Head for the hills, not the sea, for good NSW investment prospects: Terry Ryder

One of the enduring mantras of real estate is that water is the greatest wealth creator. 

Get your hands on property that fronts water or has a compelling view of it and you’ve bought a ticket to superior capital growth, according to this old cliché. 

There’s only one problem with it: it isn’t true. 

Every time I study a city or region to pinpoint the best growth areas, I find more evidence that the old paradigms about “prime” real estate are little more than myths and misinformation. 

My latest exercise focused on Newcastle and the Hunter region. Contrary to conventional wisdom – but consistent with results I’ve found in other cities and regions – the out-performing locations were the affordable places inland and the worst results were in the water-based areas. 

Once again, hill-change out-performed sea-change. The best capital growth rates were found in locations in the Cessnock and Maitland local government areas, heading west up the Hunter Valley from Newcastle. 

The worst, overwhelmingly, were suburbs in the Port Stephens and Lake Macquarie municipalities – lovely places to live, no doubt, but poor venues for investment. 

This confirmed for me, once again, that industry and infrastructure are the key elements for investors. 

The Hunter region is a great example of it. It’s emerging as one of the powerhouse economies of Australia and one of the strongest property markets, underpinned by current or upcoming projects totaling $28 billion. 

I recently flew over the region in a helicopter owned by local building company Thomas Paul Constructions. It gave me a great perspective on what makes this region tick. 

Multiple power stations, massive aluminium smelters, coal mines in abundance, some of the world’s biggest horse studs, stretches of wine country and new housing estates are all part of the mix driving the Hunter economy. 

From the air I saw a full house of ships in the port of Newcastle loading coal, with more queuing off the coast, as long trains of coal wagons were streaming into the port areas. It was easy to see why there are multibillion-dollar port expansion proposals from three different entities. 

There was also a commanding view of the construction corridor for the $1.5 billion Hunter Expressway, a project that is generating jobs and economic activity and which will revolutionise the appeal of many Hunter towns by improving access. It’s expected to knock half an hour off the drive to Sydney. 

It’s probably not coincidence that the leading areas for capital growth are the ones most influenced by this important infrastructure project – suburbs around Branxton, where the expressway terminates, top the growth list. 

The five best locations for long-term capital growth – the average annual growth in prices over 10 years – are all in the Cessnock municipality, including near neighbours Branxton, East Branxton and Greta. 

The top 20 for the wider region is dominated by locations in the Cessnock and Maitland municipality, where a country lifestyle amid the vineyards is mixed with good amenities and easy access to major jobs nodes. 

The top 20 all have long-term growth averages above 10% a year. 

At the other end of the scale, the bottom 20 list is all about the Port Stephens and Lake Macquarie municipalities. All of them have growth rates below 6% per year, and the worst of them are around 3.5% – close to the worst in the nation. 

I drove through these places and flew over them. I saw a series of lovely, almost idyllic, locations overlooking yachts parked in peaceful bays. 

They’re the sorts of places people like to retire to, and that’s part of the problem. It’s people finding jobs that drives real estate, rather than people quitting them to put their feet up. 

Economies driven by tourism and retirement seldom produce capital growth to excite investors. 

In the Newcastle/Hunter region, as elsewhere, you need to turn your back on the water and drive inland to find the growth. 

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.