Newcastle, Central Coast and Coffs Harbour houses at market peak: HTW
Houses in Newcastle, the New South Wales Central Coast and Coffs Harbour are at the peak of market, according to valuation firm Herron Todd White’s June property clock.
Melbourne, the Gold Coast and South East NSW are approaching the peak market.
Houses in Cairns, Gladstone and Mackay are at the bottom of the market.
Toowoomba’s housing market was noted as starting to decline in the May property clock.
Last month HTW said in relation to the Toowoomba housing market there is currently an oversupply of residential products, particularly units, that emerged during 2016.
As a result vacancy rates have increased while rental rates and investor interest has reduced.
“While properties in the sub $400,000 market have showed some signs of regression in value and rental rates, it appears that higher end property above $600,000 and even the $1 million plus price point have enjoyed a good level of interest with some strong sales being achieved,” the May report stated.
HTW's June report concentrated on the renovation market, stating that renovations are popular now in the NSW Central Coast.
In their June report, HTW said some reasons for renovating are to make an income, improve the value of a property or overcome the need to shift homes, meaning the kids can remain at the same school and a longer commute to work can be avoided.
"Closely aligned with adding value, those starting out with limited budgets or borrowing capacity buy in less expensive areas and carry out renovations to increase their equity.
"Although not definitive, a good gauge of what stage the property cycle is at can be seen from the valuation requests we receive. We can analyse this from the property type and specifics of the request – for a new purchase, a change from one lender to another or funds required to carry out renovations or extensions.
"Lately, there has been a slight increase in renovation or extension on completion assessments.
"This tells us the market cycle is on the move again and this generally follows a period of growth where values of home purchases are getting beyond many upgraders and a decision is made to stay and renovate rather than move.
We are seeing this growing in many parts of the central coast region.
"From our perspective, we see more valuation requests received for owner-occupiers seeking funds to carry out renovations.
"We believe the reason for this is that owner-occupiers tend to spend more on renovations or extensions to improve personal comfort or functionality with the medium to long term in mind – think that often used term ‘forever home’.
"Whereas, investors usually spend less on make overs and use their own funds with the prime motivation of increasing the returns for as small an outlay as possible.
"Properties available for renovation can be located close to the main centres or the beach and lakefront areas. They’re the ones advertised as having enormous potential, renovate or detonate, suited for tradies and similar. They can just as easily be located in those suburbs previously seen as undesirable but thanks to the strong market over the past few years, have proven affordable to new entrants in the market. Suburbs that spring to mind in this region include Narara, Niagara Park, Killarney Vale and Berkeley Vale."
HTW said property in Newcastle is at the point of the cycle where it’s a fine line between upsizing your current dwelling or simply staying put and adding value to your existing home with an extra couple of rooms.
"The option to stay and extend is attractive when you look at the savings you would make on the transactional aspect of moving to a new home," HTW said.
"You save stamp duty, agent’s fees, finance charges and moving costs which on a reasonable home can be close to $100,000 in real dollars. Utilising that money on your extension can really kick start your plans.
"The key driver of the Newcastle and Lake Macquarie markets at present is the lack of stock available; essentially the supply side is very low. When you have a low supply side, as long as demand is reasonable and constant, this can place upward pressure on prices. This in turn raises values and in many cases the price has increased enough to set a new benchmark level for your land.
"The increased price of the underlying land may be such that it is economic to knock down your existing home and build a brand new house.
"As an example, you may have purchased your home originally for $350,000 in 2005. Your house may be worth $650,000 now (not unreasonable here in Newcastle). Your underlying land value might be $450,000 which far outstrips your initial purchase price and makes building a brand new home where you currently live more feasible.
"We note that builders’ prices and waiting periods are signi cantly up across the board which indicates strong demand for renovations and extensions. We often see builders’ trucks in quiet suburban streets clogging up both sides of the road with extensions and small building projects.
"Anecdotally the home renovation boom is very much the avour of the moment with the number of renovation programs on TV indicative of current trends. At present, in strong localities it appears quite hard to over capitalise with sales seemingly attaining record prices on a weekly basis."