Buying in Newcastle

By Alex May

“Newcastle beaches are better than Sydney’s.”

That’s the bold claim of Newcastle estate agent Brett McGovern, who says it’s no wonder premium beachfronts in the former industrial city are fetching $3 million or more.
“Our beaches make Bondi look like a backyard operation – our sand is still clean, the beaches aren’t crowded and we have some of the best surfing spots in Sydney,” the Street Real Estate agent says.
Newcastle’s beachside properties have certainly risen strongly during the property boom of the last five years, with prices more than tripling in gentrifying beach areas like Redhead since 1998.
And in the former industrial city, even the cheapest suburbs have had heady price gains similar to the beaches, with places like Mayfield rising 40 per cent during 2003.
Australian Property Monitors’ Louis Christopher says the huge property price gains are not unique to Newcastle, which the Australian Bureau of Statistics says is the sixth largest city in Australia.
“It’s been the story across Australia during the boom,” he says. “But Newcastle has now experienced a slowing, like everyone else.”
Christopher says Newcastle’s auction clearance rates have fallen this year and there is strong evidence of price discounting.

APARTMENTS BOOMING

No-one seems to have told brand new apartment buyers about any slump in the property market.
In March, Street Real Estate sold 55 of the 58 apartments available in the Azura redevelopment of the Holiday Inn Esplanade hotel in six hours. Two of the penthouses reportedly sold for $3.5 million and $3.4 million, with prices starting at $500,000.
Newcastle’s harbour foreshore is undergoing massive gentrification with brand new apartments, marinas and cafes and restaurants springing up.
Robinsons Property agent Scott Purnell says another harbourfront apartment development, Lee Wharf, is just as popular as Azura with the first stage selling out and 300 people on a waiting list for 70 apartments.
“A few years ago, native Novocastrians wouldn’t look twice at our harbour, but now that apartments, restaurants and cafes are springing up everywhere, it’s a lovely place to be,” he says.
Walkom Linehans First National’s Sonia Walkom says it is a myth that it is only Sydney buyers snapping up luxury apartments at high prices.
“Sure Sydney buyers have been buying apartments and places at the end of the lake, but the majority of buyers are from Newcastle or the Upper Hunter,” she says.
“Newcastle is a very wealthy city but you’d never pick it because the people aren’t showy.”

THE BEACHES

Walkom says Merewether and Bar Beach are the premium beachfront spots, and she has a listing at John Parade for a luxury beach house with an asking price of $3.5 million.
“Some of our lakefronts are also getting $3 million,” she says. “But the beaches and harbour apartments are in high demand.”
The local real estate record price is $5 million which Sydney property family, the Roses, paid for Gwanda Bay Manor at Gwandalan on Lake Macquarie.
Real Estate Institute of NSW Newcastle Hunter division chair Wayne Stewart says Newcastle’s beaches are ideally located close to the CBD and offer a range of houses, from luxury beach houses to renovated miner’s cottages.
“Anything within one kilometre of the beach is in enormous demand, especially if it gets a glimpse of the blue stuff,” he says.
Purnell says Dudley is one of his favourite beachspots, and he believes Sydney buyers are flocking to it.
“Dudley is like Sydney’s Palm Beach without the restaurants,” he says. “And between Dudley and Whitebridge there is some coastal acreage which you can get for between $1.2 million and $2 million.”
The former mining town of Redhead has undergone enormous change, with buyers attracted to its secluded village feel and historic homes.

THE SYDNEY BUYERS

“Newcastle is the last bastion of the Australian way of life – it’s still got good state schools, it’s affordable, the beaches are great and you can send your kid up to the park to play on his skatey and nothing will happen to him,” agent Scott Purnell says.
“Sydney buyers see this and see how affordable it is.”
Purnell says the new state government first home buyers incentives have sent Sydney couples to Newcastle in search of an affordable family home.
“In the last two weeks, about 10 Sydney couples have been through open inspections on the weekends,” he says.
Dalton Partner’s Tom Quinn agrees, saying more and more Sydney buyers are looking at good quality family homes in middle ring suburbs of Newcastle for between $350,000 and $500,000.
“I am dealing with about half a dozen Sydney couples who are executive types and have not yet started a family but want to come to Newcastle to do it,” he says.
“They are looking at buying now while it’s a buyer’s market and renting it out until they can transfer here.”
Quinn says one of the most popular suburbs for Newcastle and Sydney buyers is New Lambton.
Walkom says New Lambton is similar to Sydney’s upper north shore suburbs of Wahroonga or Warrawee.
“It’s a lovely, leafy area that doesn’t have the same big blocks as Sydney but has renovated family homes at a good price,” she says.

