Property prices up in flames in NSW?
It’s that time of the year again, when the weather heats up and bushfires threaten. So is it worth buying an investment property in a bushfire prone part of NSW? John Hilton finds out
When people think about summer in NSW, images of barbecues, beaches and cricket usually spring to mind. Sadly, in recent years, the time has also become associated with bushfires and properties reduced to ash.
In October 2013, NSW lost at least 248 buildings to bushfires, which burnt more than 100,000 hectares of land. The fires were particularly active in the Blue Mountains area, which was an unusual location for bushfires in that time of year. So now that summer has come and the danger has increased, what will happen to property prices in this region?
Professor Chris Eves from the Queensland University of Technology specialises in property economics and has studied the effects of natural disasters on property markets.
Eves says that after a heavy fire, there is always an immediate and significant effect on property prices. He believes this is different from other natural disasters such as floods, which tend to lose their major visual indicators of damage after a couple of weeks.
“With a bushfire and particularly when we are talking about areas like the Blue Mountains which is predominately timbered, that visual reminder can remain for up to two or three years,” he says. “And there is also a link between the amount of media coverage an area gets and the impact on values.”
The other connection that Eves found is that loss of life through bushfires had more of an impact on prices than loss of property.
Thinking twice before buying
Despite the Blue Mountains bushfires predominately affecting suburbs such as Springwood
, Blackheath and Winmalee, Eves says that the incident will increase the chances of people hesitating before buying not just there, but anywhere in the region.
“People might say: ‘Well Winmalee and Blackheath went up last time. Is it going to be Wentworth Falls in February?’” he says. “So it’s in their psyche when they are buying and it’s a negative aspect they will take into consideration when they put an offer in.”
However, he also says that some people may take the opposite view and see it as the perfect time to buy.
“Some buyers may also say: ‘Well, this area has been burnt out already and the chances of it happening again are a lot lower. So some people will see it as an opportunity to get into a market at a lower price than they would if they were trying to get into that market six months earlier,” he says.
Another one of Eves’ interesting findings is that even though renters can easily vacate a damaged property, they will often move in to another house nearby because their family, friends and schools are in the vicinity. And that applies no matter where the fire is.
“Even if people are living in Turramurra because they want to be close to Lane Cove National Park or somewhere like that, they still usually look for a place near there because that’s an amenity they put a high value on.”
Sydney’s auction booms
With homes selling at auctions left, right and centre in Sydney, the property boom has enabled the NSW government to collect a record amount of stamp duty receipts for the month of October.
Data revealed by the Office of State Revenue shows that in October the NSW government collected $356.8m, which is the highest monthly figure since records began in 2005/06.
Chris Dawson, a licensed real estate agent and auctioneer with Raine & Horne Neutral Bay says that in the Lower North Shore, strong demand has seen a low level volume of stock on the market and that doesn’t look like changing much in the six months ahead.
“On the supply and demand side of things there is a high demand and if anything it has stepped up with the low interest rates making borrowing much more affordable,” says Dawson. “We are seeing good results at the moment and they are only going to get stronger.”
“Our biggest problem is that there aren’t enough properties to sell.”
Suburb to watch: Castle Hill
There is a lot to like about Castle Hill, particularly since ongoing gentrification has seen it come a long way in 20 years. Over that time it has gone from a working class suburb with lots of cheap acreage to a place that’s full of professionals living in large well-maintained homes. Its amenities are brilliant, especially the massive Castle Towers Shopping Centre which includes every shop or restaurant you could possibly need. There are also a wide range of quality schools, parks and medical facilities, all in the suburb itself.
Castle Hill is located 31km north-west of the Sydney CBD and it’s well-serviced by buses that make this journey along the M2 motorway. It’s also less than 10 minutes from the Norwest Business Park which includes over 400 companies employing more than 25,000 people. It is projected to employ 32,000 people by 2031.
The major infrastructure development is the $8.3 billion North West Rail Link which is due to be completed by the end of 2019. This will include a station at Castle Hill and will provide even better access to and from other commercial centres such as Epping and Bella Vista
Despite having a median house price of $835,000, this could be considered undervalued for The Hills Shire, with median prices in nearby Kenthurst at $1,200,000. Currently, rental yield for houses is a satisfactory 4% and there has been a solid 10% 12 month growth in house prices. The average house in Castle Hill spends just 69 days on the market, which indicates that this market is competitive.
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