Regional QLD April 2018

The month in review: Regional QLD

By Herron Todd White
April 2018

Sunshine Coast

There are a number of measures that matter to the Sunshine Coast residential property market.

Interstate migration and the strength of the southern markets affect our market, particularly the higher end beachside and prestige hinterland properties which appeal to retirees and sea change buyers making the move north. Market sentiment in the Sydney and Melbourne markets is generally a good indicator and interstate migration to the Sunshine Coast increases as these markets reach the top of the property cycle. Prestige beachside areas such as Noosa and Sunshine Beach are influenced by demand from southern buyers as are some prestige hinterland areas including Maleny and Doonan.

Employment levels also influence demand for local property and, generally speaking, when the tourism and construction industries are strong, the local residential market follows. The injection of employment around the Sunshine Coast University Hospital has also been great for the local economy. There is increased demand for the more affordably priced properties up to $700,000. Strong employment also increases the demand for rental properties which is positive news for investors but not so good for tenants.

The Sunshine Coast has always been a popular investment location for both dwelling and units alike, with many holiday let units owned by intra and interstate investors. Like most areas, any significant interest rate rises will likely impact many investors and we may see an increase in the supply of investor stock hit the market, which is what has happened in the past.

This may also be a similar issue for some of the newer affordable estates which have a higher proportion of investment properties as opposed to owner-occupied stock.

The Sunshine Coast is still rolling along well on most fronts. Land prices, as well as established housing, are continuing to increase with demand remaining strong. Currently, stock levels across the coast are low and we are seeing multiple offers becoming more common again. Units are also improving although not to the same extent as traditional housing. With a number of local infrastructure projects still to be delivered, we’re expecting another good year for the residential property market on the Sunshine Coast.

Toowoomba

Toowoomba’s economic drivers are quite varied and diverse in comparison to other localities around Queensland. This is most likely due to its central hub location being within close proximity to the state’s capital and being the major regional centre servicing the agricultural sectors of the Darling Downs to the west and the Lockyer Valley to the east. Traditionally, Toowoomba has not been subject to volatile market movements given the diversity and relatively stable workforce underpinned by large government employers including numerous schools, the University of Southern Queensland, TAFE College, three large hospitals and the Oakey and Cabarlah army bases.

The major industry sectors by employment in Toowoomba include healthcare and social assistance, education and training, with manufacturing and agriculture also being significant employers. Toowoomba has also proven to be a popular location for retirees from the broader south-west Queensland area. At the last census, the proportion of 60 plus year olds in Toowoomba was 23.6% versus 18.8% for Queensland and 19.6% for Australia. This demographic mix supports the health sector which, along with the education sector, is forecast to enjoy continued strong growth in the region.

With a strong health sector, it is no surprise that medical professionals have dominated the prestige market in recent years and this trend is likely to continue. Professional workers tend to occupy areas such as the eastern suburbs while manufacturing workers and retirees tend to be widely spread throughout all suburbs of Toowoomba. The majority of new investment tends to be concentrated in the western suburbs.

Vacancy rates across Toowoomba are approximately 2.6% as at February 2018. The Toowoomba Second Range Crossing project under construction appears to have assisted in maintaining low vacancy rates, with many workers residing in the region. Vacancy rates and the impact on the investment market will be closely monitored when the Second Range Crossing nears completion at the end of 2018.

West of Toowoomba, the coal seam gas sector heavily influenced the main Surat Basin centres including Chinchilla, Miles and Roma. When the industry transitioned from the construction to production phase, many workers exited the region and a subsequent oversupply of accommodation emerged, with a major downward effect on property values and rents. These towns appear to have stabilised and returned to historic levels which are more aligned with their predominantly rural-based economies.

Hervey Bay

Stable employment for the Fraser Coast region is a major factor in maintaining residents moving from other areas of the country. The three main areas of employment in Hervey Bay are tourism, medical (including allied health) and construction. According to the ABS (labour force data) and Department of Employment, the unemployment rate was 10.11% for the September 2017 quarter, with the rate rising slowly over the past six years.

Tourism has improved for the Fraser Coast region over the past three years, with domestic visitors increasing by 1.1% and business travel up by 15.9%. Travel for holidaying and visiting friends or relatives was stable over the same period. The intrastate market increased by 2.5%, underpinned by a rise in Brisbane visitors who made up 76% of the overnight visitation to the Fraser Coast region. Interstate visitors declined by 3.1%. International visitation grew by 10.7% and was predominantly from western countries for holiday purposes (Tourism and Events Queensland, 2017). The busiest time for the Fraser Coast is generally between August and November each year when whales migrate to the calm waters off Fraser Island, whale watching being a very popular tourist event.

