Regional QLD

The Smartline Report – December Edition

The month in review: Regional QLD

By Herron Todd White
December 2015

Sunshine Coast
Any year in the Sunshine Coast property market tends to be pretty interesting and 2015 is no different. We have had good activity with sale volumes being up. All in all it has been a pretty good year.

At a high level overview, the first half of 2015 was strong with significant sales being recorded throughout the market and some sectors experiencing price increases. Then about half way through the year we started to get the speed wobbles, with a slow down in sale volumes and general enquiry. There appears to be a few factors around why this slowdown may have occurred but one thing is for sure – the new APRA policy to curb investment lending, mainly aimed at slowing the Sydney and Melbourne markets, has had an effect on the Sunshine Coast market.

When looking more specifically at the market sectors some of the other factors that have slowed down the market become clearer.

The most activity in housing tended to be in the entry level areas and typically along the coastal stretches and areas close to amenities.

Time on the market decreased dramatically and improvements in values occurred. As a by-product, stock levels have reduced becoming quite thin thus causing transaction volume to slow. We do not believe there have been any main problems with this market other than limited stock levels that has effectively curbed sale volumes.

The unit market has been somewhat similar to the housing market in that entry-level properties have tended to perform well. Combined with complexes that have fairly low body corporate fees, this has led to reasonable volumes being recorded. Typically these are walk up complexes and townhouses which also offer an alternative to single unit dwellings.

We have also seen a bit of an increase in the larger permanent style units and also larger townhouse and small lot housing on the back of empty nesters wanting to downsize.

We have seen an improvement in the rural residential sector however it is certainly been at a slower pace than the housing and unit markets. Some reasonable buys remain given the discretionary nature of these properties and there are opportunities to purchase at below replacement.

The prestige market has also improved over time and once again, it is generally at what is considered to be entry level. A comment that we regularly hear is that there are plenty of people looking between $1 million and $1.5 million, however above that the market tends to thin out pretty quickly. As with all the markets but more so in the prestige market, it is very much reliant on the specifics and circumstances of the property, the purchaser and the vendor. Any properties that have issues or are overpriced will tend to sit.

As mentioned, 2015 has been a pretty good year for the property market on the Sunshine Coast. With the Sunshine Coast University Hospital due for completion in 2016, there may be some exciting times ahead.

Hervey Bay
Predictions from earlier in the year have been fairly accurate, with steady demand for lower priced stock, increased sales for property over $500,000 and continued low rental vacancy with gradually increasing rents for most types of property.

There are now at least seven separate estates developing their next stages which will cater for more house and land packages predominantly below $400,000. The volume of construction activity was not foreseen however is welcome given the employment stimulus and ongoing demand for investor stock from out of area buyers. Sales of property above $500,000 are now occurring on a more regular basis, with higher earners thought to be from the medical profession accounting for renewed interest and sales in this price range.

Unit values are mostly holding firm, however some particular developments that have had excess developer stock have seen some lower sales filtering through. This may be due to frustrated developers and vendors seeking to offload underperforming assets after an extended marketing period.

The residential market across the Central Highlands continued to fall approximately 10% to 15% through 2015 with the worst now behind us for the time being. Most mining companies are reporting that the bulk of their job cuts are over for a while and they will try to survive with the current low coal prices. Values in most towns appear to be levelling as locals are starting to be active purchasers in Moranbah, Dysart and Blackwater. Sales turnover has also been steady. Values in Emerald are now back near 2005 and 2006 levels. Agents are reporting new rentals being signed up each week. The supply is still far greater than demand and if there was a pickup in the local resources economy there is a lot of stock to be absorbed first before values would start to rise.

At the beginning of 2015 we forecast that most market sectors would stabilise however there may be further price vulnerability as the construction workforce associated with the LNG construction falls.

