Byron Bay – Beachfront & Other Properties

BYRON BAY HOUSE SALES CYCLE

The highest house sales (140) were in March 2002, the height of the surge, and then followed by much lower turnover, average of 80 house sales per month. The latest sales (100) were in March 2007 and are now showing what I believe to be the beginning of an upswing. The median house price has reached now $600,000. We have had single digit price increase for four or five years with a downturn in 2005. The median price of around $150,000 was in March 1997 and – can that be true? Byron prices have quadrupled in 10 years?

BEACH FRONT

This one is interesting for a couple of reasons. Thanks to First National. It shows the median average price increase over the five years from 2002 to now on a few of Australia’s beach front suburbs. And the winner is, yes little old Suffolk Park with an average 20% increase over the last 5 years, which means the median has doubled in a relatively flat period.

The other interesting point is look at the median price of Mermaid Beach on the Gold Coast. Yes, most of us would expect the highest average house price to be Sydney Harbour, Wategoes or somewhere in Perth where the mining magnates hang out. But, no, the most expensive real estate enclave in Australia is a beachside suburb just over the border at Mermaid Beach – not called the “Gold Coast” for nothing!

Suburb – Median 02 – Median 07 – Avg Annual change

—————————————————————————–

Suffolk Park – $234,256.05 – $595,000.00 – 20.5%

Lennox Head – $228,422.75 – $540,000.00 – 18.8%

Kingscliff – $283,727.47 – $576,000.00 – 15.2%

Mermaid Beach – $580,411.77 – $1,145,000.00 – 14.6%

Byron Bay – $346,981.48 – $672,500.00 – 14.2%

Palm Cove – $309,585.56 – $488,750.00 – 9.6%

Port Douglas – $365,405.52 – $552,500.00 – 8.6%

Noosa Heads – $426,923.44 – $624,500.00 – 7.9%

A BIT OF BALANCE

In times of market exuberance it is great to increase an asset but also a bit of balance is called for. Over the years I have overhead conversations as in: “I bought this property only three years ago for $500,000 and just sold it for $750,000″. A casual listener may just do the sums and guess that this loud mouth has made $250,000 for sitting around but that is not looking at all the facts. Purchase costs of stamp duty and legal fees for a $500,000 property is going to be around $25,000 not including time spent and expenses actually doing the search. Then there will be holding costs above and beyond living costs or negative gearing. If it is an investment property with a debt of $400,000 the mortgage will be around $30,000 PA – offset by a rental of around $400 a week which is a shortfall of around $10,000 a year plus rates and maintenance. Lets say $70,000 for getting in and holding over three years and then to sell with an agent paying, say $30,000, to a selling agent. So roughly $100,000 or half that amount could be shaved off that boast if they took the time to go into details.

All of these scenarios are different and some can do better or worse. My point is that it is lazy thinking in just subtracting the purchase price from the sell price in estimating the profit on a property transaction. Many people do it and it is misleading and inaccurate. I could even go further and include the interest on the deposit money, Capital Gains Tax or lost opportunity costs of being in the deal as well. Of course in my business as a buyers agent I am an advocate of property as an investment and as an interesting past time, I just felt the need to take off some of the easy, gung-ho chatter that can infect this industry.

AND THERE’S MORE ….

and while I am having a bit of a rant …….. there are two things going down in Byron right now that is of interest enough to me to comment on:

1. HOLIDAY LETTING

I know there are some complicated issues in the background but how complicated can it be for council to get this one together. People have a right to holiday let their property but neighbours have a right to shut them down if they create a disturbance. This is a popular holiday town, visitors want to come here, some people operate a business letting holiday houses and some people subsidise their holiday by sub letting their homes. How complicated or anti social is that? Why can’t council sell permits to people wanting to holiday let, this can create some badly needed revenue and if they let to noisy, disruptive people their permit is revoked. How complicated is that?

2. LOW COST HOUSING

In my business of being a buyers agent most of my clients are relatively well off people wanting to make a home here. I must say that the majority by far are great people – sensitive, aware and ready to embrace this town values, community and lifestyle. The only thing that worries me is the number of them and I do worry for the diversity in our community. This problem is a lot harder to fix than holiday letting outlined above but it needs to be tackled. There is only a little bit of developable land left in the shire and Council needs to find a way to accommodate and house low income residents so we can maintain the cultural mix we currently enjoy.

In Holland and other European countries they encourage a mix of properties in the same development so that top end apartments are built alongside smaller compact units. Sometimes a whole mini suburb is built, complete with environmentally sound practices of grey water recycling, solar power, on site waste disposal and internet interactivity. The developer contributions are relaxed for the smaller units and sometimes subsidised so they can be built cheaply. This encourages a mix of residents instead of the current trend towards homogenisation and conformity. The numbers of places that have made this mistake are legion, Florida, Gold Coast, etc that soon become a “Blandland” of uniform development. The other negative is becoming an isolated wealthy enclave like Lake Como in Italy or Silicon Valley in California. Services suffer as people like teachers and service workers have to commute long distances to work there.

