Dec 2008 Newsletter Hunter and Central Coast Property News.

1. pds live.com.au property news
property data solutions
your local market update
Property Data Solutions Update
Hunter and Central Coast
Local statistics , research and news
Property Data Solutions has a local representative
supporting businesses located in the Hunter or Central
Coast. Kent Lardner can call into your office and offer
obligation free training and ongoing support for your
pdslive property information subscription service.
Contact: 0437 770 123
Long term owners likely to get the best on housing may be attributed to the decisions of
prices both government and insurers.
Research conducted by Property Data Solutions The CSIRO says sea levels are rising faster than ex-
suggests that property owners who hold for 6 years pected. If predictions are correct, 250,000 properties
or longer are getting the best possible prices. in Queensland alone may be at some level of risk
between now and the year 2100. Having experi-
We conducted the analysis of over 120 property
enced the June long weekend storms in Newcastle
sales over the last 6 months in a variety of suburbs
last year, I can appreciate first hand the problems
around Sydney and in nearby regional centres.
we face with changing weather patterns.
Houses included in the tests had been owned for
periods of between 1 and 10 years. Considering the wide range of potential issues that
may impact housing markets, inflationary costs and
We estimated the market rate for each property
insurance are the most tangible risks. According
using our PriceFinder system, and compared this to
to the Garnaut Climate Change Review, coastal
the actual sale price. This gave us an indication of
infrastructure in the medium term (from 2030) will be
a property being under or over market value, which
impacted, requiring ongoing repair and increased
we plotted against the number of years it had been
maintenance. In Newcastle, the council has intro-
owned for.
duced a special rates levy to fix the drainage prob-
PDS observed some of the biggest discounts in lems that contributed to the local flooding problems
properties that had been owned for 4 years or less. in the inner suburbs. Many other coastal councils’
The vendor circumstances had not been included in are also experiencing added costs that can only be
the research, but we would expect some distressed met by special levies and rate rises.
sales in the sample given current market conditions
The special levy for the Newcastle storm-water
Those holding on to properties for 6 years or more drain upgrade is relatively small. But the necessary
were observed as being sold at above market rate increase in rates to protect and maintain infrastruc-
when compared to those selling prior to the 6 year ture, as well as water rate increases from supple-
period. Vendor premiums improved by approxi- mentation programs, higher power costs and other
mately $9000 per annum for each year of owner- carbon trading related price increases, will all have
ship, once the property had been held for at least 6 an inflationary impact. Applicable to many house
years price prediction models, GDP, inflation, real wages
and interest rates are significant variables. All of
these variables will be impacted to some degree by
Climate Change and Mortgage Risk climate change and associated government policy.
In the lead up to a NSW state election in the mid
80’s, the Liberal opposition at that time distributed a
leaflet that claimed, ‘Once the Labor Government
l
Free Tria
For a free seven day trial,
has mapped your area … the value of your property simply visit pdslive.com.au
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data now openly available to identify such environ-
mental risks, the market will be free to dictate how
property prices move. However the biggest impact
© property data solutions page 1

2. A leading insurer is currently running an ‘automatic If we assume that the more luxurious waterfront
flood cover’ campaign, but the first line of the small properties will likely have a lower LVR (loan-to-value-
print states clearly, ‘Actions or movements of the ratio), the main risk for the mortgage industry would
sea are not covered’. Properties with increased be for lower lying areas at higher LVRs. Locations
exposure to bushfire, flood or coastal sea surges are such as Cairns, The Gold Coast and the Central
readily identifiable using existing data and mapping Coast of NSW have been mentioned in a number of
services, which is good news for risk departments. articles in recent months..
The number of uninsurable properties is set to rise as In relation to Cairns, comparisons to the New Or-
general insurance underwriters seek to better man- leans catastrophe have even been made, due to
age exposure to our changing climate. For a mort- its increased risk of storm surge flooding. With these
gage lender, this promises to remain a crucial part rather nasty images etched into our minds, buy-
of the approval process. ers may be increasingly cautious in years to come,
A home’s location can mean higher insurance reducing demand in some locations. Underwriters
costs, and higher insurance costs already make or certainly will not forget the enormous cost of Hur-
break a sale. A study at Houston, Texas, found that ricane Katrina
flooding in 1979 had no real direct impact on values
of those houses flooded. But as soon as insurance
premiums increased considerably, house prices fell. Has it started?
Lenders also don’t generally approve deals if the Several studies have found that properties situated
property can’t obtain adequate insurance cover- in designated floodplains are often valued less than
age, further contributing to lower prices. comparable properties situated outside the flood-
Some states in the US now prohibit the develop- plain. Price differences for flood prone areas can be
ment of new housing in areas likely to be eroded. -10% or more, however the estimates differ substan-
Concerned about the need to protect property tially between various studies and countries. Flood
rights, Maine, South Carolina, and Texas have imple- depth was also an important variable.
mented what is being called “rolling easements,” in To try and understand if rising sea-levels will have
which people are allowed to build, but under the a similar impact as traditional floods on housing
condition that they will remove a structure if and markets is difficult. Comparing waterfront to non-
when it is threatened by an advancing shoreline. waterfront prices is not appropriate for our research
Closer to home, the South Australian Supreme Court at this time. In a report created for 4BC radio earlier
has recently ruled that predicted sea level rises are this year, PDS found comparable waterfront proper-
a valid reason to reject beachfront housing devel- ties in various SE Queensland locations were priced
opments. between 1.5x and 5x more than the price of an
equivalent house only one or two blocks away from
the waters edge.
What-If
So if price comparisons are not relevant, maybe
Model simulations are limited, however, a free map- growth levels could be used to judge the poten-
ping service is available enabling various sea-levels tial threat of rising sea-levels? In a simple test, PDS
to be tested (go to http://flood.firetree.net). Whilst compared a total of 20 properties sold in the past 12
the estimates of how much the sea levels will rise months that could be considered exposed to a 3m
vary, some reports say it will be up to 1.5m by 2100. surge level rise. The price growth of the waterfront
But the experts also mention the risk associated with group was then compared the average growth for
king tides and simultaneous storms. This is exactly the LGA (local government area). This was repeated
what happened during the Newcastle long-week- for the Gold Coast (QLD) and for the Clarence Val-
end, so it is not a far-fetched scenario. As potential ley (NSW) for a 5 year period to June 2008.
homebuyers become more aware of these issues,
we may find more use of ‘what-if’ testing pre-pur- The waterfront property sample average price
chase, with potential buyers entering sea-levels as growth was 64% in Broadbeach Waters and 37% in
high as 3m or more. The perceived risk could prove Yamba. Compared to the average growth of 35%
to be an important factor in home purchases, for Gold Coast City LGA and 26% for Clarence Val-
including consideration of current and future insur- ley LGA, it appears that the waterfront properties
ance premium costs. have shown stronger demand.
According to Philip J. Trounstine, director of the Whilst it could hardly be considered in depth re-
Survey & Policy Research Institute at San Jose (CA) search, the data shows that if the risk does exist it is
State University; yet to diminish the desire to live next to our beautiful
beaches and waterways. Time will tell, but the evi-
“My suspicion is that those who are highly educated dence appears that Australian buyers are lagging
are aware of this issue and there is some caution behind the US when it comes to responding to rising
about purchasing in low-lying coastal areas. You are sea-level risk.
thinking in 50-year increments, which means leaving
the property to children and projections in the rise in
sea levels in 50 to 100 years”. Kent Lardner
© property data solutions page 2

