The month in review: Regional QLD
By Herron Todd White
Despite the region having passed the peak of the market, Toowoomba’s fringe suburbs gained momentum throughout 2015. These fringe suburbs are dominated by the owner-occupier sector with less investor activity than in Toowoomba.
For instance, localities such as Highfields and Kleinton to the north and Westbrook, Wyreema and Cambooya to the south-west have all shown considerable capital growth over the past decade, with all areas recording a steady increase in median house price.
The median house price for Highfields and Kleinton is $520,000 and $541,000 respectively, which sits considerably above Toowoomba’s affordable median of approximately $369,000 as at the second half of 2015. So, why are these outer suburbs proving so popular? Simply, it is because purchasers are getting more for their money. Although the median price is almost 30% above Toowoomba’s more central suburbs, Highfields and Kleinton provide a high quality, modern or large home option within a mere 14 to 20 kilometre commute to the Toowoomba CBD.
To the south of the CBD, from 12 to 22 kilometres, Westbrook, Wyreema and Cambooya offer a slightly more affordable fringe dwelling option. The median price in Westbrook is still above Toowoomba’s at $460,000, however Wyreema and Cambooya are below at $310,000 and $320,000. Similar to the northern satellite suburbs, these localities provide predominantly modern dwellings, however on a more moderate scale and with a more basic fit out.
Overall, Toowoomba’s fringe suburbs have shown that they typically trade off a central location for a superior quality and size dwelling. In terms of investment, all satellite localities have mirrored Toowoomba’s in that median values and volumes peaked in the second half of 2014 to the second half of 2015 and have begun to show signs of flattening. There are large land development projects to come on line in areas such as Highfields and Cotswold Hills which may stymie some of the recent growth rates as supply increases.
The fringe suburban areas at the southern extremity of the Gold Coast and Tweed are the inland locations of Bilambil Heights, Chinderah, Cudgen, Tumbulgum and beach side towns of Pottsville, Cabarita and Bogangar.
Within Bilambil Heights , the average range in selling prices for units in the past six months is between $325,000 and $400,000. Weekly rents range between $300 and $425. Gross yields generally range between 5% and 6%. The average range in selling prices for houses sits between $400,000 and $550,000 with gross yields generally ranging between 4.5% and 5.5%.
At Chinderah,Cudgen and Tumbulgum, the average range in selling prices for units in the past six months is between $200,000 and $300,000. Weekly rents range between $225 and $350. The range in selling prices for houses is between $325,000 and $550,000 with rents between $350 and $550 per week, with an example of gross yields of circa 4.75% to 6%.
The beach side townships of Pottsville, Cabarita and Bogangar have unit sales within the past six to eight month from as low as $250,000 up to $450,000 generating gross yields of up to 5.5%. The houses appear a better investment as they have no body corporate fees. Sales between $450,000 and $625,000 generate rents between $475 and $600 per week reflecting gross yields of up to 5.5 %.
Sales activity and prices have improved within the beachside, sought after Tweed Coast locations, making it more difficult for buyers as stock levels have tightened. Accordingly, some buyers are opting to purchase better properties in fringe localities which provide more property for their money.
History has however generally shown that it is wiser to invest in property in localities closer to the coastline and urban amenities. Although, based on affordability restraints, some buyers can only afford to purchase in fringe areas which have lesser capital growth in comparison to ‘in demand’ localities.
The first half of 2015 was running pretty hot. There was a strong increase in sale volumes with entry level properties being the most popular. Investors comprised a higher percentage of our market with some buyers being priced out of some coastal areas. The sub $500,000 housing market close to coastal centres has shown the largest sign of the market improving. To find value and affordability for either investors or owner-occupiers, you are reviewing property type or looking further afield.
The population base generally runs along the coast from Noosa Heads south to Caloundra. While there are some small infill fringe areas near the coast, our real fringe areas tend to be the hinterland and railway townships form Cooroy in the north through to Beerwah to the south incorporating the main centre of Nambour and a number of small towns. Within these areas entry level dwellings are around the high $200,000 to low $300,000 with these properties generally renting from between $300 to $350 per week which is not a bad return.
