Newcastle region property prices cool as Sydney investors pull back

The disappearance of economic refugees from Sydney, previously a linchpin of the property markets of Newcastle and surrounds, have helped contribute to price falls of up to 10 per cent, according to experts.

Extending from around 120km to 300km north of Sydney, and including the city of Newcastle and Lake Macquarie at its south end, the Hunter Region has been hit by the housing downturn affecting much of the rest of the nation.

Yet it’s not all bad news: a multibillion-dollar infrastructure boom, demand from downsizers, and housing shortages are tipped to help underpin the residential property market in the longer term.

Tiron Manning of Newcastle Buyer’s Agent said rentvesters had been a key driver of demand, with many Sydneysiders priced out of that market buying in and around Newcastle, with the view to relocating later.

The Federal Government’s negative gearing changes, announced in May, meant doing so often no longer stacked up, given the removal of tax deduction benefits on established properties.

“I refer to them as economic refugees, as they can’t afford to buy a home in Sydney, let alone an investment, so they invest in Newcastle with the view to finding work here or working remotely,” Mr Manning said.

He said prices had fallen by between 5 per cent-10 per cent since the tax changes were announced.

Grant Atherton, Managing Director of Newcastle-based Open Doors Buyers Agent, said investors had largely evaporated, like in most of the rest of the nation, following the tax changes.

Yet demand from downsizers remained robust, and there was still demand from first home buyers at lower price points.

“The downsizer market is still pretty strong,” Mr Atherton told Australian Property Investor Magazine.

“For properties that are single-level, renovated and close to amenities and shops, there are a lot of clients looking.

“Interest rates and cost of living haven’t really affected them, and they’re still keeping demand quite good for those types of properties,” Mr Atherton said.

He said areas such as New Lambton, an established suburb about six kilometres west of Newcastle’s CBD, was particularly attractive among downsizers.

So too were properties in Warners Bay, Eleebana and Valentine, all lakeside suburbs of Lake Macquarie, just south of Newcastle.

“That eastern side of Lake Macquarie is quite popular due to lifestyle features; it’s an hour and a half to Sydney, while Newcastle is a little bit further, being an extra half an hour,” Mr Atherton said.

Like elsewhere, values at very top end of the market had fallen notably.

“The higher end has definitely come off a bit, purely because demand isn’t there for that $3 million to $5 million-plus kind of property,” he said.

There was still demand from first home buyers seeking properties at or below the $1 million market, with Maitland, about 35km north-west of Newcastle, particularly attractive.

“Maitland is very popular with first home buyers due to the price point and good amenities, as well shopping centres and train lines, and end of the freeway,” Mr Atherton said.

There prices had fallen by around 5 per cent, he said.

According to analyst Cotality, the Lower Hunter and Upper Hunter, excluding Newcastle, were among the top 10 regional NSW performers over the past year.

In the Lower Hunter, the median dwelling price grew 9.3 per cent, to $785,985.

Further north, in the Upper Hunter, prices grew 9 per cent, to a significantly more affordable median of $585,556.

Mr Atherton said strong infrastructure pipeline in the region would likely help underpin future growth in the region.

Infrastructure blitz

Shannon Hutton, Marketing Manager of Newcastle-based developer GWH, said multi-billions in capital commitments had recently been announced.

“In a six-week window in mid-2026, more than $17 billion in committed capital was announced across the Hunter Region including, NSW Government rail manufacturing, pumped hydro, Greensteel (Australia’s first steel production in Newcastle since 1999), Lockheed Martin’s defence precinct, and more,” he said.

GWH is currently building two major Newcastle residential developments, totalling around 500 apartments.

The company’s long-time Managing Director, Jonathan Craig, said the market had slowed considerably, but the outlook was positive longer term, and the rental market remained extraordinarily strong.

He said apartments had become more sought after as house prices had soared, and as new house and land packages reached $1 million.

Many of the group’s apartment buyers were locals, as well as people moving to Newcastle from surrounding regional areas.

“We’re getting people from the west, Dubbo and Tamworth, and people Port Macquarie coming south, a lot of that,” Mr Craig told API Magazine.

“But a lot of our purchasers have been locals.”

Many of those were local owner-occupiers, downsizing or rightsizing.

“I see this is a short-term bump in the long-term road,” Mr Craig said.

“Because it won’t stay like this; it can’t and it won’t.

“The market’s going to be very different in two-to-three years, that’s for sure.”