The NSW Far North Coast residential ‘trade up’ market (one step beyond the first home buyer market) comprises a wide range of product with various price points situated within the differing localities.

The majority of ‘trade up’ buyers within the NSW Far North Coast are typically families due to the following:

* needing larger space to accommodate a growing family

* change of job which requires moving and using this as an opportunity to acquire a superior property

* personal preference to relocate to a considered superior location after spending time in an area that may have been initially suitable for a first home purchase due to its affordability, but not necessarily favoured.

The other types of ‘trade up’ buyers within the NSW Far North Coast include retirees and professionals whose employment is based in a major regional centre (eg. Lismore), however who want to reside in a more coastal location (such as Lennox Head, East Ballina or Yamba).

Within the localities of Lismore City, Casino and Kyogle, the type of property most favourable for a ‘trade up’ purchaser are established four-bedroom, two-bathroom homes with double garages, where the previous house would have been somewhat smaller or older. Units within these localities are very rarely sought after as a trade up option unless they are large, brand new detached product on a strata title which typically has a value in the range of $350,000 to $380,000 in Goonellabah or $270,000 to $300,000 in Casino / Kyogle.

The type of property favoured by the trade up purchaser within the coastal localities of Ballina and Lennox Head are also established four-bedroom, two-bathroom homes with double garages. Within the coastal township of Lennox Head,  trade up buyers are mostly looking for product within the village locality which offers a better ‘lifestyle’ component due to the proximity of village facilities and beaches. However, due to the premium asking prices within this precinct, the next option for trade up buyers is the ‘hill’ locality outside of the village CBD. The prices being paid for this ‘trade up’ product is generally within the range of $500,000 to $650,000. There is currently a large amount of stock available to choose from for the trade up buyer with a budget of between $700,000 and $1,000,000 within the Lennox Head locality.

The most favourable property type for the trade up buyer within the Byron Bay area is also a more contemporary home located within close proximity to the Byron Bay CBD and beaches. However, the price point for this product is generally between $700,000 and $1,000,000 and there is currently limited stock available. As a result, there is also appeal for unit product with the same characteristics, however for lower prices between $500,000 and $700,000.

There has been a noticeable development within the NSW Far North Coast, whereby first home residential property purchasers within the younger generation (i.e. Gen-Y) are attempting to skip the traditional first home buyer product and the resultant future trade up process. This is being achieved by purchasing vacant land and building a new dwelling. This is occurring within subdivisions located within Goonellabah and Ballina. The total cost of this product is generally within the order of $400,000 to $475,000. This is of concern in a slow market and where first home buyers are possibly over-extending their financial position with the possibility of capital gain unlikely in the near future.

The key issue facing most potential ‘trade up’ buyers within the NSW North Coast is the not just the continuing unrealistic expectations of vendors wanting to sell their homes to the trade up buyer in a currently subdued market, but also the difficulty encountered by ‘trade up’ buyers trying to sell their existing homes in an also subdued lower end market. There are currently limited first home buyers actively looking in the market. Any significant reduction in the potential ‘trade up’ buyer’s property value will ultimately have a negative effect on the affordability to purchase the trade up property.

The NSW North Coast residential market continues to be ‘soft’ following similar conditions experienced over the past twelve months. This has resulted in low volumes of sales occurring, particularly within the trade up market.

The cold hard reality is that while the property market remains quiet and subdued, the ‘trade up’ buyer will often struggle UNLESS they can sell their existing home within a reasonable period of time. Otherwise, they will either miss out purchasing the ‘trade up’ home to a cashed up buyer or investor from outside the North Coast locality (i.e. Melbourne, Sydney, Brisbane or even the Gold Coast) who are more likely not constrained by having to purchase a property conditional upon the sale of an existing property.

... the market at present is a buyer’s market ...

In summary, the market at present is a buyer’s market with a large number of properties listed for sale, giving potential purchasers better bargaining power to secure a ‘trade up’ property at a discounted price. However, this will only occur if the sale can be transacted unconditionally.

September 2011

 Opinion By Herron Todd White -  Property Valuers

......the NSW Far North Coast residential market continues to be ‘soft’, following on from similar conditions experienced over the past 12 months....

Potential tenants currently have more of a choice in rental properties. This supply and demand scenario has resulted in a decrease in rents achieved since January 2011. Evidence of a residential property purchased for investment purposes is a dual occupancy (built circa 2002) situated in rural centre of Casino (population 10,000 plus) comprising a two-bedroom and a three-bedroom attached unit, each with an attached single garage. This property is currently under contract in August 2011 for $490,000. The property is to be leased with an expected rental of $540 per week or $28,080 gross per annum. After deducting outgoings, including rates, repairs, maintenance and a management fee, the investment property analyses to a potential return of approximately 4.5%.

Further evidence of a residential investment purchase is a block of flats situated in rural centre of Casino (population 10,000 plus) comprising two two-bedroom and one three-bedroom attached flats, each with an attached single garage. This property was purchased in February 2011 for $370,000. The property is leased by long term tenants and is achieving $580 per week or $30,160 gross per annum. After deducting outgoings, including rates, repairs, maintenance and a management fee, the investment property analyses to a return of approximately 6%.