Resources:

www.byronpropertysearch.com.au

www.realestate.com.au

Property Market, Share Market, New Developments in Byron Bay

There has been a lot going on lately – shake down and confusion. During these times human emotion works like this – greed is the accelerator and fear is the break. Many people have been jumping from one pedal to other – or applying pressure to both at the same time – not good for the health of the vehicle.

Property Market:

Agents – can you trust them? – Some have been saying that it is still full tilt boogie and business is strong. I think this is an automatic default response. Some agree that the recent stock market melt down has slowed the property market a bit. Many people are just sitting on their hands and waiting for the dust to settle. The big question is will this market meltdown create the same rush to property that happened after the meltdowns in 87 and 2000.

Of course agents are predicting so but there are few indicators that may hinder that outcome – mainly interest rate fears and housing affordability. Yes property usually doubles in Australia every 9 years but there must be some constraints sometime around rental returns and the ability to purchase a house without a corresponding increase in incomes. At present it takes 7 times average annual income to buy an average Australian home – the highest ratio in the world. Can this keep increasing? Can rental returns keep going up to support the increasing costs of investment properties? Stay tuned for the next thrilling instalment!

To put Oz house prices in perspective – the only country if a higher median house price than Australia which is $412,000 is the UK at $472,000. Compare it with other similar countries: Spain $369,000, France $293,000, US and Canada $324,000.

Share Market:

After the revolution I will have all day traders taken out and shot – but in the meantime I am sure many are having a gay old time with the volatility. The All Ords is in a classic support and resistance trading pattern between 5600 and 5750. Day traders love this pattern as they wait to see which way it will break and then rush in – either with calls or puts. I think the break out will be mild and in an upward direction. I think the worst is over but all the uncertainties will keep it in a slow recovery.

One interesting thing with recent market “corrections” is the ferocity. This is due to the prevalence of margin lending. This is also a reason why even the top end of the property market has been affected by the recent downturn. Many people are holding their portfolios on margin – using blue chip shares as collateral and borrowing against them. Fine in a stable market but when there are sharp falls brokers are forced to sell out people on margin calls and the market tumbles even more drastically.

This causes harder than usual sell offs and a hairy roller coaster ride. The banks have been hit the hardest and, although it takes some courage to enter the market again just on yield alone the major banks are giving a good return with the share price way down the dividend yield combined with the imputation credit can give a return of double figures. (pls remember I am not qualified to give financial advice so this is just an opinion).

New developments

I thought I would talk a bit about a few of the things that is happening around the shire. Some of the new developments that are happening are worth a mention.

Kiah

Kiah Apartments are on Cavanbah Street between Shirley Street and the railway line. They have just been open for inspection. Not exactly beach front but close. This was a long time in coming this development with the developer facing the usual amount of hurdles and obstacles. They are up market 3 bed 2 story units with a starting price around $1.8M. No bargains there.

The Butter Factory

Just north of Mitre 10 on the south side of Jonson Street is being made over into The Butter Factory. Ten very swish architect designed apartments and some retail will retain some of the old structure from the Norco Butter Factory days. Prices here start at $950K for 1 bedroom and up to $1.5 for 3 bed. Go online and look as they look good and that sounds reasonable.

Sea Drift

Just at the southern roundabout in town in Browning Street is another Eric Freeman development of units between $500K – $750K each. Apparently these have been selling well and are good value for money but I have not inspected. Stage 2 and 3 are yet to be released so probably a safe off the plan buy. This one and the previous two are marketed by Byron Bay First National.

Crosby Caravan Park

Opposite the Byron Golf Course on Broken Head Road the old Crosby Caravan Park (like most of the local caravan parks) are more than a face lift but a complete overhaul. This one is interesting in that they are offering 2 bed pre-fab units that start around $340,000. It is leasehold not freehold and body corporate is $100 a week – so you never own the land, just the building and a renewable 100 years lease. You can live in them or holiday let – or both.

Will be interesting to watch what happens with the Suffolk Park Caravan Park which is zoned “Community Use” as donated to council in a more relaxed time when nobody would ever of guessed it become such valuable real estate.

North Beach – Becton Site at the Byron Beach Resort

After all the years of strife I think that what finally is going to happen here will be good – and leave lots of natural habitat. I think it will be a win for the community as they seem like they are going to do a good job – sensitive aesthetic development, regenerate some bush and still be a good space for community events like the writers festival. Also it looks like good value – 1 bed apartments start at $380K, 2 bed beach house for $630K and bigger homes at 1.2 and 2M. Everybody is wondering how they are going to police the 3 month limit on owner occupier as it is licensed for holiday let – I know of a few people lining up to settle in for the long term.

Epicentre

Well the old landmark is finally flattened – thank god what an eyesore. But the end of an era now that the whaling and meat abattoir is no longer a Byron feature. 19 residential lots are planned. Prices are not yet decided but would have to $1.5M at least.

The only other piece of news is that it looks like we have had the wettest and coolest summer in over 20 years and that has had an impact on retail and holiday letting.

Resources:

www.byronpropertysearch.com.au

www.realestate.com.au