By Herron Todd White
Sunshine Coast Property Update
In the early stages of 2020, we experienced the escalation of COVID-19, which in turn led to restrictions on social interaction and ultimately nationwide lockdowns and the closure of the state’s borders. As a result, there was a high level of uncertainty about the economy and the property market as a whole for a short period. However, Queensland has been on the forefront of containing the spread of the virus, actively keeping the borders closed to the remainder of the country until 10 July.
As restrictions ease, recorded cases continue to decline and government stimulus packages (JobKeeper and Homebuilder) continue to roll out, it appears there has been a considerable resurgence of confidence in the market. Agents have reported a high level of interest throughout most areas but in particular beachside suburbs which have historically been sought after. Extremely low stock levels coupled with all-time low interest rates and considerable economic stimulus packages have in most cases seen property values remain stable on the tail end of the pandemic and in some instances value rises have occurred. Moving forward there are some concerns as to how the property market may react once the government stimulus packages are wound back towards the end of the year.
Investors in the Sunshine Coast property market are still active with market sentiment having improved which has in turn instilled confidence in the marketplace. The main driver of this sentiment is the Sunshine Coast lifestyle and the major infrastructure projects across the Coast. With interest rates at an all-time low, investors are looking to property as a way or increasing their returns. Across the Coast, gross yields normally tend to range between four and 15 per cent which reflects the relative risk on investment.
Properties situated within areas underpinned by re-development potential or situated in highly sought-after localities tend to be at the lower end of the yield range. A yield at the higher end of the yield range is typically achieved by units within the main tourist precincts however with high body corporate and management fees, much of these yields can be eroded.
Standard dwellings on the coast typically show a return of four to five per cent which is primarily driven by first time investors. We have seen an increase in interstate investors throughout the Sunshine Coast who have been purchasing and constructing dual occupancy style properties which generally provide a higher yield of up to 6.5 per cent. Slightly higher yields can also be achieved through the hinterland townships with properties comprising three to five flats achieving yields in the seven to eight per cent range. Typically these properties are older with ongoing maintenance and additional management fees required.
In the prestige market we have continued to see a number of investors, however it is difficult to gauge given that there are a number of different drivers in the investment decision. This market is closely related to the southern markets of Sydney, Melbourne and Brisbane. Investors within the segment have typically looked at investing in the Noosa region with a view that their investment may become the future retirement home and principal place of residence.
All in all, the investment market on the Sunshine Coast has been pretty healthy. The good thing is that there are a number of infrastructures projects underway and still in the pipeline that will help with maintaining market sentiment in the area.
Rockhampton Property Update
Monthly COVID-19 update: Over the past month, there has been no noteworthy change to the recent trend we have been experiencing in the local market. We continue to see residential property in the Rockhampton region (including the Capricorn Coast) selling. Well-presented properties continue to be snapped up by purchasers and Rockhampton and the Capricorn Coast are continuing to see an upward shift in prices. Regionally, we have been fortunate to continue with no new COVID-19 cases. If the state as a whole can continue in the coming months without the need to reintroduce any COVID-19 restrictions, there is no reason to expect any changes to our local markets.
Historically, the Rockhampton market has always been heavily influenced by investors, however over recent years, we have seen new investors stop entering our region. This coincided with the downward trend experienced across the mining industry in 2012. Since this time, investor activity has been limited, however 2020 is starting to see some improvement in the investor market.
Drivers for this recent change are considered to be a direct result of a combination of factors, including record low interest rates, affordability, a tightening trend in vacancy rates, increasing weekly rents, opportunity for capital growth and a number of significant infrastructure projects underway where a shortage in the order of 3000 workers has been predicted in the next few years.
Recently the investor activity has been mostly local, however we anticipate nonlocal investor activity will start to improve with some local agents reporting interstate investors already starting to enquire, based purely on rental returns. Duplexes or sets of flats are likely to provide the best returns from an investor’s perspective.
Gross yield on sets of flats range broadly between six and nine per cent in the region, with the majority of flats returning around seven to eight per cent gross. Houses in the region also provide a sound return and scope for capital gain over the long term.
Standard duplexes typically require an initial investment in the mid to high $200,000s and entry level into the residential market in Rockhampton for instance for a two-bedroom home in Rockhampton City, out of flood is around $150,000 with average rents around $220 per week.
There are many positive indicators for the residential investor market in 2020.
