Suburb spotlight: Has Cessnock’s bubble burst?

Suburb spotlight: Has Cessnock’s bubble burst?
Suburb spotlight: Has Cessnock’s bubble burst?

Cessnock, in New South Wales’ Hunter Region, is a town 52 kilometres west of Newcastle.

According to the Australian Bureau of Statistics, the area had 50,840 residents as of 2011, with 20,901 homes. The area’s median weekly household income is $1,042, with median monthly mortgage repayments of $1,517.

Like other mining towns in the area, Cessnock has seen its primary industry, coal, largely move north. Other primary industries in the area include the wine industry, which in the Hunter Valley employs over 7,000 people, according to the Cessnock local government.

Tourism is another big industry for Cessnock, with the local government estimating that the Hunter Region’s wine tourism industry is worth $521 million, with subsequent investment and spending worth around $227 million. Finder.com.au listed Cessnock at the top of its investment holiday hotspots list for houses this year, after the city showed the highest yield for houses of any of Tripadvisor's Top 10 Traveller's Choice Best Destinations in AUstralia. 

Facing a downturn in employment due to changes in the coal industry, the Cessnock local government is focussing on long-term, sustainable businesses to limit the area’s exposure to volatile industries.

Infrastructure investments, particularly transport links to nearby employment hubs like Newcastle, are hoped to attract businesses and residents to Cessnock. However, those infrastructure investments will come at a price, with Cessnock council rates to rise 9.55% permanently from 1 July.

Some residents have taken a strong stance against other resource industries entering the area, with many, including the local government, refusing to support coal seam gas related activities in the region.

According to a 2013 study commissioned by the Valuer General of New South Wales, in New South Wales areas where coal seam gas mining occurred, there was no evidence of an impact on property prices. However, the report also stated that the poor availability of data limited the study’s conclusions.

The report also stated that “anecdotal evidence indicated that in some areas negative perceptions of CSG led to a reduction in the number of potential purchasers and an increase in the time taken to sell properties.”

Property Observer spoke to Australian Property Monitors’ senior economist, Andrew Wilson, about the area late last year. He said the area had seen 4% price growth in the past year. 

“Given that there’s some dollar recovery in the resources sector, Cessnock will continue to be a reasonable performer into 2014,” he told Property Observer.

Jurd Real Estate principal Alan Jurd said in November that the downturn in the mining sector had “taken the zing off [the property market] a little.” He also told Property Observer that vacancies were up, after a period of unsustainable rents.

He now says that the effects of the resources downturn on the rental market have started to filter through to the investment market.

“There was a bubble in the rental market, which wasn’t real,” says Jurd.

“There were some properties that were really inflated.

“A new four bedroom, double garage, 250 square metre home: at the peak of the market, you could get $500 or $600 for that. Four years ago, it was $400 a week.”

According to Jurd, now that the mining industry has moved on, as have work crews from the Hunter Expressway, vacancies are up.

new four bedroom home at Cessnock’s Stonebridge Golf Estate, pictured below, is now available to rent for $400 per week.

Suburb spotlight: Has Cessnock’s bubble burst?

Jurd says that some investors were lured in during the rental bubble by property spruikers, who advertised inflated yields. But he says that the area is a sound investment for those with realistic long term expectations.

According to Jurd, the new Hunter Expressway may deliver demand from Newcastle residents.

“The driving time to Newcastle is so much faster,” he says. “So we’re getting some interested from that area, which we never really had before.”

The median house price for the Hunter region is $268,000. For Cessnock, the median house price is $258,000.

 Feature picture courtesy of Ian Armstrong/Creative Commons.

Tags: 
New South Wales Suburb Spotlight

Community Discussion

Be the first one to comment on this article
What would you like to say about this project?