Hunter – What’s Happening in the Housing Market?

The Hunter has a strong regional economy with projected continued population growth, high amenity and environmental diversity and is also close enough to Sydney to be impacted by the housing market there. This region has seen strong price growth in both rents and sales, prolonged tight vacancy rates indicating an undersupply of private rental, a significant loss of affordable rental housing supply yet strong demand from the significant number of low income residents, with many residents in housing stress.

Hunter Region – What’s Happening in the Housing Market?Housing Market - Rental

Rents There have been strong increases in median rents for all dwelling types in all

bedroom categories in the Hunter region for well over a decade, with prices steady over the 12 month period to June 2019. The graph below shows the increase in median rents for all the Hunter LGAs from June 1990 to June 2019.

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At June 2019, median rents for houses in the Hunter ranged from $300 per week in Upper Hunter to $448 per week in Newcastle and for flats ranged from $223 per week in Muswellbrook to $360 per week in Newcastle.

The two tables below show the change in median rents for houses and for flats between June 2008 and June 2019 in each of the Hunter region LGAs.

Median Rent - Houses

Local Government Area Jun-08 Jun-19 change% change

Cessnock 230 390 160 69.6Dungog 200 360 160 80.0Lake Macquarie 290 430 140 48.3Maitland 290 420 130 44.8Gloucester (Mid Coast) 220 360 140 63.6Great Lakes (Mid Coast) 250 360 110 44.0Greater Taree (Mid Coast) 230 360 130 56.5Muswellbrook 230 378 148 64.3Newcastle 300 448 148 49.3Port Stephens 265 430 165 62.3Singleton 293 415 122 41.6Upper Hunter 220 300 80 36.4

Median Rent - Flats

Local Government Area Jun-08 Jun-19 change% change

Cessnock 195 300 105 53.8Dungog        Lake Macquarie 190 330 140 73.7Maitland 200 290 90 45.0Gloucester (Mid Coast) 125 280 155 124.0Great Lakes (Mid Coast) 180 280 100 55.6Greater Taree (Mid Coast) 160 280 120 75.0Muswellbrook 165 223 58 35.2Newcastle 240 360 120 50.0Port Stephens 200 320 120 60.0Singleton 230 285 55 23.9Upper Hunter 200 228 28 14.0

Over this time frame, the highest increases in median rents for houses occurred in Dungog (80.0%), Cessnock (69.6%) and Muswellbrook (64.3%). For flats the highest increase (excluding Mid Coast - council amalgamation makes it difficult to

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determine the average increase for the whole LGA) occurred in Lake Macquarie (73.7%) and Port Stephens (60.0%).

Vacancy Rate A vacancy rate of 3% is understood to represent a balance between supply and

demand. According to REINSW data, vacancy rates were below 3% for Newcastle and the rest of the Hunter for most of the period from 2006 through to 2019. For much of that time the vacancy rate has been below 2% - indicating a chronic shortage.

At September 2019 the vacancy rate in Newcastle was 1.2% and in the rest of the Hunter was 1.0%. This compares with 3.0% in the Central Coast and 2.9% in Sydney. While more recently vacancy rates in Sydney have eased, this is not the case in the Hunter.

Affordable Rental The general trend across Sydney and NSW has been for a decline in the

proportion of rental stock which is affordable for very low, low and moderate income earners. Although this region is more affordable than Sydney, the reduction in the proportion of rental housing that is affordable has been concerning.

At September 2017, every Hunter LGA with the exception of Upper Hunter and Muswellbrook, had a lower proportion of affordable rental for very low income households than the average of 23.1% for the Rest of NSW. Lake Macquarie

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had the lowest proportion with 7.8%, followed by Port Stephens with 9.0% and Maitland with 9.4%.

The graph below shows the change in the proportion of private rental accommodation affordable to very low income households in the Hunter LGAs and Rest of NSW between 2001 and 2017. Over that time frame every LGA has experienced a reduction in the proportion of new bonds lodged that are affordable to very low income households, although Upper Hunter has recently shown a sharp improvement in affordability for this income group.

The proportion of rental affordable for low income households has also declined in the Hunter, with every LGA except for Muswellbrook and Singleton having a lower proportion of affordable rental for low income households in 2017 than in 2001.