....it has been noted that the supply of properties available for rent have increased steadily since the beginning of the year....

An example of investment properties within the ‘mid’ sectors of the market are properties located within the more coastal based regions of Ballina and Lennox Head. Discussions with rental managers indicates that there has been an increase in available rental properties and enquiries have eased since the beginning of 2011. This has resulted in a fall in rental rates, particularly for properties generally within $350 to $550 per week.

The Pacific Highway upgrade and various major road bypass constructions have been economic drivers of the residential rental market, particularly within Ballina in recent years. However, the winding down of the current stage of the Pacific Highway upgrade between Tintenbar and Ballina is attributing to increased vacancy rates within the Ballina residential market. This is due to some workers and their families relocating for employment.

Evidence of a residential property purchased for investment purposes is a unit located within the village of Lennox Head. This property was purchased in December 2010 for $560,000. The property has been leased and is achieving $380 per week or $19,760 per annum. After deducting outgoings, including rates, repairs, maintenance and a management fee, the investment property analyses to a return of only 2.8%.

The upper/prestige sectors of the investment market are also located in beachside locations, particularly within Byron Bay. The investment return on the majority of these properties is gained from holiday letting. However, the tourism industry within Byron Bay has been affected by a combination of the increasing Aus $ (resulting in increased overseas holidays for Australians and decreasing number of visiting overseas holiday makers) and the poor weather conditions over the last year. The poor performance of the tourist market within Byron Bay has resulted in some traditional ‘holiday let’ properties now being occupied by permanent tenants. This has affected the yields traditionally achieved for these prestige properties.

In summary, investing residential property, particularly in an “ambiguous” market, has its difficulties. There is currently uncertainty in the market which is affecting potential investors. These uncertainties relate to possible increases in interest rates, the current volatile investment market and continual rises in electricity, rates and water charges and the increased rental stock now available. All these factors result in doubts or threats for the residential property investor. 

August 2011

 Opinion By Herron Todd White -  Property Valuers

The NSW Far North Coast residential market continues to be ‘soft’ following similar conditions experienced over the past 12 months. Due to the poor performance a lack of sales occurring within the market, there appears to be a common view that the NSW Far North Coast has experienced a b

road 5% to 10% fall in market values across all sectors of the residential property market. In most instances, this broad brush stroke of statistical evidence is correct. However, different sectors of the residential property market within the NSW Far North Coast are running at different speeds. In this months review, we will have a closer look at different sectors of the residential market and see if they are conforming to this common perception.

....affordability combined with level of debt is playing a large role in the number of market transactions occurring....

A fall of 5% to 10% in market value is considered to be relatively on the mark for residential property within the Lismore, Kyogle, Richmond Valley, Clarence Valley, Ballina Shire and most townships located within the Byron Shire. However, it should be noted that this anecdotal fall in value is not strongly supported by ample sales evidence. The main reason for this is that the due to the softness of the market, sales volumes have decreased significantly since the peak of the property market in late 2007. However, the general impression and discussions with those within the industry point to limited enquiry from prospective purchasers which have lead to a revision of asking prices, particularly if properties have been on the market for over 3 months.

Some smaller regional villages within the North Coast have experienced possibly further falls in value (greater than 10%) which are due in part to their semi remoteness or villages/townships which have suffered a loss in relation to a market indicator industry. Timber related industries west of Casino are a case in point.

Byron Bay, which was one of the stronger performing townships in relation to increasing market values throughout the last boom period, has also experienced greater than 10% falls in value, particular in relation to the upper/prestige end of the market. Fall in market value within Byron Bay are partly a result of the underperforming tourism market over the past 12 months. There are no real standout sectors in the market which have performed well or any particular suburb that has lead from the pack. It seems to be more the case of which market sector has not been softened as much in comparison to the rest. ....as long as the property is well maintained and aggressively marketed, a property’s intrinsic value should be realised....

Vacant residential land appears relatively steady within more regional based localities, with Casino and Wollongbar a key indicator. This is largely due to limited supply of vacant land and land values being competitively priced. However, at the same time, the land market within Ballina and Lennox Head is currently experiencing limited demand and very low rates of sale, with various stages currently being marketed having recent price reductions. The hardest sector to pick is the rural residential / farmlet property market over 40 ha. There are a considerable number of these types of properties on the market with generally limited demand and enquiry. In some instances, a property which is considered to be a good quality, well presented farmlet with extensive creek frontage is taken to the market with an auction campaign and subsequent offers are considered to be below the likely market value. In the same instance, a property located in a more semi remote area is put to the market with interest achieved over the expected market value. The only possible reason for this anomaly is - “each to their own”.

If commonsense is to play a role in the current market, it is generally the poorly presented properties or those with significant issues i.e. High Floodway Hazard or beachfront locations affected by coastal erosion, that struggle to sell within a reasonable time frame in the current subdued and somewhat skittish market. As long as the property is well maintained and aggressively marketed i.e. the asking price is set within very close range of the market value, then a property’s intrinsic value should be realised.

There is no room for greed in this current market as prospective purchasers should be encouraged and NOT to be “toyed” with especially since tight lending criteria and recent disappointing economic data only add to the frustration.