Within these areas there are a number of small infill subdivisions that have been performing well on the back of relatively low land prices. One big benefit is that the sizes appear to be more traditional at 600 to 800 square metre allotments with some larger rural residential allotments. Comparing this to the mainly small lot product in the coastal areas is leading buyers to look at these areas as a good alternative for families. Another factor leading to people looking at these areas to live and invest is the sense of community being generated. The schools have that country feel, there are a number of sporting clubs and the towns provide a small main street.
All in all we believe that these hinterland and railway townships have and will continue to tick over pretty well. There is very much a big affordability factor that goes into these areas and that you get some bang for your buck. We have also started to see some lifestyle factors come into play and the fact that people are looking to these areas to raise families.
The layout and composition of property in Hervey Bay limits the degree of fringe property. Within the same suburb, property ranges from conventional onground brick or lowset cottages to executive homes with extensive improvements or esplanade frontage. The Hervey Bay market is well known for its affordability aspect. The past two years has seen rental rates steadily increase which has resulted in relatively good returns for investors. The developing estates offering 4-bedroom, 2-bathroom accommodation are achieving rental rates in the range of $360 to $380 per week with house and land package prices ranging from $345,000 to $370,000. Falling unit prices and increasing rental rates have also seen investors return to the unit market with some traditional holiday complexes converting to permanent to capitalise on the more consistent cash flow.
The older established areas of Hervey Bay also provide good affordability with early 1990 onground brick, 3-bedroom, 1-bathroom homes with single garages in the mid $200,000s.
This style of property achieves rental rates in the range of $280 to $320 per week. Although the continuous supply of house and land packages is creating a price ceiling for the new product market, there is potential to see some capital growth in these older established homes given the clear price gap currently being seen.
Maryborough is also a very affordable market. Prices have been falling over the past year with consistent activity in the mid to high $100,000s for typical post war timber homes of either 2- or 3-bedroom accommodation. Rental rates appear to be increasing with the base rental rate in the order of $260 per week. At a price of $180,000, this would provide a gross return of 7.5%.
The Bundaberg residential market is in a stable period, with quarterly sales volumes remaining relatively consistent since mid-2013. The median sale price has similarly remained consistent at $269,000, with no change over the past year. House listings increased over the past year, indicating that vendor confidence in the market is growing. Bundaberg’s unit and townhouse market remains static with sales activity easing over last year’s September quarter.
Fringe locations, often known as the tree change locations, have experienced even further softening in the market with extended selling periods required to achieve realistic sales. Affordability and larger allotment sizes are the drivers towards these outer areas. These markets historically won’t change in the medium to long term until the coastal markets show a more positive outcome.
The whole of the Emerald market appears to be starting to level out for the time being. The Mayfair and Riverview estates have seen the largest drop in values as the investor ratio is much higher and pride in the street is less, causing the estates to be less attractive. Many homes were built the same and the street appeal is inferior. Because of this they do offer some good value for money if one is prepared to call it their home. Flood affected properties are also selling at a discount and are hard to move.
Calliope is considered a fringe residential suburb in the current market, being located on the Bruce Highway, approximately 20 minutes from Gladstone. During the boom, Calliope expanded rapidly to help ease the accommodation demands on Gladstone. Unfortunately, as with Gladstone, development continued well past the peak of the market and supply in Calliope now heavily outweighs demand. Vacancy rates are high and this has forced rental and capital values down. Most of the oversupply is of modern housing in new estates and there are also significant vacant land stocks available. New infrastructure is planned for the location with the local shopping centre undergoing an expansion to double the size of the IGA and provide more specialty stores. A new tavern is also planned. While this infrastructure will be good for the township, it is unlikely to curb the downward trend of values in the area.
