcastle is already the world’s biggest coal export port and major upgrades to export facilities occur regularly. A $1 billion upgrade to the Newcastle Airport and RAAF Base is also under way.

The airport – where the runway is shared with the RAAF Base Williamtown – is already a major employer, with around 3,000 military and civilian personnel working at the base.

Newcastle is Australia’s seventh largest city and one of its oldest. It has a busy harbour, many beaches and plenty of elegant historic buildings. Despite its reputation as an industrial city, Newcastle is ranked the sixth most visited place in Australia, attracting 9.6 million visitors per year.

It thrives as part of the Hunter Region, which is the largest economic base in NSW outside of Sydney. The Hunter region is also well known for its primary industries, notably equine breeding and winemaking. It’s also a key area for mining and power generation.

But in recent years, much of Newcastle’s employment growth has been experienced within the services sector, especially in health and the tertiary education sector.

Generally, Hotspotting regards Newcastle as one of Australia’s most under-rated markets. It has strong prospects as an affordable alternative to Sydney, offering an attractive beach lifestyle, proximity to the Hunter Valley and to Port Stephens, plus solid job prospects in a growing economy.

The impetus of the State Government’s Urban Renewal Strategy for Newcastle has become clearly evident; building activity has been rising for the past 3-4 years – especially with unit construction – as the city strives towards higher-density living to cater for population growth.

Over 100,000 new dwellings will be needed in the Lower Hunter region by 2031, according to the NSW State Government.

The affordability of Newcastle relative to Sydney is shown in the median house prices in the Mayfield suburbs ($445,000 to $484,000), Shortland ($380,000), Wallsend ($415,000) and Waratah ($500,000), as well as the median unit prices in New Lambton and Waratah (both $380,000), and Adamstown ($405,000).

There are good prospects for real estate in Newcastle, based on extensive spending on infrastructure and property developments.

Newcastle has recently been the beneficiary of investment activity, largely stimulated by the $6.55 billion State Government investment mandate covering projects such as the new light rail system on Hunter Street, the transport interchange at Wickham and construction of the Newcastle City University Campus.

A June 2016 map of Newcastle building activity showed 28 residential projects with a combined value of $1.6 billion in the construction pipeline, with more proposals in planning. Around 3,000 apartments will be added to the city’s housing stock as a result, including 1,200 in the west end.

Work on revitalising the CBD began in December 2014, with the $73 million transport interchange at Wickham expected to open late in 2017. The interchange will integrate trains, buses, taxis, light rail, cyclists and car drop-off and pick-ups, alongside a light rail service from Wickham to the beach.

The Hunter Street Mall is also receiving a serious makeover, transforming the CBD into 50 percent residential and 50 percent commercial/retail. Included in the plans are an “eat street”, an entertainment precinct and around 500 apartments.

The State Government plans to move sections of Newcastle University into the CBD to help revitalise the inner-city.

Key projections for the university over the coming decade include increasing its student numbers to 40,000, making it one of the top three regional universities in Australia.

Construction has started on the $95 million NewSpace campus, with the NSW Government contributing $25 million towards the cost. By 2020, the university expects to have moved its business, law and creative arts faculties entirely to the CBD.

All this activity is helping to keep the Newcastle economy vibrant, providing a strong underpinning to a growth property market.

Terry Ryder is the founder of hotspotting.com.au. You can  email him or follow him on Twitter.