Speak with a Rockhampton Mortgage Broker today.
Gladstone Property Update
A short and sweet COVID-19 update this month! Sales activity continues to increase, values are slowly rising and there have been no new COVID-19 cases in the region. All in all, another positive outlook for the month.
Gladstone has always been a hotspot for investor activity. During the mining boom, Gladstone was spruiked from here to kingdom come by project marketers and the like, promising huge returns and capital growth. While those returns were seen for a number of years, the market soon came crashing down as it was always going to. We draw attention to history, where the commencement of large projects within the region have resulted in surges in demand during construction followed by periods of lower demand, resulting in volatility in the residential market. As the market began to fall in 2012, investors started retreating from the market and this eventually turned into a full-scale exodus.
However, after the market bottomed in 2017, we slowly started seeing investors re-enter the market. Activity was still limited as the 4680 postcode had significant lending restrictions in place based on past turmoil. Fast forward to 2020 and investors are definitely back in Gladstone. It’s not quite the hotspot it once was, but various factors are definitely contributing to the improvement in the sector. Drivers include record low interest rates, affordability, rising rents, tightening vacancy rates (1.4 per cent in July, the lowest since March 2012) and slow and steady capital growth.
Investor activity has come from a good mix of local and non-local purchasers. One small lot estate in Gladstone has a number of new homes being built at the moment, all by interstate investors.
Duplexes or sets of flats are likely to provide the best returns from an investor’s perspective. Gross yields on sets of flats range broadly between six and 12 per cent in the region, with the majority of flats returning around seven to nine per cent gross. Standard duplexes typically require an initial investment of between $150,000 and $300,000. Larger sets of flats of up to a group of four to six flats are also definitely obtainable with a budget somewhere between $300,000 and $550,000.
Bundaberg Property Update
Monthly COVID-19 update: Over the past month, there has been no noteworthy change to the local market. Residential property in the Bundaberg region, including the coastal strip, is continuing to sell despite the doom and gloom forecast at the beginning of the pandemic.
Demand has been steady across all areas of the region with no apparent decline in interest. Investors appear to be mostly locals due to the relatively affordability of the area. Demand for new housing appears to be on an upward trend due in part to the unprecedented grants on offer to new homeowners. REIQ data indicates that rental vacancy rates have remained within a tight range for an extended period. Investors can expect to achieve minimum rental yields of five per cent per annum gross and above which looks set to continue in the short to medium term.
Emerald Property Update
Investors are very active in Moranbah, Emerald and Blackwater during each coal boom, however currently the activity is limited. We are seeing the highest rents in the past six years, but it appears investors are only interested in multiunit properties which are returning on average ten per cent gross yield. Some houses in Moranbah are nearing eight per cent gross yield as rents have spiked considerably over the past six months. In most areas, vacancy rates are below two per cent however we keep one eye on coal prices which are low. We wait to see if coal prices will start to affect employment in the region and whether we will come out the other side of COVID-19 and see a strong demand for coal again.
Speak with an Emerald Mortgage Broker today.
Mackay Property Update
Monthly COVID update – Mackay has continued to fare well economically through the current COVID-19 crisis. The major industries of mining, mining services, infrastructure projects and agriculture have been virtually unaffected. Employment opportunities in the Bowen Basin and mining services has continued to be strong and with the sugar crush about to commence, increased employment in the agricultural sector should begin. With restrictions continuing to ease, more and more businesses affected have been opening up.
The effect of COVID-19 on the residential market has been fairly limited. The market has continued to be strong with local agents reporting increased buyer demand, shorter listing times and general optimism returning. Many local long-term agents have stated they have achieved record sales results over the past month or two, with no signs of the market slowing down.
The rental market in Mackay has been very strong for around the past 12 months, with vacancy rates sitting below two per cent. Growth in employment in the resource sector, large infrastructure projects and the sugar crush, plus the restrictions on travel have been some of the factors leading to this tightening. Rental values have also increased substantially over the past 18 months. All in all, conditions are ideal for investors to re-enter the property market in Mackay.
Gross yields for standard residential dwellings currently sit around 5.5 per cent to six per cent, while we have seen sales of modern two x threebedroom, two-bathroom duplexes sell for around the $530,000 mark, analysing to a gross yield of 6.9 per cent. Larger, older style flat complexes are showing analysed gross yields of between seven and nine per cent.
