NSW reaping resource rewards
Sydney shows signs of recovery, but confidence spikes in Hunter Valley drive the region to outshine the rest of the state as resource spending points to strong growth.
Analysts saw some signs of life in the Sydney property market over the last quarter of 2011 as the region’s growing housing shortage and levelling of price declines pointed to a stronger market in 2012.
Australian Property Monitor’s Andrew Wilson says he expects Sydney to post a modest rebound this year. “Given that our expectation is that with the prospect of a strengthening economy it is reasonably valid we would expect to see some price growth in the middle of the year.”
Wilson expects regional NSW to pick up as well, though maybe a little more slowly. “Regional markets, especially those without a strong independent economy, particularly in NSW tend to follow what happens in the major capital because there is a flow-on effect. As the Sydney market grows, you will get a flow-on effect into the other regional markets, particularly Orange and the Central Coast.”
Hunter Valley rising
But Wilson says the Hunter Valley is one regional centre that is already charging ahead because of a sustained growth in demand for property due to the influx of workers in support of the booming coal mining industry.
In fact many areas of the Hunter have far outpaced Sydney over the past year, with a healthy proportion posting double-digit growth especially in the Upper Hunter where much of the new mining activity is located.
Simon Deeming, Director of Research at the Hunter Valley Research Foundation, says he sees a lot of areas that are undervalued currently in the area and its regional hub, Newcastle.
With unemployment at just 4% and a tight rental market rivalling that of Sydney, Deeming points to the huge amount of investment in mining and says that flows through to the rest of the local economy.
“The new mines are further and further up the valley, so that is really benefiting the Upper Hunter, but the infrastructure components run all over the place.” He points specifically to the Hunter Valley Expressway and the ports expansion as developments that will spur growth in the area for years to come.
Alternative to Sydney
Deeming says he believes the Hunter region is already benefiting from a flow-on effect from its southern neighbour. “The softer side of the economy is exposed in Western Sydney and if you can get a job up here [in mining] rather than building houses which isn’t happening too much right now in the Western Sydney fringe, you can get paid a whole lot of money up here with a better lifestyle.”
Median home prices across the Hunter region average around $400,000, about $100,000 less that most Western Sydney suburbs.
Deeming is not alone in being bullish on the Hunter region. John Anderson, senior economist at forecasting firm Macroplan, calls the Hunter the breakout area in NSW expecting price rises of 7–8%. Terry Ryder, another popular property forecaster, highlighted Newcastle as “Australia’s most under-rated market.”
And analysts are not alone. A recent Property Council of Australia survey showed the Hunter region was bucking the national trend in terms of confidence in the housing market, posting the highest numbers in NSW.
But, Deeming says the Hunter region stands apart from the more famous mining boomtowns. “We’re not like Western Australia or Central Queensland where we just go crazy for the cycle of the resources boom and then are dead for 20 years,” he says. “What will happen is that we’ll benefit from this upside but we are not entirely beholden to it so that when it does ultimately fade, which it will, we will actually have other elements of the economy which will pick up.
“Because we do have this diversified economy, it’s not like there is a huge wave that doubles the population and transforms the place. So there is a base that keeps these things in smaller waves.”
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