At September 2017, there were four Hunter LGAs with a lower proportion of rental affordable for low income households than the average of 54.1% for the Rest of NSW – Lake Macquarie with 33.4%, Newcastle with 35.6%, Maitland with 39.3% and Port Stephens with 39.9%.

Every Hunter LGA, with the exception of Upper Hunter and Muswellbrook experienced a decline in the proportion of properties affordable for low income households between 2016 and 2017.

The graph below charts the change in the proportion of private rental accommodation affordable to low income households in the each of the Hunter LGAs and the Rest of NSW from 2001 and 2017.

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There is evidence that short term holiday rentals such as Airbnb are impacting the supply of housing, including long term rental and affordable housing in cities and coastal communities. The North Coast region and Byron Shire in particular has experienced significant impacts, including loss of long term and affordable rental housing.

The University of Sydney Urban Housing Lab undertook a study and prepared a report for the Australian Coastal Councils on short term holiday rentals: “Planning responses to online short term holiday rental platforms” - Research Project for Australian Coastal Councils Association Inc. September 2018 by Nicole Gurran, Yuting Zhang, Pranita Shrestha, Catherine Gilbert.

The study found (p7) “that there has been a rapid growth in online holiday rental listings overall and in coastal Australia in particular. Since Airbnb was launched in Australia, the number of listings has risen to over 130,000 properties, amounting to around 0.2% of the housing stock nationwide. If holiday rentals are considered to be part of the rental housing stock (a smaller proportion of Australian homes), then Airbnb listings for whole homes represent around 3.5% of rental accommodation. In coastal communities, the rate is much higher. Across the communities in this study, between 0.3% (Moreton Bay) and 17.6 % (Byron) of the total housing stock is listed on Airbnb.”

Further (p7) “the majority of these listings are whole houses, and more than half appear to be frequently available holiday lets rather than permanent residences. Considered as part of the rental housing stock, these whole houses, frequently available, amount to 19.7% of the rental housing stock in Kiama…and 48.3% of the rental housing stock in Byron”. The report states that (p23) “Airbnb listings…is equivalent to around a fifth of the rental housing stock in Kiama (and) Shoalhaven…”

None of the coastal communities in the Hunter were included in the 10 case study communities examined in the study. Nevertheless, the study identified impact to communities within a 3 hour radius of capital cities. Much of the Hunter falls into this category. This report, in discussing the implications for local housing markets, noted that (p36) “Many, but not all, of the case study communities report

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that lower income residents and local workers face barriers in securing affordable rental housing or entering home ownership” .

The rapid growth in on line listings and loss of affordable rental accommodation are likely connected, with tourist accommodation outcompeting longer term renting for locals, particularly in Hunter coastal communities. This may go some way to explaining the decline in low income rental households in Mid Coast and Port Stephens.

In addition, the report for the Australian Coastal Councils on short term holiday rental platforms states (p33) “the income from online holiday rentals is comparable to up to 170% of the income derived from existing permanent rental properties, making them an attractive proposition for investors. Indeed, interviewees on the NSW South Coast… advised that they had observed the rise of a new type of investor who purchased homes solely for the purpose of operating a holiday rental.”1

This may help explain some of the decline in low income households in Lake Macquarie, Newcastle and Port Stephens.

Rental Stress At the 2016 Census, the proportion of very low income households in rental

stress in the Hunter ranged between 91% in Newcastle and 64% in Upper Hunter. There were only four LGAs in the Hunter with equivalent or higher proportions of very low income households in rental stress to the average of 89% for the Rest of NSW – Newcastle (91%), Lake Macquarie, Mid Coast (90%) and Muswellbrook (89%)

There were no LGAs in the Hunter with a higher proportion of low income households in rental stress than the average of 62% for the Rest of NSW. Newcastle and Mid Coast had the highest proportion with 59%. However it should be pointed out that six Hunter LGAs had more than half of low income rental households in stress (Newcastle and Mid Coast with 59%, Lake Macquarie 54%, Port Stephens and Singleton 52% and Maitland 50%). This is a very high proportion of low income renters in stress.

Newcastle has the same proportion of moderate income households in rental stress as the average of 23.0% for the Rest of NSW. The other Hunter LGAs have a lower proportion.

At the 2016 Census there were 18,130 very low and low income renters in housing stress across the Hunter, increasing from 15,515 in 2011. This represents a 17% increase from 2011 to 2016.

The graph below shows the proportion of both very low and low income households in rental stress in the Hunter LGAs and the Rest of NSW at the 2016 Census.

