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Third Quarter │2012

NEWCASTLE Property Watch®

Newcastle LGA Market Overview

MARKET INDICATORS Change from Last

Year

Half Year

HOUSE SALES HOUSE MEDIAN HOUSE RENTS UNIT SALES UNIT MEDIAN

The LGA’s Sales Cycle graph reveals stronger growth in the median house and unit prices in the past three years, compared to the preceding period. This is largely attributed to the stimulus dispensed by the government over 2008 and 2009 in reaction to the Global Financial Crisis. Since the October 2009 peak, activity softened by approximately 30% for both houses and units, despite an increase in median price of 10.5% for a house and 3.3% for a unit. In the past 12 months the median house price declined by 2.6%, while the median unit price rose by 1.4%. The fall in activity over the past three years has seen the contraction of the ‘aspirational’ buyers’ market and the increase in the number of cautious purchasers who are attuned to the state of the housing market and are factoring in the risk of potential falls in capital values.

NEWCASTLE LGA HOUSE & UNIT SALES CYCLE House Sales

UNIT RENTS

Unit Sales

House Median

Unit Median

3,000

$450,000 $380,000

The indicators depicted above are based on the year ending April 2012.

$400,000

2,500 $350,000

Unit Rental yields of 5.1 to 7.2% are proving attractive to investors, who are targeting properties selling within lower price brackets.

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$250,000 1,500 $200,000 1,000

$150,000 $100,000

500 $50,000

2012 APR

2011 APR

2011 OCT

2010 APR

2010 OCT

2009 APR

2009 OCT

2008 APR

2008 OCT

2007 APR

2007 OCT

2006 APR

2006 OCT

2005 APR

2005 OCT

2004 APR

2004 OCT

2003 APR

$0 2003 OCT

0 2002 APR

The fall in activity has led to the contraction of the ‘aspirational’ buyers’ market and the increase in the number of cautious purchasers who are factoring in the risk of potential falls in capital values.

$300,000

2002 OCT

2,000

2001 OCT

KEY HIGHLIGHTS

Number of sales

$339,725

Median sale price

Apartments along Honeysuckle Drive Newcastle’s premier entertainment precinct

This report aims to navigate through the historic and current market conditions of the Newcastle Local Government Area (LGA) and provide an overview of the outer and inner city’s market conditions. A booming coal industry in the Hunter Valley has led to the strong economic momentum prevalent in Newcastle. The record trade throughput of the Newcastle port is driving the employment market in the region, with infrastructure investment in the City and the nearby Tomago areas positioning the region as one of the most robust in NSW. While demand for industrial and commercial properties is strong, the residential and retail sectors have experienced softer conditions in the past two years. However, recent land purchases by the state government set a brighter outlook for Newcastle CBD’s retail market and strengthen the long term position of the residential market.

Half year period Graph prepared by PRDnationwide Research. Source: PDS

An analysis of days on the market was conducted to ascertain the liquidity of dwellings in the region. The study revealed an average of 91 days to sell a house in the Newcastle LGA, compared to over 118 days in the neighbouring LGAs. This figure increases to an average of 122 days for units, but remains favourable compared with 136 days or more for the adjoining regions.

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Newcastle Inner City Market Overview

HOUSE PRICE POINTS

Property transactions in inner city suburbs represent the bulk of sales in the region, with a strong performance compared to the broader market. A look at the Sales Cycle graph points to a robust incline in the median house price from April 2009 to $472,490 in April 2011, before easing to close the April 2012 half year period at $459,975. While the increase to the median unit price was more gradual, it recorded a similar long term growth (3.4% per annum) to that of houses over the past five years. The House Price Point graph indicates that the decline in activity toward the upper end of the market is the main reason for the softer median price, while an increase in sales volumes was recorded for houses selling between $300,000 and $399,999.