Fringe suburbs within the Rockhampton region would include Gracemere to the south, Parkhurst to the north and Lakes Creek to the east. These areas are typically much more affordable largely due to the cheaper parcels of land on offer. For example a spacious brand new 4-bedroom, 2-bathroom brick home in Gracemere can be anywhere from $100,000 to $150,000 cheaper then Norman Gardens yet can potentially provide the same level of accommodation and comfort, with location and distance to the CBD being the key factor in value. Rental values are also significantly cheaper in these fringe locations, in some cases up to 40% cheaper for similar quality homes. Future prospects see the north and eastern sides of Rockhampton as potential areas for investment however Gracemere appears to have an oversupply issue which makes current prices appear good buying, however it must be said that a recovery in this particular market appears to be some time in the making.
There are quite a number of fringe suburbs and rural townships scattered in most directions from Mackay. These fringe areas all received good solid market gains through the period 2010 to 2013 on the back of a very strong Mackay residential market. The main attraction was affordability, with a lot more bang for your buck in these areas. Towns such as Sarina and its surrounding beach towns to the south and Marian and Mirani in the Pioneer Valley were good performers as the market moved out of Mackay.
However since 2014, the Mackay market has fallen significantly on the back of a weakened resource sector and the heavy reliance the Mackay residential market has on the mining industry. The market in Mackay generally has fallen between 20% and 30% with weakening demand for both sale and rental properties and rising vacancy rates. While this downturn has seen values fall, it has presented some great buying opportunities in terms of value levels not seen in Mackay for over ten years.
This fall in property values in Mackay has had a huge influence on sale numbers and values in the fringe areas. The big wave that rode out of Mackay in the boom times has definitely receded. The relative affordability now experienced in Mackay has meant these fringe areas had to reposition price points to compete. Towns such as Marian and Sarina have seen significant price falls sometimes greater in percentage terms than seen in Mackay City.
Whitsundays has a few fringe suburbs and rural townships scattered mostly to the south and west of Whitsundays. The properties in these areas are small residential lifestyle and these continue to show a stable market.
However to the south, the areas of Midge Point and Bloomsbury are showing a downturn in the market and seem to be more affected by the Mackay market as when times were good, people where looking for their beach hut or fishing weekender and most buyers were from Mackay. Now that the market in Mackay has had a large downturn and with the continuation of job losses there, fewer buyers are heading into this area.
Laguna Quays was once a thriving golf course resort with unit and townhouse style accommodation. Since the golf course and all the amenities were closed, parts of the complex are now extremely run down with the exception of the units which the body corporate ensures are presented in a good condition. These are currently selling at a fraction of the price they once were, however maybe there is light at the end of the tunnel for this area as there is a new owner so we will wait with interest to see any resulting changes.
Affordability concerns continue within the Townsville market with buyers only purchasing properties they regard as affordable based on their current economic circumstances. Job security, high unemployment and the absence of any local stimulus or broader economic drivers would indicate little change from this position in the short term. The residential market remains stationary at the bottom of the market cycle.
While not limited to these suburbs, the fringe areas of Condon, Burdell, Deeragun and Mount Low offer affordable entry levels for basic semi modern homes.
Condon is in the south-western suburbs within five kilometres of Willows Shopping Centre and is easily accessible to major employment hubs of the Townsville Hospital, James Cook University and Lavarack Army Barracks via the Townsville Ring Road. Condon comprises a mixture of housing styles including semi modern on-ground masonry block and high set timber framed dwellings of fair to average condition. Pockets of this suburb have perceived social issues and a reasonable amount of government housing. Price entry into this suburb is from the low $200,000s.
Burdell, Deeragun and Bushland Beach are located within the expanding northern beaches corridor. Over the past few years there have been major expansions in infrastructure and services along this corridor including fast food, shopping centres, schooling and strip retail centres. Deeragun comprises a mixture of dwelling types from basic to modern on ground homes. This suburb has some perceived social issues and price entry is from the low $200,000s. The areas of Burdell and Mount Low generally comprise more modern homes with price entry from the high $200,000s to low $300,000s.
Overall there remains affordable buying in all sectors of the residential market if you are willing to shop around. The secondary suburbs where there are perceived social issues offer some good buying, with the trade-off between value for money and these perceived issues posing consideration. Outer lying suburbs also offer some good value for money in the bottom of the market position with an oversupply of property available relative to current demand.