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Spotlight on regional NSW

John McGrath
Tuesday, October 28, 2014

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by John McGrath

The heat of the Sydney market is starting to have an influence on the state’s regional areas, inspiring new confidence among local upgraders and investors seeking to take advantage of low interest rates, high yields and great capital growth opportunities in their own backyard.

We recently documented the key changes in various NSW regional property markets in our 2014 McGrath Report. Many NSW markets are experiencing a good level of buyer activity and steady or improving prices. In many cases, local upgraders are dominating the market but local and out-of-area investors are also out in increasing force.

Competition from Sydney buyers is increasing as city dwellers look further afield for investment, retirement or a lifestyle change.

Many Sydney investors are expanding their search to regional areas as rising prices back home reduce yields. More investors are using self-managed super funds (SMSF) where they are buying houses as well as apartments that deliver strong yields.

The ‘pre-retirees’ – those that are purchasing now for investment with the specific intention of moving in themselves in retirement; are becoming a significant new buyer demographic.

Post-GFC, many baby boomers have delayed retirement to give their super nest eggs a chance to regenerate. Sydney’s recent property boom has given them newfound equity that is enabling them to buy their future retirement homes now.

This is a very typical scenario in locations such as Byron Bay, Banora Point, Kiama, Berry and Bowral. This is really smart thinking given most regional areas are in line for good capital growth; and strong rental yields of up to 7 per cent means these properties will pay for themselves until the owners choose to move in.

Of course, we are still seeing downsizing retirees relocating permanently to lifestyle markets, particularly those with easy access back to Sydney to visit the grandkids.

In Port Macquarie’s Town Beach, 12 out of 17 in a new luxury complex sold to Sydney downsizers. The lowest price paid was $950,000 for the ground floor and the penthouses are being marketed above $2.2M.

As is often the case with Sydney booms, city prices reach a point where some young families simply decide to leave Sydney for a lifestyle destination. Others expand their search and buy in commuter regions like the Central Coast, Wollongong, Bowral and the Blue Mountains and we’re starting to see more of this now.

Another trend not seen in many years is Sydney buyers purchasing weekenders and not just beach shacks either, we’re talking $1.5M-$2M+ properties on the Central Coast and in Bowral; as well as early $1M homes in Berry.

We are also seeing instances of Chinese activity in some markets for the first time. In the Southern Highlands, there have been several major landholding purchases of 100 acres or more, including the 11-hectare site of the iconic Milton Park guesthouse which sold for $13M in December 2013. A few Sydney-based Chinese buyers are also active in Newcastle and Port Macquarie as they look for development sites.

John McGrath’s Top Picks

Moss Vale (Southern Highlands) – beautiful village area with diverse housing. Moss Vale is a 10 minute drive south of Bowral and offers better value but the same lifestyle (median house price approximately $185,000 less than Bowral).

Mount Ousley/Balgownie (Illawarra) – positioned north of Wollongong CBD, these areas are popular with young families and Sydney commuters, with easy access to the Princes Motorway for a 30 minute trip to Sydney’s southern border. Fantastic local village shops at Balgownie and a lot of housing diversity.

Blackheath (Blue Mountains) – offers wonderful character homes on quarter-acre blocks from $350,000. It has a lively local village and is already benefitting from road upgrades enabling faster access to Sydney.

Kincumber (Central Coast) – the more affordable neighbour of Avoca Beach and Saratoga, Kincumber offers good yields and prospects for capital growth with today’s prices about 20 per cent less than Avoca Beach and Saratoga.

Published: Tuesday, October 28, 2014


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