Construction continues to increase for the area, with the majority of builders reporting very steady to busy schedules. We have seen an increase in higher priced building contracts for locals that can range up to $650,000. There are still additional stages of estates being developed, as well as the smaller infill developments. Land prices for these estates are typically stable and range between $150,000 and $220,000, however some higher prices for land in established older areas have been achieving above $200,000 for sites below 1,300 square metres. Building approvals have been steadily rising since 2013 and have been similar throughout 2015 to 2017 at just over 22,000 per year according to the ABS (8731.0). Rental vacancy rates remain very low and typically range between 1% and 2%.

The increase in medically related employment for the area is a very welcome addition to the local economy, bringing stable, higher incomes to the area. The new emergency department for the public hospital is currently under construction with more medical staff required on completion.

Emerald

Emerald is now predominantly a major regional centre servicing the coal mining sector. Having originally been an agricultural community, it has seen significant growth due to the Bowen Basin coal mining fields. Currently the resource sector is picking up and in turn has created more jobs which has tightened the rental market, pushing rents up and values are now starting to firm. We also have some solar farm projects underway and the Fairbairn Dam Spillway is under repair. While coal prices enjoy a better period, so will our residential market.

Whitsundays

The Whitsundays market’s primary driver is tourism. The secondary driver is farming (sugar cane and beef in Proserpine, crops and beef in Bowen).

The Whitsundays was affected by Tropical Cyclone Debbie which hit the area on 28 March 2017. A year on and there is still significant repair work to be completed including to Daydream Island, Hayman Island and Hamilton Island along with the smaller resorts on the other Whitsunday islands. The surge of tradesmen coming to the area combined with the number of locals made homeless due to Tropical Cyclone Debbie have put pressure on and have made a noticeable increase in rents in the current market. It is unknown how long this demand will be in play. It is expected that the insurance work will continue for the next six to twelve months.

Regional QLD rent

The Whitsundays is showing early signs of improvement in the current market. With fingers crossed that there are no more cyclones and with islands opening up again, we look forward to the next 12 months.

Mackay

When thinking about the numbers that matter, we thought we would look at the roller coaster that has been the Mackay residential market over the past five or six years and compare some interesting statistics and measures. A simple snapshot of these measures is contained in the below graph.

Regional QLD rent 2

The Mackay residential market is heavily influenced by the mining activities associated with the Bowen Basin. One of the main measures relating to mining is the price of metallurgical or coking coal. During the peak period in 2012, coking coal prices sat at around the $250 per tonne mark. The price then fell significantly to around $90 per tonne during the mining downturn in 2015.

On the back of falling coal prices and the major downturn in the mining sector, we saw the flow on effect to other measures in the economy. For instance, the unemployment rate in Mackay was at 3.2% during 2012, before rising significantly to 8.4% at the height of the mining downturn in 2015.

What did this mean then for the Mackay residential market? Well, vacancy rates in Mackay were around the 1% at the peak of the market in 2011/2012. Vacancy rates then blew out significantly to 9.8% during the mining downturn in 2015. This weakening demand led to the median rent for a 3-bedroom dwelling to fall significantly from around the $480 per week mark in 2012 to $290 per week in 2015.

It wasn’t only the rental market that experienced the full force of the mining downturn. The median sale price of dwellings also fell significantly from $426,000 in 2012 to $345,000 in 2015 with sales volumes virtually halving during this period.

So how does the current Mackay economy and residential market stack up against these historical figures? The good news is that on almost every measure, the Mackay market has improved, with a stronger mining sector, increased employment opportunities and significant infrastructure projects.

The price of coking coal has increased significantly (albeit is volatile) since the downturn (around $90 per tonne) to around the $190 per tonne mark at the end of 2017. Due to a stronger resource sector and expanded infrastructure projects, the unemployment rate for Mackay has also fallen (from 8.4%) to currently stand at 4.4%.

On the back of a stronger economy and increased employment, vacancy rates for residential dwellings have fallen significantly over the past few years (from a high of 9.8%) to currently be at around 3%. This increased demand has led to the median rental of a 3-bedroom dwelling increasing to $300 per week with further upward pressures on rental values. With regard to sales, the median house price has remained stable over the past 12 months and currently sits at $325,000, albeit with increased demand, shorter time on the market and renewed buyer confidence. While this has not led to increased prices yet, it is anticipated that some growth in values will occur over the medium term.

Gladstone

The one measure that historically has most affected the Gladstone market is employment.