FOR INVESTORS

Compared to Sydney or Wollongong, Newcastle has always offered strong rental returns for investors.
Christopher says that in the current market, Newcastle offers the “outside chance” of a good buy for investors seeking decent rental yields.
“In Sydney the average gross rental return is 2.7 per cent if you’re lucky but in Newcastle it is more than 4 per cent,” he says.
The Real Estate Institute’s Wayne Stewart agrees, saying there is an acute shortage of quality rental accommodation in Newcastle.
The April 2004 vacancy rate figures from REI show Newcastle with a vacancy rate of 2.1 per cent, compared to Sydney’s 3.4 per cent and Wollongong’s 3.6 per cent.
Stewart says investors need to pay at least $300,000 for “a nice three or four bedroom house with car accommodation close to the city” which should return $400 to $450 a week in rent.
Walkom says John Hunter Hospital and the 20,000-strong student population of Newcastle University help drive the strong rental demand.

SUBURB TIPS

Stewart says he picks the established suburbs of Newcastle close to the CBD as the best long term buys for the area.
“If you’d asked me 25 years ago the best suburbs to buy in, then I would say the same today – Bar Beach, Cooks Hill, Merewether and Hamilton South – they are the traditional well-to-do areas,” he says.
“The big problem with them now is that the entry point for them is at least half a million and that would be a house that needs renovating.”
Walkom agrees that the established suburbs will do well, especially because of their proximity to the beaches, harbour and CBD.
“I think Mayfield, Maryville and Islington are cheaper areas that will do well – you can get freestanding houses for between $280,000 and $350,000 and you are close to the water,” she says.
“Those suburbs are also close to a new suburb called Linwood, where you pay $700,000 for a new townhouse.”
Purnell says the middle ring suburbs like Adamstown Heights, New Lambton and Highfields will be strong long term performers, as you can buy a totally renovated 1930s or 1940s house with landscaped gardens for between $300,000 and $500,000.
Stewart says some former industrial areas are poised for redevelopment and can offer good investment opportunities for a lower cost.
“If you look at Wallsend, it is very similar to Sydney’s Parramatta especially in terms of transport,” he says.
“Wallsend is on the fringe of the freeway and a main feeder road to the city, Lake Macquarie and Maitland.”
He says Glendale and Argenton are similar “sleeping giants” where people can buy for under $300,000.

MEDIAN HOUSE PRICES

Beachside

Bar Beach

• 1998 $412,000
• 2002 $692,000
• 2003 $800,000

percentage change in five years 94%
percentage change in 12 months 16%

Merewether

• 1998 $235,000
• 2002 $400,000
• 2003 $463,456

percentage change in five years 97%
percentage change in 12 months 16%

Redhead

• 1998 $152,000
• 2002 $358,500
• 2003 $480,000

percentage change in five years 216%
percentage change in 12 months 34%

Dudley

• 1998 $165,000
• 2002 $330,000
• 2003 $350,000

percentage change in five years 112%
percentage change in 12 months 6%

Established suburbs

Hamilton South

• 1998 $235,000
• 2002 $340,000
• 2003 $465,000

percentage change in five years 98%
percentage change in 12 months 37%

Cooks Hill

• 1998 $201,500
• 2002 $333,750
• 2003 $405,000

percentage change in five years 101%
percentage change in 12 months 21%

The Hill

• 1998 $290,000
• 2002 $476,250
• 2003 $652,500

percentage change in five years 125%
percentage change in 12 months 37%

Middle ring

New Lambton

• 1998 $145,000
• 2002 $249,000
• 2003 $310,000

percentage change in five years 114%
percentage change in 12 months 24%

Adamstown Heights

• 1998 $156,000
• 2002 $270,000
• 2003 $314,500

percentage change in five years 102%
percentage change in 12 months 16%

Bargain buys

Wallsend

• 1998 $115,025
• 2002 $176,500
• 2003 $229,000

percentage change in five years 99%
percentage change in 12 months 30%

Maryville

• 1998 $97,500
• 2002 $190,000
• 2003 $245,000

percentage change in five years 151%
percentage change in 12 months 29%

Mayfield

• 1998 $92,250
• 2002 $175,500
• 2003 $245,000

percentage change in five years 166%
percentage change in 12 months 40%