AN EXPONENTIAL rate of growth in Newcastle’s median house price may be over according to analysts, easing immediate pressure on prospective buyers to scramble onto the property ladder.
BIS Oxford Economics’ Residential Property Prospects 2018-2021 report to be released on Monday predicts Newcastle’s median house price will rise by six per cent in the three years to June 2021.
This follows a rise of 42 per cent in the four years to June 2017 and five per cent over this financial year.
Report author Angie Zigomanis said the slowing was in line with a weakening Sydney market, where continued tightening on bank lending policy has caused investors to pull back and owner-occupier demand, aside from first home buyers, appears to have “topped out”.
“We’re talking in Newcastle about 50 per cent median price growth in a few years to $615,000 and as prices go up and exceed income growth, affordability becomes more difficult,” he said.
“Unless you’ve got other things there that keep pushing prices up like strong employment growth, strong population growth and a big deficiency [of properties] then price growth starts to peter out.
“Apart from perhaps some first home buyer incentives, there’s not a huge amount there to push up prices. Plus, investors looking for value can’t borrow as much as they used to to bid up prices and are retreating.”
Mr Zigomanis said the forecast suggested a return to a more balanced market.
“There’s not going to be as much urgency for buyers to get into something that may not be totally suitable for them just for the sake of getting into the market, because they think prices are going to run ahead of them.
For a seller, it means if they keep holding firm for a high price it will take longer to sell. It doesn’t necessarily mean they won’t get that price if it’s realistic, but if they do want to sell quicker they may have to meet the market.”
Robinson Property’s Cveta Kolarovksi said while the “frenzied conditions” of the past few years had slowed, there were still ample opportunities for both buyers and sellers.
“Buyers can now catch their breath,” she said.
“Sellers can be confident but may have to be a little more patient for their prices.”
Mr Zigomanis said the Hunter had become reliant on its local market to drive prices, because despite decreasing affordability in Sydney, there hadn’t yet been significant migration north.
“Normally at this stage of the cycle we often see people from Sydney move up to Newcastle but it just doesn’t seem to be happening at the moment,” he said.
“Slowing prices in Sydney means people looking to trade down and move up are not as confident in doing it.
“The challenge for Newcastle is the majority of people don’t commute, they go up there looking for local jobs.
“[There needs to be] a big turnaround from the employment side to attract people – the employment market has been pretty soft because there’s been a fall off in coal investment and other sectors.
“There’s new projects coming such as the light rail and the whole CBD is rejuvenating.
“If Newcastle becomes more attractive and desirable not just to live, but to attract other businesses and create more employment opportunities, then there may well be some stronger upside in the next cycle.”
Walkom Real Estate director Scott Walkom said Newcastle “has its best to come”.
“Once we get the benefit from infrastructure it will be fantastic and vibrant,” he said.
“The university has been a game changer for the city. The light rail is going to be unbelievably great and will make the whole city from east to west accessible to everybody. It will generate jobs and economic growth.”
He said about 10 to 15 per cent of his agency’s buyers were from Sydney and this rose to about 30 per cent when looking solely at inner city apartments.
Others were interested in family-sized properties in The Hill, Merewether or Cooks Hill.
“If you look at what you’d get for around $4 million between Paddington and Newcastle, you get a lot more house here compared to what you’d get in Sydney,” Mr Walkom said.
“It’s still attractive to come here and our lifestyle drives that.
“We have people who are retiring, as well as people moving up for medical jobs and university jobs, plus mining is still going quite well and there’s still lots of construction jobs.”
Mr Zigomanis said while supply across the country has reached record levels, Hunter vacancy rates were “between tight and balanced”.
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