Newcastle housing market set to shine

If you could put together a fantastic investment opportunity, what would it entail? Would you make every effort to find an opportunity that has all of the signs of a quality investment such as low supply and high demand, fantastic amenities and a strong, diversified employment base?

Would you select a location that is close to all necessary amenities and some that are perhaps unnecessary but highly appealing just the same? Would you search for a location that professionals forecast as a strong growth area for years to come, providing you with massive capital growth and cash flow opportunities?
Of course you would.

So what would you do if I told you that Newcastle enjoys all of these qualities? You'd take a look for yourself, that's what you'd do!

Low Supply/High Demand

According to the 2010 Lower Hunter State of the Land Report, the region is experiencing a dearth of houses – it is undersupplied by more than 3,000 per year. The area has not been zoned for more residential development, adding to the squeeze on supply already being felt from a growing population.

Per realestate.com.au's data, postcodes 2300 and 2302 clearly show that demand is surpassing supply in Newcastle, and has been since October 2009.

As the chart below indicates, the rental market for the Newcastle area is quite strong – a little more than half of the population is renting.

Population is growing as a result of infrastructure spending and employer growth. The largest share of the population growth has been centred in the areas of Lake Macquarie, the Port Stephens council area, the Great Lakes Council area and of course the City of Newcastle.

As the data indicates, population has outstripped supply in the Lower Hunter region, and if the population continues to grow as predicted, housing will continue to be in high demand.

Infrastructure improvements and jobs outlook for the region has contributed to predictions by The Hunter Valley Research foundation of an increase in the population to 730,000 by 2026.

Amenities

The old real estate dictum “location, location, location” still holds as true today as ever. If your investment property is in an area of low supply and high demand, yet its location lacks many of the amenities desired by today's demographic, then your return on investment will be lacking.

Newcastle offers both residents and visitors a distinctive combination of pristine beaches, prosperous wharves and an animated city landscape, offering individuals a wide variety of fun and entertaining things to see and do.

Walkers get the chance to take in a bit of natural beauty on Bathers Way, which is a well-known five-kilometre walk along the coastline between Nobbys Beach and Merewether Beach, and shoppers can find the perfect gift among a number of unusual and interesting shops at Cooks Hill's Darby Street. Antique buffs can take a trip back in time among the antique stores in Mayfield and Islington.

For a walk on the “wild” side, Blackbutt Reserve is a mere 10 minute drive from the city. Visitors enjoy the chance to connect with Australia's wildlife, while wine enthusiasts can soak in the beauty and enjoy tours courtesy of many Hunter Valley wineries just minutes from downtown Newcastle.

Employment

ABS reported in June of 2010 that unemployment rates in the Hunter region were at 4.3%  – lower than the state average of 5.2%. Financial services, education and health sectors as well as massive natural resource exploration and extraction is contributing to the Newcastle economy.

As China's need for coal continues to grow, so too does Newcastle's export of this highly desired resource. Newcastle's port is the highest exporter of coal in the world, moving a massive 97 metric tonnes during years 2009-2010 with plans to increase that output to 180 metric tonnes by the year 2013. To accomplish this amazing feat, expansions to mining facilities and subsequent employment growth will further strengthen Newcastle's economy.

Market timing

In 2010, Newcastle was labelled as the only current “hotspot” in New South Wales by hotspotting.com.au's Terry Ryder, and corroborated by Australian Property Investor magazine that same year. These views were in no small part derived from the massive billion dollar infrastructure improvements both planned and currently in progress that are driving factors in the Newcastle and Hunter region economies.

Timing, as they say, is everything, and current market indicators suggest that right now represents a perfect time for investors to jump into this market, as Australia’s sixth largest city, Newcastle appears to be on the cusp of recovery. Right now prices are still low for this populous city location, putting investors in a very good position to get in at an affordable price, at the perfect time of the market and realise strong capital gains.

Sam Saggers is CEO of Positive Real Estate.