With historic low interest rates (which appear set to stay for the medium term) and continued employment opportunities, it is considered to only be a matter of time before investors start returning to the Mackay market.
Speak with a Mackay Mortgage Broker today.
Hervey Bay Prpoerty Update
Since the lifting of Stage 3 restrictions for COVID-19, the Fraser Coast has experienced a return to some normalcy.
Tourists from mostly within Queensland have visited for the school holidays and provided a valuable cash injection to the local economy. Despite Victoria and New South Wales recording a second wave of infections, regional Queensland appears to be unaffected at this stage. Property values in the area are stable with no noted decline in any property class. There has been a considerable increase in the volume of land purchased as a result of the Homebuilder package which will no doubt sustain the building industry for at least twelve to eighteen months into the future. Developers are now swiftly working on infrastructure for the next stages of developments to provide more land stock before the end of year deadline. An extension to this deadline would be welcome news with many builders having been overwhelmed by the Homebuilder incentive.
Local agents have been reporting steady demand for investor stock which does not appear to have changed since the start of the COVID-19 pandemic. Investors are somewhat constrained at present with low levels of residential stock listed for sale with some hesitant residents choosing to sit tight and stay put rather than list their homes for sale. Some lower priced property in the sub-$300,000 price range is achieving slightly above market prices due to the shortage. Local investors appear to be more prevalent of late, particularly for standard house and land packages. Hervey Bay has very low volumes of available rental stock, particularly for detached houses, which is increasing rents in response to demand. Investors can expect to achieve minimum rental yields of five per cent per annum gross and above which looks set to continue in the short to medium term.
Speak with a Hervey Bay Mortgage Broker today.
Townsville Property Update
The resilience of the Townsville residential market post COVID-19 continues to astound us with increasing sentiment and a noticeable increase in vacant land sales and new home construction following the $25,000 Homebuilder grant.
The investor market for house flippers continues to see good activity, particularly in established suburbs such as Railway Estate, Currajong and Gulliver. The entry level price for this type of investment is in the low $200,000s range.
Agents are reporting that there has been an increase in enquiry from traditional investors from the southern states and anecdotally we are seeing buyer agents acting on behalf of buyers also becoming more active in the market.
The rental market over the past few months has again begun to tighten having been largely unaffected by COVID-19. The number of residential properties advertised for rent on realesate.com.au within the greater Townsville region has reduced considerably from around 850 mid-April 2020 to around 450 in mid-July 2020. During the June 2020 quarter, the trend median house rent stood at $360 per week and the trend median unit rent at $290 per week.
Overall there are many suburbs throughout Townsville with solid yield investing options available, particularly if not seeking short to medium term capital growth. As yields vary based on demand and supply in the rental market, it is important when buying an investment property to consider property that will appeal to a wide range of potential renters.
Darling Downs/Toowoomba Property Update
Residential housing markets in Toowoomba and the broader Darling Downs region appear to be relatively stable and are operating within normal market tolerances. The demand for vacant land is booming due to the Federal Government new home construction stimulus package.
Estates that had been carrying residual stock over the last two years are now fully sold with Developers reporting unprecedented demand for additional lots. Estates in fringe suburbs such as Kearneys Spring and Cotswold Hills and satellite suburbs including Highfields, Kleinton, Gowrie Junction and Withcott are basically sold-out which has made it very challenging for first home Builders to enter the market.
The effects of Covid-19 were felt in March and early April however buyer inquiry appears to have returned to more normalised levels. Toowoomba is not heavily reliant on the tourism sector to sustain its economy and the previous closure of the Queensland border did not have a significant impact on the broader market in the region. Western Queensland businesses did feel the impacts of the loss of the ‘Grey Nomad’ tourism dollar over the normally busy winter travel period. The Darling Downs region is supported by the agricultural sector which has been performing well due to early summer rains.
Limited supply and a low interest rate environment have underpinned values in the higher price brackets and rural residential sectors. The investor market is less buoyant and trading steadily.
New dwelling construction is expected to ramp up over the next six to twelve months on the back of the Government’s stimulus package. This will place pressure on construction costs as the demand for trades and materials increases and workforces tighten. Of concern will be the cost versus value equation in a market where second hand properties begin to compete with an increasing supply of new dwellings.
New unit construction has been slow over recent years with early signs of a re-emergence of activity in this sector.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.