Newcastle property predictions: growth suburbs and where to invest in property in 2018

Property management

Newcastle, two hours north of Sydney, has historically been seen as Sydney’s industrial, poorer cousin. The once industrial town is undergoing a massive transition into a more desirable place to live thanks to infrastructure improvements, investments and a focus on arts, culture and a thriving food scene.

15 NSW regional growth suburbs in NSW for smart property investment in 2017 and 2018 lists Newcastle in second place next to the Central Coast, an hour south of Newcastle. It may be a race between the two areas as Newcastle embarks on a massive expansion campaign.

The Newcastle property market

So, why is Newcastle so hot right now?

You could easily simplify it by saying that Sydney prices are out of control. With more houses worth $2 million than $600,000 according to an article by entitled “Forget Sydney, Newcastle is the next big thing to boom you can see why investors are heading to Newcastle in droves.

“Newcastle is on the cusp of transitioning from a great regional city to an emerging global city.”

The article quotes Newcastle’s Lord Mayor Nuatali Nelmes, who says, “Newcastle is on the cusp of transitioning from a great regional city to an emerging global city.”

Ms Nelmes goes on to say that construction “is booming in Newcastle after the value of approved developments soared 70 percent last year.” Currently, $3 billion in property investment is taking place in Newcastle.

Infrastructure is high on the list of Newcastle council’s priorities. It includes a $300 million light rail development that should be completed by 2019. Roads are being improved, too, making it easier to get from the Newcastle CBD to surrounding suburbs – making it an attractive place to live for families, young professional and university students alike.

While investment is strong in Newcastle, including a new cruise ship terminal in Carrington, housing is still affordable in many parts of the city. This is attracting renters and buyers from Sydney and other regions looking for affordable housing in an area where employment is high. The unemployment rateis higher than in Sydney, but lower than the Central Coast, Sydney’s southwest, the Southern Highlands and Coffs Harbour, which has one of the highest unemployment rates in New South Wales.

Current state of the Newcastle property market

In the September quarter of 2017, the Newcastle property market dipped from a median price of $610,000 to $595,000. This is a good thing, according to the Herald, which reported the drop. The drop replicated drops in price in Sydney and Wollongong, so was not an isolated event. The current median price is still lower than other regional centres such as Wollongong, Shellharbour or the Southern Highlands.

In spite of the September drop, prices in Newcastle have risen about 40 percent over the past four years. Unlike Sydney, where foreign investors have driven prices up, foreign investment in Newcastle is low, but Sydneysiders have been investing heavily in Newcastle. In spite of the drop, there is still more demand for housing in Newcastle than supply.

Should you invest in Newcastle houses or apartments?

The price dip is not likely to last in Newcastle, since demand outstrips supply, so investing in housing in Newcastle is likely to result in increased house prices in the future. Is a house a better investment than an apartment?

While housing prices have risen by 40 percent in three years, apartment prices have risen by only about 21 percent throughout the region, but there are exceptions. Lake Macquarie is an example of one of those exceptions. While house prices fell from $565,000 to $530,000, unit price rose from $435,000 to $449,000. Buying an apartment in the right Newcastle suburb could be a wise investment and apartment prices in Newcastle are lower than in Sydney, where unit prices average $700,000, making them unaffordable to many.

The best Newcastle suburbs to invest in in 2018

All of Newcastle has seen price rises in recent years, despite the slight dip in the September quarter. They include the CBD area and outer suburbs. Even suburbs once considered undesirable are being gentrified and where prices were once subdued, they are rising, but can still be affordable. What are the best suburbs in Newcastle for buying or investing? Let’s take a look below.

Investing in Wickham, Newcastle

Wickham is only 3km from the CBD, is close to the Hunter River and is one of Newcastle’s more desirable locations. The price of a home in Wickham is around $650,000, in contrast to Sydney’s harbourside values of over $2 million.

Investing in Lambton, Newcastle

Lambton is 8km from the beach, but house prices there have been rising, too, by 20 percent per annum. Maryville is closer to the CBD and is considered an inner west suburb. Prices there have been rising, too, but the most surprising price rises have been in suburbs further from the beach like Wallsend, which has seen a jump in prices of 22 percent. Wallsend is 12km from the CBD and the driving time to the CBD is about 20 minutes.

Investing in Lake Macquarie, Newcastle

Lake Macquarie is 20km south of the CBD and a 30 minute drive, but prices there have risen 9 percent in one year. It’s location on a peninsula overlooking Belmont Bay and its close proximity to the ocean may have something to do with Lake Macquarie’s popularity and being just 30 minutes from the CBD means people who buy there can easily commute to work.

Investing in Kahibah, Newcastle

Kahibah is closer to Newcastle and is reasonably close to Newcastle’s beaches, but far enough away from the beaches to require driving. In some streets in Kahibah, prices have risen 14.5 percent.

Everywhere you look in Newcastle, prices have been on the rise. The question is finding an affordable suburb in an area you like and looking at prices in that suburb.

Rental demand in Newcastle

Apartments are generally less expensive than houses, but you need to look at rental demand and rental returns before buying an apartment as an investment. The good news in Newcastle and surrounding suburbs is that rental demand is higher than supply. According to CoreLogic, rental supplies are lower by 7.1 percent since 2016.

The median rent in Newcastle is $540 per week, higher than the national average of $395 per week, but far lower than Sydney’s $662 per week for a one-bedroom apartment outside the city centre or $1177 for a 3-bedroom apartment in the city centre.

Rental returns are a healthy 3.79 percent in most parts of Newcastle and demand for rentals is high.This reflects a rise of 1.2 percent over a single quarter and rental rate rises of 5 percent. As demand still outstrips supply in Newcastle, rental returns should improve.

Where should you invest in Newcastle in 2018? It will depend on your budget and the area, but most of Newcastle’s suburbs are enjoying healthy growth. With rental supply outstripping demand, rental returns should go up and if you’re looking for a place for a family home, many Newcastle suburbs are still affordable. Even high end suburbs overlooking the beach are far more affordable than Sydney and other major centres. Whatever your budget may be, Newcastle may be a great place to live or invest in.

` newsletter-cta-img
Subscribe to our newsletter

Subscribe to our newsletter

Hints, tips and ideas to guide you through your property management journey