Friday, March 12, 2010

Conundrums with New England real estate

A twit from hunternewsfeed brought me to this NBN story: properties being snapped up in Newcastle. Now this one didn't come as a real surprise. However, this was in fact just one of just one of a number of stories over the last six months or so that has been interesting me.

Almost twelve months ago, I was sitting on a bus in Sydney chatting to a woman who I saw from time to time on that bus. She had just bought a house in Gulargambone, not a normal choice for a Sydneysider. However, she could afford it, had been to the town, and thought that it might be nice to live there in the longer term. I asked if she was going to rent in the meantime. She said no, she could afford rates and upkeep. She then said something that surprised me, that since she bought all the lower price houses that had been on the market in the smaller western towns she had been looking at had been snapped up.

Reading the newspapers especially across inland New England I noticed how the increased first home buyers grant had led to a sharp increase in house prices at the lower end of the market. The effect here was more pronounced than in Sydney because house prices were so much lower, making the increased grant a much higher percentage of the sale price. As a consequence, stock literally vanished for a period at the lower price end.

Since then, overall real estate prices seem to have continued to move up, although I have not done an investigation of the detailed pattern.  In Armidale, for example, a weatherboard cottage in East Armidale, one of the lower price areas, sold for a record $320,000 a few weeks ago, while there is a shortage of rental accommodation in both Armidale and Tamworth.

One of the big problems in inland New England, one that can impede development, is the limited availability of serviced land and of rental accommodation. Normally this is okay, but it doesn't take much of a kick-up in development before pressures appear. Guyra experienced this recently with the growth of the tomato industry. Joint action by the council and state government was required to fund an immediate start to the development of new serviced land.

Guyra also shows the other side of the equation. With the earlier closure of the abattoir and the economic decline of the town, house prices declined, vacancies increased. There was no economic incentive to develop or build. Mind you, those who were prepared to buy at that point really did make some big longer term capital gains.

Just at present, the Government in Sydney is looking at new proposals to forcibly free up land in Sydney to accommodate the projected population increase there. I am not sure that anybody outside Sydney, or in it for that matter, really wants to see the city grow to six million people in the medium term. The Government really would be better off looking more seriously at options elsewhere.

Not every community community in New England wants development and especially along the coast. However, many inland communities would benefit from greater population. The difficulty with planning based on as is projections is that, to some degree, they become self-fulfilling prophecies because of the nature of consequent investment. They actually discourage investment elsewhere.

If we assume, as I think is in fact the case, that the dynamics are shifting in favour of the inland, then there is a case for consciously planning to accommodate greater populations across the spectrum of Government services. Of itself, that is likely to encourage growth.


Mitch said...

It's the people who make up the community not the buildings and houses built there. People should be mostly welcome in any place. Thanks. By the way, I found the most comprehensive real estate online marketing package in Australia that will surely benefit you. Good luck!

Jim Belshaw said...

Hi Mitch. I'm never opposed to a bit of shameless self promotion where people might actually have read the post!