Market review – Orange NSW

 
Regional property investment continues to gain momentum. Recently I attended an auction in Orange NSW. This property had no kitchen, no bathroom, broken windows and holes in the floor, and sold for 20% more than the top guide price. The auction saw 60% of bids come from Sydney investors, all indicating their plans to convert the site into a dual income property. It ended up being purchased by a first home buyer. Orange is seeing a strong mix of investors looking for cash flow and growth off the Sydney boom, and treechangers, looking for affordability and lifestyle while maintaining their proximity to Sydney.

Orange is Australia’s 34th largest City, located 250km from Sydney and 280km from Canberra. The City of Orange services multiple outlying towns and villages, giving it a servicing population of more than 53,000 people. Orange’s main employment providers and industries are Health (21.1%), Mining (3.6%), Government (8%), retail (11.9%) and education (10.1%) but is seeing a strong growth in tourism (last year contributing more than $112 million to the Orange economy).

The average house price in Orange NSW is $400,000, with a current average rental costing tenants $360/week. Rental demand is consistently at a good standard, currently seeing 1.6% vacancy rates. Land values, being lower than in capital cities, mean that investors can hold multiple good sized blocks while still remaining under the NSW land tax threshold of $629,000. While smaller regional towns and localities across Australia have been seeing net migration losses, Orange, and cities like it, have defied this trend to be building close to 300 new residential properties a year over the past decade, and has seen a consistent population growth averaging 1% per year.

Orange’s greatest appeal is currently its affordability. Many industries pay workers a standard wage, regardless of the location in which they live. In an interview with regionalpropertynsw.com, Orange based Buyers Agent Matthew Ward suggested that technology is contributing to decentralisation. Rather than being required to live within commuting distance to their office, employees can work full or part time from the home office.  The roll out of the NBN, improved air transport, and the announcement of the Bells Line Expressway means that individuals and families can have the home on the quarter acre block, with less commute and less living expenses, whilst still pursuing their career. Facilities and services are critically important to this move, and the larger towns with their restaurants, wines, education facilities, and health services are seen as key influencing factors to people making a treechange. Local agent Adam Scimone identified a growing trend of young professionals and families making the tree change from Sydney, working from home 3-4 days a week and 1 day a week back in Sydney.

Orange was recently announced as the headquarters for the Regional Investment Corporation (Barnaby’s Bank), bringing 20+ high paid jobs to the region. The city has also seen ground break on a new Private Hospital (an estimated 500 jobs during construction and beyond) following a new Public Hospital being completed in 2010. The Department of Primary Industries currently employs 800 Orange residents and in July 2018 announced its plans to construct new premises to house a consistently expanding operation.
Apart from young families who are priced out of the Sydney market and retirees, selling high in Sydney and buying low(er) in Orange, investors have been identifying Orange as having strong investment potential. Matthew Ward from Aspect Buyers Agency identified that Sydney investors who have little faith in the Sydney property market or a budget that does not allow them to acquire into the Sydney or larger coastal markets, are looking to regional NSW. The larger regional centres of NSW and Victoria particularly are benefiting from this, with strong interest in his experience being from investors looking for that mix of capital growth and reasonable rental return.

In interviews with regionalpropertynsw.com, Dr Andrew Wilson (economist and property commentator) and Matthew Ward both suggested that regional NSW is being impacted by the 'ripple effect'. The property markets are a function of economics, thus there has to be price relativity between regional property markets, such as Orange, and the Sydney property market. What we have seen in the past few years are dramatic increases in the Sydney region property values which have slowly filtered out in a ripple effect, first it was the central coast and Illawarra regions then into Newcastle and Canberra and now into the Regional Centres. Ward identifies that 10 years ago, the median house price in Blacktown was $350,000 and Orange was $277,000 about 27% difference, in 2018, Blacktown was $766,000 and Orange $388,000, thus 100% more. This pricing pressure is not being offset by household income with Blacktown residents earning approx. 25% more than median household income of Orange residents.
 
Orange’s property market is ultimately dependant on jobs and an affordable, appealing lifestyle. Changes in technology and further congestion in Australia’s capital cities will likely see some Australians continue to make the move into regional NSW. While demand for housing continues, growth in property values and rental returns for investors should follow. As this economic reality continues to come into play, people with broad or adaptable skills sets will be looking for the regional alternatives to afford to live. This economic driver will continue to strengthen the regional centre property markets where diverse well-paying jobs are available. Thus the markets have some way to go until the economic relativity between the Sydney (particularly the Western Sydney markets) and the regional markets catch up again.

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