Such an interesting property market at the moment it needs a whole article on its own.
Sydney and Melbourne trend
In Australia, there is currently no single market but a patchwork-quilt of different areas. One area can be in high demand, while two streets over can be completely cold. Some regions are still powering along, some are steady and some falling off a cliff. The market is in a transition phase and needs closer analysis.
Sydney and Melbourne have come off the boil and we are usually 12 – 18 months behind that trend. Byron, after such a long period of strength, has already met that trend and is slowing. Locations like Lennox and Brunswick Heads are still experiencing heated attention. They are now getting the spill over from Byron Bay and seeing high demand. In general, good property in a good location throughout the Northern Rivers and listed at an accurate market value is selling. But, there could be wobbles on the horizon.
This chart breaks down activity and growth in our main towns. Of interest is that Byron Bay has had 135.7% growth in the last five years. A good proportion of that growth was in the last couple of years. This is pretty spectacular. Mullumbimby is the next major growth with 91.4% growth in 5 years. The assumption can be made that Lennox and Brunswick are experiencing the present demand since they are still on the upward trend line behind Byron Bay.
Many of our outer towns like Ocean Shores, Federal, Newrybah can expect to see more growth. Ocean Shores and Mullumbimby, for example, still have rental yields higher than 4% and below the average median price. Byron Bay has a median house price of $1.46M. That is twice that of both Ocean Shores and Mullumbimby.
Now for those wobbles. It may be a coincidence but the market slowed markedly just when the Royal Commission into the banks started. Home prices in the capital cities have weakened for an eighth month in a row. However regional areas are still maintaining growth. CoreLogic said last Friday that the annual house price to May 2018 has slipped 0.4% for the year. This is the first time annual national home prices have declined since 2012.
The government has been putting pressure on the banks to rein in investor and interest-only lending. Overseas buyers have dropped considerably and lending restrictions are probably going to tighten even more. Add into the mix the general fragility of international affairs and uncertainty around peace and security. Then we have the idea of next years election probably bringing in a Labor government who will wind back negative gearing and possibly CGT discounting. My belief is this will not pull on the market too much, but is another factor in nervousness.
On the plus side, the Byron area keeps going from strength to strength. The delights of living in natural beauty, strong community and close proximity to metropolitan standard infrastructure, is a winning combination. Many of the wobbles mentioned above can also strengthen this attraction. Fortunately we are mainly a lifestyle purchase destination without a lot of investors or speculators. This means if there is a downturn we will not experience a lot of forced or panicked selling.
Our local economy is seeing two areas of growth outside of tourism: specialty produce food production and creative industries. Fibre-optic NBN rollout will be complete at the end of the year and we can expect an influx of cashed-up internet small business operators wanting to move here. SME entrepreneurs are also in a growth phase value-adding locally produced foodstuffs, roadtesting them at the booming farmer’s markets and prospering for export to the insatiable middle-class markets in Asia.
Even with these considerable local and global concerns, the Northern Rivers region has a lot going for it. I expect we will see a softer and more tempered property market for the rest of the winter at least. Properties with problems or less in-demand locations may be required to make price corrections. Long term, the market in the Northern Rivers should be sustainable and keep its value. Have a look at our Hot Property blog archives to see what’s been happening in the area property market.