The month in review: Regional QLD
By Herron Todd White
Toowoomba is a 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 relatively stable workforce underpinned by large government employers including numerous schools, the University of Southern Queensland, three large hospitals and the Oakey and Cabarlah Army bases.
The coal seam gas and energy resources boom between 2010 and 2014 in the Surat Basin to the west created significant hype in the Toowoomba region. Toowoomba become a target for interstate investors who found the affordability and position as the gateway to the Surat Basin attractive.
During this period and in conjunction with development of the privately funded Brisbane West Wellcamp Airport, sales activity increased with the strong influence of interstate investors driving up values, particularly in the sub-$500,000 price bracket. To capitalise on this demand, developers saw opportunity to develop units and townhouses which are popular amongst the investor market.
As the market now cools, there is an emerging oversupply of new or modern units, particularly across new estates in Glenvale. The rental vacancy trend has stabilised, although this may be in line with seasonal movements. Sitting at 3.5%, the vacancy rate had crept up to as high as 4% during late 2015 and early 2016. This follows many years of consistently low vacancies around the 1.4% to 1.8%.
Dwelling sales activity has slowed in 2016 and this follows slowing activity since the recent peak in 2013. The number of properties listed for sale in Toowoomba is rising and with slowing sales activity, there may need to be some adjustment in asking prices to attract buyers in this market.
The key drivers of the Toowoomba market moving forward will continue to be local owner-occupiers and local investors. The development of the Toowoomba second Range Crossing Road and new industries such as a large milk powder processing facility supplying directly to China may provide some short to medium term growth opportunities for the region.
The main drivers in the local economy are pretty simple, the tourism and construction sectors, and for a number of years both these sectors have been performing pretty well.
With tourism we have experienced an increase in occupancy rates on the back of the lower Australian dollar. This has made it more attractive and affordable for local holidaymakers as well as overseas visitors.
For construction, investment into the area has also had an impact. The strong southern markets of Sydney and Melbourne combined with Brisbane have had an effect on the Sunshine Coast market.
The construction of new housing has improved significantly with many of the residential estates selling out, in some cases stages in advance.
The Sunshine Coast University Hospital continues to be a big driver of both optimism and confidence locally. It was due for completion in late 2016 but has been delayed to 2017. This will provide a level of professional employment that hasn’t previously been seen on the coast. Also the government being a major employer can’t be a bad thing.
There are other projects on the agenda such as the new Maroochy Town Centre, duplication of the Sunshine Coast Airport and Aura from Stockland (formerly Caloundra South) but these projects will be market led with a high level of private investment.
Jobs and more importantly, creation of jobs, will be critical for the coast going forward. Also the limited investment in infrastructure by both state and federal governments will have an impact. The main growing pains being experienced at present are the congestion experienced on the Bruce Highway to Brisbane and in and around Kawana servicing the Sunshine Coast University Hospital.
The highest growth in sale volumes and values has continued in the sub $500,000 housing market which has transitioned into the higher value markets in some areas ($600,000 to $700,000). We believe this will continue with owner-occupiers being able to upgrade into more valuable properties. This upgrader market has also been buoyed by the general uplift in these local economic drivers. There continues to be concern about limited stock in this sector and affordability which will have an adverse impact on the volumes.
The main industry driving the Hervey Bay market is tourism. Tourism directly employs approximately 2,800 Fraser Coast residents and injected around $322 million into the economy in the year ended March 2016. This is however a decrease of approximately 15.5% for the year. The Fraser Coast region recorded a 21.1% increase (to 619,000) in domestic visitation in the year, driven by more visiting friends and relatives and business related travel (Source: Tourism and Events Queensland).
The winter months see the Humpback whales enter Hervey Bay and with them comes an influx of interstate travellers escaping the freeze. The Australian dollar can impact our tourism market not just domestically but internationally. A lower dollar generally results in more international visitors and domestic travellers holidaying locally. Our residential market generally experiences good enquiry during these winter months as the visitors compare our affordable prices and returns to the higher prices they experience back in the southern states.
Although tourism is our main industry, allied health and medical services is on the increase. This is a result of the generally ageing population and the completion of the 96 bed St Stephens Private Hospital in 2015 opposite the Hervey Bay hospital.
The residential market in general is steady with little capital growth being experienced at present. House and land packages are possibly the most active market with numerous estates currently offering packages, some including State and Local Government grants. These generally range from $340,000 to $460,000 depending on the location.
We have exciting new developments and industry being attracted to the region including the Bundaberg Port. The $70 million Knauf plasterboard factory’s foundations have been laid and construction is steadily progressing. This factory is reportedly bringing over 600 jobs to the region. The new $90 million wastewater treatment plant at Rubyanna has started along with the gas pipeline. These three projects should stimulate growth.
The residential market for both houses and units has remained steady and consistent over the past half year with overall confidence being subdued. As these previously mentioned developments move forward, confidence in the market should lift through to the end of 2016 and beyond.
The Gladstone residential market is well known for its big boom and bust cycles, often bucking the trend of the rest of the state. Gladstone’s booms have always been caused by major projects being announced and the city is synonymous with major industrial growth. The most recent boom commenced when the three major LNG plants were approved to be developed on Curtis Island off the coast of Gladstone. These projects are nearing completion at present and have employed over 20,000 workers during the construction phase. The market peaked in late 2011 and early 2012 and significant declines in value and demand have been seen since.