It is widely known that Gladstone has always been a big boom and bust town and the market has always been driven by major industrial projects in the area, resulting in demand or lack thereof for accommodation for workers. While there have been a few possibilities of new projects thrown into the ring over the past several months, nothing is set in stone. The market, however, has seen a changing of the guard over this time, with increased confidence surrounding the local economy and jobs. The market should continue to improve on the back of increasing business confidence and more job opportunities.

Vacancy rates are another measure that has typically driven the market in Gladstone. The vacancy rate in the Gladstone region currently sits at 4.3%. The rate has hovered around the 4% to 5% mark over the past six months and while not yet a balanced market, the market has acknowledged its tightening trend and rental levels have started to rise. Most agents have reported around $10 to $20 increases on existing housing as they come up for renewal.

Rockhampton

Rockhampton and region property markets are typically influenced by a number of factors including employment, mining and cattle industry trends and interest rates.

Currently, historically low-interest rates do not seem to be having any major effect on the local property market. It is considered that interest rates would have to skyrocket to be an influencing factor in the region.

Job security has been the main driving factor behind our residential market. Notably, jobs within the mining sector and associated industry have had the most significant influence in recent years, more so than that of education, health and agriculture, which are the region’s other major contributors to the employment sector.

There are a number of infrastructure projects in the pipeline for the region, most notably Rockwood Weir and upgrades to the Base Hospital car park. Rockhampton Regional Council has also heavily invested in upgrading the riverfront which is now complete and there are further plans to integrate this area with the CBD. Another largescale infrastructure project on the horizon is the Rockhampton Ring Road, however, this remains in the early planning stage at this time. Each infrastructure project will have an influence on the housing market as a direct result of the employment opportunities each project is capable of creating.

Being a regional area, migration (international and interstate) is not a massive influence on the housing market. Having said this though, the meatworks has become an employer with a large multicultural workforce in recent years. A significant number of these employees are renting locally which improves the rental market.

As we move through the first half of 2018, more positive indications have crept into the local mining industry which has helped to stabilise the residential market in Rockhampton and surrounding regions.

October 2017 saw the announcement of 1,100 FIFO workers to be located in the Rockhampton region for the two year construction period of the Adani Carmichael coal mine commencing in early 2018. After construction is completed, the number of FIFO workers located in the Rockhampton region will reduce to approximately 625. Since this announcement, there has been mounting speculation regarding Government support and financial backing of the project which is likely to delay any progress in the short term.

In addition to this, Rockhampton vacancy rates have dropped to approximately 4.6%. This tightening trend will lend itself to an improvement in the investor market. RTA quarterly statistics show slight increases in new rents between the September 2017 and December 2017 quarters. Should this momentum continue, Rockhampton investors may start to see some minor capital gains and improved returns. The owner-occupier and first home buyer market sectors continue to remain relatively stable.

One final influence of note on the local market is the performance of the capital city markets. Once investors looking to the major centres for strong capital growth start to see signs of slowing in these areas, they have historically looked to regional centres such as ours. These investors often then notice solid returns and good potential for capital growth in the long term along with affordability (some investors choose to purchase multiple properties for the same or a lesser outlay than one property in a heated southern market). With the current rental vacancy trend, this is starting to put Rockhampton in an attractive position for this type of investor once again.

So, how will these measures influence the market in the Rockhampton region? The outlook for the short term is considered to be a continuation of the current stable market and if current trends continue, we may even see some slight growth which would be welcomed across all market sectors.

Townsville

Jobs, jobs, jobs are the measure that matters in Townsville’s residential property market at present. This measure affects population growth, unemployment rates and ultimately the property market.

The trend in the number of jobs being advertised on employment websites for the Townsville region has continued to flourish over recent months and has been maintaining record trend levels. The number of jobs advertised in December 2017 increased by a very healthy 30% compared to December 2016 and this bodes well for a continuation of net employment creation during the coming twelve months.

Regional QLD employment

The number of persons employed in the region reached 107,500 in December 2017 and indicates a net employment recovery of 10,000 persons since December 2016. Most of the growth so far has come from increases in part-time employment.

The unemployment rate in the Townsville region has nudged higher in recent months as the perverse result of even more job seekers (not previously regarded as unemployed) now starting to look for work due to the improved economic conditions. Despite this, the region’s trended unemployment rate has still seen a significant reduction from the thumping 12.6% in June 2016, down to the latest reading of 9.2% in December 2017.

These encouraging statistics are helping to build positive sentiment in the local property market. Vacancy rates during the course of 2017 reduced significantly and the pipeline for future works and therefore jobs growth is positive. Whilst these factors are having a positive influence on the property market, it remains fragile and real jobs need to continue to be created to help strengthen the market.

Share

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.