Why is capital gain so strong?

We have set up this site to provide a direct method of communication between Byron Bay First National Real Estate and members of the public interested in anything at all related to real estate in and around Australia’ most popular rural postcode: 2481.

The Bulletin Magazine did an Australia-wide survey at the height of the boom and realised that between 1993 and 2003 the 2481 postcode had an average capital gain per year of 17%. To our knowledge nowhere else in Australia, outside a few hot spots in some of the capital cities, enjoyed such a sustained high level of capital appreciation.

Why is this so?
As the principal of Byron Bay First National Real Estate, and with over 20 years working in this area, I would suggest the following reasons:

1. The entire 2481 postcode is very small with only about 5,500 dwellings and less than 12,000 permanent residents. It is a small market.

2. An 8 year development moratorium put in place by various councils. This has, in short, constricted the supply side of the market so much that even when other markets have been flat or going backwards, Byron Bay has experienced capital gain because of a lack of supply into our market. A good example of this is the Sunrise Beach area of Byron Bay. It has enjoyed a steady capital gain of at least 10% in each of the last few years because there is no more land and so few houses for sale.

3. There is no land. Successive councils have ‘locked-up’ the rural areas and the fringe areas of the town so that there is negligible land for sale. This means that there is no safety valve in our town for people to build themselves, as opposed to buying an existing property. Any market place without some vacant land has a continual upward pressure on prices.

4. Byron Shire Council’s inability to complete and implement a new planning instrument has contributed to planning uncertainty, but also to capital gain, because no new land or rezoning has been released onto the marketplace. This uncertainty has not only made many aspects of our business extremely difficult but it has also continued to put upward pressure on prices.

5. The obvious but no less relevant fifth reason for such strong capital gain is the simple beauty of this place. There are no high buildings. The area is still virtually untouched and if you fly over the town or view it from a boat on the ocean you realise how pristine and underdeveloped our region is. That is why so many people want to invest or own a home in this area.

6. Finally, as Adele Horin wrote earlier this year, there is only one Byron Bay. We have been copied, parodied, lampooned and criticised but not one can deny that the unique confluence of ideas, people, cultures and temperaments has led to the creation of a small but energetic and passionate community, that when discovered by newcomers makes them want to be a part of the place. People don’t just invest their capital here to make money (but they do) – they invest here because they love the place. That is why capital gain has and will continue to be strong.

Chris Hanley
Principal
Byron Bay First National Real Estate