Annual change in transaction numbers Share of transactions 35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

Price point Chart prepared by PRDnationwide Research. Source: PDS

SUBURB PERFORMANCE FOR THE YEAR TO APRIL 2012 Annual Change

Suburbs

Median Total Median Total Price Sales Price Sales

New Lambton

$459,000

69

4%

-12%

Merew ether

$650,000

61

-14%

-22%

Hamilton

$468,500

38

2%

-27%

Adamstow n

$382,000

35

-15%

-35%

Merew ether

$350,250

42

1%

0%

Cooks Hill

$385,750

24

-1%

41%

New castle West $335,000

21

-6%

62%

Adamstow n

14

36%

17%

$350,000

Table prepared by PRDnationwide Research. Source: PDS

AVERAGE CAPITAL GROWTH HOUSES

Buyers in this price bracket are taking advantage of the decline in prices and cheaper cost of finance to dispose their outer ring homes in favour of a superior location or better quality accommodation. Unit rental yields of 5.1% to 7.2% are proving attractive to investors, who are targeting properties selling within lower price brackets. Despite a seasonal rise in the rental vacancy rate (1.7% in June 2012), the City’s high demand and short supply of quality residences further reduces the risk to investors. The strong rental price growth of 6.1% for a three bedroom house and 7.1% for a two bedroom unit brought the median rents for the March quarter to $383 (house) and $360 (unit). The growth of properties is best measured through the capital gains achieved by individual vendors over a period. A house resale analysis carried out by PRDnationwide Research revealed a strong average capital gain of 6.4% per annum for sales between November 2011 and April 2012. This figure equates to a doubling in price every 11 years. However, current estimates predict future growth to be more closely aligned with growth in wages, equating to 3 to 4% per annum. That said, a sustainable growth in income is expected to continue in Newcastle, as the port operations expand and its close proximity to the Hunter Valley keeps employment levels steady. The Suburb Performance table includes the most active suburbs in the inner city. The table demonstrates the difference in house and unit activity, with a softer house performance and a rise in unit sales between the April periods in 2011 and 2012. The sharp growth in unit sales can be explained by buyers’ demand for lower priced product and the low number of sales compared to houses, making any change in activity more obvious.

NEWCASTLE INNER CITY HOUSE & UNIT SALES CYCLE House Sales

Unit Sales

House Median

Unit Median

1,200

$500,000 $459,975

7.0% 6.4%

6.5%

$450,000 1,000

$400,000 $350,000

6.0%

Number of sales

Average capital growth p.a.

7.5%

5.5% 5.0% 4.5%

$350,000

800

$300,000 600

$250,000 $200,000

400

Median sale price

UNIT

HOUSE

APR 11 HY

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$150,000

4.0%

$100,000

200

$50,000

2012 APR

2011 APR

2011 OCT

2010 APR

2010 OCT

2009 APR

2009 OCT

2008 APR

2008 OCT

2007 APR

2007 OCT

2006 APR

2006 OCT

2005 APR

2005 OCT

2004 APR

2004 OCT

2003 APR

2003 OCT

2002 APR

$0 2002 OCT

Chart prepared by PRDnationwide Research. Source: PDS

0 2001 OCT

Half year period

Half year period Graph prepared by PRDnationwide Research. Source: PDS

Research Analyst │Oded Reuveni-Etzioni P (02) 9257 0254 E odedetzioni@prd.com.au PRDnationwide Newcastle │Principal Mark Kentwell P (02) 4926 0600 E sales@prdnnewcastle.com.au This report was prepared by PRDnationwide Research. Source: PDS, Housing NSW, REINSW. PRDnationwide does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. PRDnationwide will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Prepared by PRDnationwide Research © All medians and volumes are calculated by PRDnationwide Research. Use with written permission only. All other responsibilities disclaimed. © 2012

Newcastle Property Watch Q3 2012  

This report aims to navigate through the historic and current market conditions of the Newcastle Local Government Area (LGA) and provide an...

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