1 The University of Sydney Urban Housing Lab report “Planning responses to online short term holiday rental platforms” - Research Project for Australian Coastal Councils Association Inc. September 2018 by Nicole Gurran, Yuting Zhang, Pranita Shrestha, Catherine Gilbert

www.facs.nsw.gov.au

The table below shows that there has been a significant increase in the number of very low and low income households in rental stress in every LGA in the Hunter region between 2011 and 2016.

Area

2011 low and very low

income households

in rental stress

2016 low and very low income

households in rental stress

Change % change

Cessnock 1386 2527 1141 82.3Dungog 163 278 115 70.6Lake Macquarie 4394 5996 1602 36.5Maitland 1509 2898 1389 92.0MidCoast 3034 4835 1801 59.4Muswellbrook 298 854 556 186.6Newcastle 4992 6827 1835 36.8Port Stephens 1929 2576 647 33.5Singleton 243 618 375 154.3Upper Hunter 181 441 260 143.6Rest of NSW 63819 106457 42638 66.8Hunter Total 18130 27850 9720 53.6

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This increase in very low and low income rental households in stress is occurring in spite of the fact that there has been an overall decline in the number of very low and low income rental households in the region. This suggests that very low and low income rental households in the Hunter are remaining despite increasingly high housing costs relative to income.

Note that Mid Coast had an increase of 1,801 very low and low income rental households in stress despite having a loss of 2,339 low (and very low) income rental households between 2011 and 2016. This demonstrates a hostile rental environment for lower income households in Mid Coast in particular and the need for affordable housing provision.

The table below shows the number and proportion of tenants in the Hunter region who are in the private rental market, are in receipt of Commonwealth Rent Assistance, and despite this additional income support, are in housing stress. The Hunter has a higher proportion of CRA recipients in housing stress than the average for the Rest of NSW.

Newcastle has the highest number and proportion of CRA recipients in housing stress in the Hunter and the Hunter region as a whole has 29% of all CRA recipients in housing stress in the Rest of NSW.

Area

Total CRA recipients 2016

CRA recipients in Housing Stress 2016

% CRA in Stress

Cessnock 4265 1665 39.0

Dungog 460 175 38.0

Lake Macquarie 11931 4585 38.4

Maitland 4904 1895 38.6

Mid Coast 8671 2794 32.2

Muswellbrook 1591 385 24.2

Newcastle 12748 6563 51.5

Port Stephens 6021 2008 33.3

Singleton 972 346 35.6

Upper Hunter 777 189 24.3

Rest of NSW 201580 70760 35.1

Hunter Total 52340 20605 39.4

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Loss of Affordable Housing Stock DCJ has calculated the number of new bonds lodged with the Rental Bond Board

that were affordable to low income earners in the Hunter in 2006, 2010, 2013 and 2017. The Hunter experienced a significant decline in affordable bonds lodged, and consequently loss of affordable housing between 2006 and 2017 – with 4,453 fewer affordable bonds lodged – representing a loss of 61% of affordable stock.

The table below shows the number of new bonds lodged that were affordable to low income households (including very low income households) in 2006, 2010, 2013 and 2017 in each of the Hunter LGAs as well as the total for the Region.

It is clear from the table that Newcastle (-1,297), Mid Coast (-1,041), Lake Macquarie (-655), Cessnock (-475) and Port Stephens (-361) have suffered the largest numeric losses. Yet proportionately, Dungog has experienced the largest decline (81%), followed by Mid Coast (68%) and Cessnock, Newcastle and Upper Hunter (all on 63%).

No. of affordable rental properties for low income households

Local Government Area 2006 2010 2013 20172006-2017

Change% Change

Cessnock 753 318 230 278 -475 -63%Dungog 100 41 33 19 -81 -81%

Lake Macquarie 1073 560 379 418 -655 -61%Maitland 561 257 271 267 -294 -52%Mid Coast 1,530  1,070  1053 489 -1041 -68%Muswellbrook 241 164 157 142 -99 -41%Newcastle 2054 1197 1681 757 -1297 -63%Port Stephens 587 220 151 226 -361 -61%Singleton 143 84 118 123 -20 -14%Upper Hunter 205 181 78 75 -130 -63%Total 7,247  4092 4151 2794 -4453 -61%

These are significant losses and again may help explain the decline in low income rental households in some Hunter communities, including Mid Coast.

