There has been radical change announced in NSW state politics. But how will this affect the state’s property market?
Who would have thought that a bottle of wine would be enough to sink a premier? On the day that Barry O’Farrell was to make an announcement with Tony Abbott about infrastructure spending associated with the Badgerys Creek airport, he opted to resign instead.
Enter Mike Baird, former Liberal Party treasurer who was in charge of keeping the state’s economy growing at a healthy rate. Baird’s elevation is highly significant for property investors for two key reasons.
Firstly, as premier he will have a big say on legislation relating to residential property, which could affect things like stamp duty and land tax. Secondly, his decisions about infrastructure, transport and other spending (and cutting) will influence which suburbs show capital growth over the next few months and years.
So what can we expect from Baird? Well, if you’re going to guess what somebody is going to do in the future, a good place to start is to look at their past.
As treasurer, he consistently showed he was capable of making tough decisions, says Henry Lawton of Property Council of Australia.
“He has stabilised the budget, exercised spending discipline, and been smart in recycling capital towards more productive uses.
“He also re-geared stamp duty concessions to stimulate the supply of new homes and has been prepared to invest in infrastructure that unlocks housing and employment opportunities,” Lawton says.
Lawton believes NSW still faces challenges to ensure the economy stays on the right track, such as the modernisation of the planning system.
“Mr Baird was correct in recognising the significance of the planning system to the state’s economy by appointing two ministers to cover the portfolio,” he says.
“We will encourage the new [planning] minister [Prue Goward] to undertake a root-and-branch transformation of the planning system in order to remove needless red tape, time and complexity – and give investors more comfort about placing capital in NSW.”
Sydney’s second airport
The proposed Sydney Airport is causing a lot of excitement in Western Sydney as speculation about further price increases this year gathers pace.
When the initial construction phase for Badgerys Creek gets underway, it will generate about 4,000 jobs, and the development of the airport itself is expected to produce approximately 35,000 jobs by 2035.
This economic boom for the general Western Sydney area will be of particular benefit to the property market, says Vince Labozetta from Raine and Horne Liverpool.
“Capital growth of between 5% and 10% annually will be achievable between now and the beginning of the construction phase,” he says.
“We already have low rental vacancy rates in Liverpool. This announcement will squeeze vacancies further and push up rents by up to $50 to $100 a week as more construction workers move to the region.”
Moreover, Andrew Wilson of Australian Property Monitors argues that the airport will be of particular benefit to satellite areas.
These areas will not be ones adjacent to the airport itself, due to the flight paths and noise. “However, regional centres with easy access to an airport tend to attract FIFO workers, and this development will also open up that prospect for the West.”
Suburb to watch
Gosford
After being overshadowed by its neighbouring suburb Erina in the 1990s, Gosford is bouncing back. In order to help stimulate the economy, a small number of high-rise developments have been built, with more scheduled for the near future.
There is a great train and bus service from Gosford Station, and Gosford Hospital is the largest on the Central Coast. There are also plenty of schools to choose from and great sporting facilities at the Central Coast Stadium. The fact that the suburb is an hour’s drive from both the Sydney and Newcastle CBDs means many residents make the daily commute for work or study. This is a strong testament to the increasingly good transport links. Additionally, the Kibbleplex Project announced in 2013 is set to house the new regional library, tertiary teaching rooms and associated organisations.
For those who think units around Sydney and Newcastle are too expensive, Gosford is an affordable alternative. The median price of units is just $288,000 and the gross rental yield is a healthy 6%. Furthermore, the supply and demand figures for units in Gosford should work favourably for future capital growth. The vacancy rate is 0.71%, there is only 0.47% of stock on the market, and auction clearance rates are a high 85.7%. Prices have grown by a modest 10% in the last three years and 6% in the last 12 months. This only looks like gathering momentum in the coming years.