In order to reignite the local property market another major project would need to start construction. A number of smaller projects have been spoken about however nothing of substance seems to be on the horizon. Over the course of 2016 major employers in the region (Rio Tinto, QAL, NRG) have enacted cost cutting measures through their businesses and cut hundreds of jobs. More recently Aurizon has announced that job cuts will take place in the Gladstone depot. Adding to this, there are still approximately 2,000 local employees working for Bechtel on Curtis Island finalising construction on the LNG plants, most of whom will be without work within 12 months. New job opportunities in Gladstone are very weak and without a major project on the horizon, the Gladstone economy is likely to remain subdued.
These job losses have had and will continue to have a direct effect on the already oversupplied property market in the Gladstone region. All market sectors continue to show declines in value. The market has now been falling for a longer period than it was increasing and the end is not really in sight. A crystal ball would be a really handy object to have at the moment.
The residential property market in the Central Highlands incorporating the major towns of Blackwater, Emerald, Capella, Clermont, Dysart and Moranbah is driven by employment demand in the local resource sector. Since 2012 the resource sector has gone though significant changes as coal prices continued to decline over the past four years. Interestingly enough, the coal price has increased slightly in the past two months. With no significant resource sector announcements on the horizon values appear to have reached the bottom in most areas and are leveling for the time being. If employment demand in the resource sector picks up again history shows property values follow closely behind.
As with most areas within central Queensland, the Rockhampton region’s property market has felt the effects of the mining downturn and to an extent the nearing completion of the Gladstone LNG projects. While other areas such as Mackay, Gladstone and Emerald have seen large decreases in values, the Rockhampton area has not had the same reduction in values to date, although some suburbs and areas have been affected more than others.
The Rockhampton area however is more diverse than other harder hit areas. Rockhampton is well serviced by health and education sectors and has numerous government departments located in the area. The area is a hub for the local cattle industry with two meatworks operating in Rockhampton. These factors have helped to limit the impact felt in other areas. Throw in large retail hubs, property associated services and some tourism and the region is in a position to grow in the future.
Along with the mining downturn there has been a reduction in investors buying in the Rockhampton area. Investors were driving construction of new housing in the local area which has now dropped off. There appears to be minimal first home buyers in the current market, hopefully the increase in government Incentives will see more first home buyers come into the market.
Residential sales volumes have continued to reduce over the last few years coinciding with the mining downturn. Along with reduced sales volumes the median house price is also reducing in the Rockhampton region. Gracemere has been affected the most in both sales volumes and median house prices due to it being heavily targeted by investors during the mining boom and the Gladstone LNG construction phase. With low lending rates and a weakening housing market there appears to be opportunities for all buyers, whether investors, first home buyers or owner-occupiers looking to buy in the Rockhampton region.
The main industry driver of the Mackay residential market over the past ten years has been the resource sector located in the Bowen Basin and the large service industry located in Mackay. The mining sector had a significant boom which peaked during 2012 and 2013. Mackay had the highest median house value for regional coastal cities in Queensland and one of the lowest vacancy rates (under 1%). Since this time, there has been a significant reduction in the mining industry with large redundancies, mine closures and flow on effects. This has seen the Mackay residential market fall up to 30% since the peak and vacancy rates blow out to in excess of 8%.
It is considered that without an increase in the coal price and announcement of large projects, the Mackay market will not see any appreciable increase in value.
However, with every downturn there are some silver linings. Mackay was always seen as a mining town with inflated prices and increased costs of living associated with the high wages generated in the mining industry. Since the downturn, it is now considered Mackay is an attractive proposition to non mining workers such as teachers, police officers, firemen and ambulance offices, who would have not considered Mackay previously.
Here in the Whitsundays our big driver is tourism, with some smaller drivers, including the sugar cane industry and a very small driver, mining.
In order to improve our market we need the Australian dollar to be affordable to our overseas tourists and on the flip side if our dollar is low we get more Australians holidaying at home as well.
I would expect with the continuing unrest overseas, holiday destinations here in the Whitsundays may become more appealing.
The property market on Hamilton Island is steady to slightly increasing over the past six months as it appears to be influenced by the strong Sydney and Melbourne markets.
Our sugar cane industry is located in and around Proserpine with some transit workers both when the mill is in shut down and also during harvesting.
And lastly, our mining sector which is minimal, with some miners choosing to do that extra bit of travel to the mines and leaving their families in a beautiful lifestyle area.
If our tourism market grows this will influence the furnished ocean view units in and around Airlie Beach and on Hamilton Island. We are also noticing that many homes are being holiday let over the internet.
Our market is holding steady at the moment with no big leaps or downturns.
Townsville is known for its diverse broad based regional economy with its strengths built around base metal processing and its links to the North West Mineral Province and access to the Townsville Port, rich agricultural lands and extensive grazing areas, Australia’s largest Army base and a large employment base around education, health and science.
With the mining sector downturn, a general softening in other sectors and the closure of Queensland Nickel in March 2016, the unemployment rate in the Townsville region has increased to dire levels trending just under 14% as at June 2016.
Population growth, which is a primary catalytic driver of the property market, has also experienced a decline with population growth for the years to June 2014 and June 2015 at 1.6% and 1% respectively, well below the long term average of 2% per annum.
Townsville’s residential property market conditions remain weak, afflicted by low demand and uncertainty, with population growth low and unemployment rates high dampening overall market sentiment.
On a positive note, following the recent Federal election a number of big ticket items have been committed to the area. Approved funding for the Townsville Stadium is increasing the level of excitement in Townsville.
Once building starts on this stadium, which needs to occur sooner rather then later, it is anticipated that further private investment in and around the CBD will commence and all going well it may be just the shot in the arm that the city needs to get its economy and its market moving again.