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Housing Market - Purchase

Sales Price House and unit prices have experienced strong growth since 2001 in the Hunter.

Over the period from March 2009 to March 2019 median house prices in the Hunter have increased by between 27.8% (Singleton) and 85.8% (Newcastle) and for strata properties the median price has increased by between 8.8% (Singleton) and 63.5% (Newcastle). Due to the amalgamation of Gloucester, Great Lakes and Greater Taree to form Mid Coast Council, it is difficult to determine the exact price growth for Mid Coast – however, price growth there has also been strong.

The following graphs present the long term median sales price trend for all dwellings, for houses and for strata properties (for all bedrooms).

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At March 2019, the median sales price for houses in the Hunter varied between $338,000 in Upper Hunter and $600,000 in Newcastle, while the median sales price for strata properties ranged from $278,000 in Cessnock to $510,000 in Newcastle. Note there were insufficient sales of strata properties in a number of Hunter LGAs to determine the median sales price.

The two tables below give the change in median sales price for houses and for strata properties between March 2009 and March 2019 for Hunter LGAs.

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Median Sales Price - Houses

LGAMarch

2009March

2019Change

% change

Cessnock 225 400 175 77.8Dungog 315 453 139 44.0Lake Macquarie 335 580 246 73.4Maitland 297 470 173 58.2Gloucester (Mid Coast) 217 415 198 91.2Great Lakes (Mid Coast) 320 415 95 29.7Greater Taree (Mid Coast) 260 415 155 59.6Muswellbrook 270 325 55 20.4Newcastle 323 600 277 85.8Port Stephens 330 583 253 76.7Singleton 335 428 93 27.8Upper Hunter 231 338 107 46.3

Median Sales Price - Units

LGAMarch

2009March

2019Change

% change

Cessnock 255 278 23 9.0Lake Macquarie 285 447 162 56.8Maitland 255 340 85 33.3Great Lakes (Mid Coast) 336 365 29 8.6Greater Taree (Mid Coast) 188 365 177 94.1Newcastle 312 510 198 63.5Port Stephens 313 400 88 28.0Singleton 285 310 25 8.8

Purchase Affordability In the Hunter, purchase affordability for very low income earners has declined in

every LGA since 2001. There has been some improvement since 2015 in most LGAs.

At September 2017 every Hunter LGA, with the exception of Muswellbrook (23.4%) and Upper Hunter (10.3%) had a lower proportion of properties affordable for purchase than the average of 9.0% in the Rest of NSW. Dungog

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had no properties affordable for purchase, closely followed by Newcastle with just 1.5%, Maitland with 1.7%, Lake Macquarie 1.8% and Port Stephens 1.9%

Interest rates are currently at record low levels which has contributed to the recent improvement in affordability. The graph below shows purchase affordability for very low income households in the Hunter LGAs and the Rest of NSW between 2001 and 2017.

Similarly, every Hunter LGA had a lower proportion of housing affordable for purchase by low income households in 2017 than in 2001. Again there has been some improvement in purchase affordability since 2015.

At September 2017, half the LGAs in the Hunter (Dungog 18.6%, Lake Macquarie 4.0%, Maitland 13.9%, Newcastle 4.6% and Port Stephens 11.8%) had a lower proportion of housing affordable for purchase by low income households than the Rest of NSW average of 24.7%.

Muswellbrook had the highest proportion of properties affordable for purchase by low income households with 57.8% while Newcastle had the lowest with 4.6%.

The graph below shows the change in purchase affordability for low income households in the Hunter, compared to the Rest of NSW, between 2001 and 2017.

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Additional DataAdditional data on rents and sale prices, including both current and historical data, is available from the Rent and Sales Report on the Housing NSW website at:

http://www.housing.nsw.gov.au/About+Us/Reports+Plans+and+Papers/Rent+and+Sales+Reports/

More detailed housing data and tables used in this Snapshot are available from the Local Government Housing Kit Database on the Housing NSW website at:

http://www.housing.nsw.gov.au/Centre+For+Affordable+Housing/NSW+Local+Government+Housing+Kit/Local+Government+Housing+Kit+Database/

More information on vacancy rates is available from the Real Estate Institute of NSW website (see their media releases on vacancy rates):

https://www.reinsw.com.au/

www.facs.nsw.gov.au