3. Sales and Growth Charts (Houses past 24 months)
1. Gloucester
From Q3 this year to Q3 last year we have seen an increase of 1 sale. In comparison to other markets,
sales volumes are holding steady. The most active price segments for Gloucester LGA for the last 24
months have been <$200k (46 sales) and $200k - $350k (51 sales).
2. Upper Hunter
From Q3 this year to Q3 last year we have seen a decrease of just 1 sale. In comparison to other mar-
kets, sales volumes are holding steady. The most active price segments for Upper Hunter LGA for the
last 24 months have been <$200k (138 sales) and $200k - $350k (190 sales).
© property data solutions page 3

4. Sales and Growth Charts (Houses past 24 months)
3. Dungog
From Q3 this year to Q3 last year we have seen an increase of 5 sales. In comparison to other markets,
this is a positive sign. The most active price segments for Dungog LGA for the last 24 months have been
<$200k (44 sales) and $200k - $350k (79 sales).
4. Muswellbrook
Muswwellbrook has experienced relatively large drop from 100 sales in Q3 2007 down to 53 sales in Q3
2008. The most active price segments for Muswellbrook LGA for the last 24 months have been <$200k
(151 sales) and $200k - $350k (just over 300 sales).
© property data solutions page 4

5. Sales and Growth Charts (Houses past 24 months)
5. Singleton
Singleton has experienced moderate drop from 106 sales in Q3 2007 down to 80 sales in Q3 2008. The
most active price segments for Singleton LGA for the last 24 months have been $200k - $350k (310
sales) and $350k - $500k (200 sales).
6. Maitland
Maitland has experienced moderate drop from 280 sales in Q3 2007 down to 244 sales in Q3 2008. The
most active price segments for Maitland LGA for the last 24 months have been $200k - $350k (more
than 1250 sales) and $350k - $500k (just over 500 sales).
© property data solutions page 5

6. Sales and Growth Charts (Houses past 24 months)
7. Port Stephens
Port Stephens has experienced moderate drop from 245 sales in Q3 2007 down to 209 sales in Q3 2008.
The most active price segments for Port Stephens LGA for the last 24 months have been $200k - $350k
(just over 800 sales) and $350k - $500k (550 sales).
8. Cessnock
Cessnock has experienced significant drop from 248 sales in Q3 2007 down to 189 sales in Q3 2008. The
most active price segments for Cessnock LGA for the last 24 months have been <$200k (around 650
sales) and $200k - $350k (just under 750 sales).
© property data solutions page 6

7. Sales and Growth Charts (Houses past 24 months)
9. Newcastle
Newcastle has experienced a significant drop from 723 sales in Q3 2007 down to 546 sales in Q3 2008.
The most active price segments for Newcastle LGA for the last 24 months have been $200k - $350k
(more than 2400 sales) and $350k - $500k (just under 1400 sales).
10. Lake Macquarie
Lake Macquarie has experienced a large drop from 857 sales in Q3 2007 down to 587 sales in Q3 2008.
The most active price segments for Lake Macquarie LGA for the last 24 months have been $200k -
$350k (more than 2650 sales) and $350k - $500k (over 1500 sales).
© property data solutions page 7

8. Sales and Growth Charts (Houses past 24 months)
11. Wyong
Wyong has experienced a significant drop from 799 sales in Q3 2007 down to 529 sales in Q3 2008. The
most active price segments for Wyong LGA for the last 24 months have been $200k - $350k (nearly 2900
sales) and $350k - $500k (1200 sales).
12. Gosford
Gosford has experienced a large drop from 791 sales in Q3 2007 down to 508 sales in Q3 2008. The
most active price segments for Gosford LGA for the last 24 months have been $200k - $350k (over 1700
sales) and $350k - $500k (just under 1700 sales).
© property data solutions page 8

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