The market sectors of entry level, mid price and prestige established housing have generally stabilised over the course of 2015. New construction activity has continued to weaken as it is still cheaper to buy a near new dwelling than it is to purchase land and build a new dwelling. The unit market in Gladstone has continued to decline over 2015 with very limited sales occurring and of the sales that have taken place, declines of between 45% and 50% from sale prices that occurred in the peak of the market in 2011/2012 have been recorded.

Construction worker levels on Curtis Island have declined steadily over the course of 2015. Due to the steady decline, the market has not seen any sharp increases in vacancies however as the workforce has declined the vacancy rate for Gladstone has increased. It currently sits at 8.4%, nearly double the rate of 4.4% in January 2015. Sources indicate that significant job losses will occur between now and February 2016 with all construction complete by the second quarter of 2016.

As we look back at the performance of the Rockhampton region throughout 2015, it is worth noting that although as a whole the market has showed signs of weakening, with an increased number of mortgagee in possession sales occurring, there has still been some well performing market sectors.

The first one of note is our local prestige market, with a number of sales at price levels in excess of $700,000 occurring, with approximately half a dozen confirmed sales to date.

Another market sector that preformed well in 2015 was the new unit market with riverfront units in Empire and Southbank being well received in the market place. There was also some smaller scale suburban unit developments in Rockhampton that sold well.

On the Capricorn Coast, Salt, a beachfront unit development comprising a mixed residential and retail complex consisting of 50 residential units is nearing completion (due December). The development will also comprise ground floor retail tenancies and a conference facility. The development has had a strong rate of sales throughout both the pre construction and construction phases with only three units remaining of the 50 residential units in the development. This development has gone against the grain of the greater unit market on the Capricorn Coast over recent years and is considered to be a likely result of the unique, main beach front position of the site.

At the other end of the scale, the market sector that has not proven to perform well throughout the year was our local entry level market sector (i.e. property under $250,000). Locally, there has been a marked decline in investor activity combined with higher vacancy rates and decreasing rents, all leading to a softening of this market sector. You can again purchase property in Rockhampton for $150,000, often out of flood areas.

Job security and the flow on effect of the resources industry have shaped the property market in the Rockhampton region over the past 12 months, none of which were unexpected elements. For instance, in Gracemere, you can now purchase a modern onground brick home (4-bedroom, 2-bathroom, double lock up garage) for well under the $300,000 mark. It wasn’t that long ago that this product was achieving $370,000.

Casting our minds back to February, we had anticipated 2015 would be a year of challenges locally, without being able to foresee any obvious signs to lead to a market recovery. As the year panned out, this has been proven. While interest rates have remained at record lows and our region has become even more affordable, job security in the resources industry has proven to be the major determining factor in our market throughout 2015, despite our local economic diversity with agriculture, medical and education industries performing well.

This month we can take a ride back in time and look over the Mackay residential market for 2015. In a nutshell, if was a pretty tough year, with value levels across the board reducing a further 10% to 15%, and rental values also dropping and vacancy rates increasing to over 9%. So how did we go in February predicting what would happen? In February we said… ”Our take is that the market probably hasn’t quite reached the bottom, although it seems (hopefully) to be coming up fast. We think that on the back of increased sales activity and reduction of stock, the market may stabilise by mid 2015.”

Well, for the first six months of the year we were spot on, however bottom of the market has remained elusive with values still falling after the six month mark. The increased sales activity did happen early in the year and has ebbed and flowed since depending on buyers’ reactions and acceptance of new value levels.

In February we said “It is difficult to see any growth in values in 2015 without some big momentum shift in the Mackay economy. If the coal mining or associated services located in Mackay start to increase, then this will have a positive effect on the Mackay market. It is considered that no real recovery will occur.” This prediction still holds true today. At the moment there is a lot of negativity surrounding the Mackay market. This negativity is seen as the biggest hindrance to any sort of recovery.
Townsville’s residential property market has weakened during 2015 and is seemingly searching for direction. While we have previously maintained that the market remains in the early stages of recovery, albeit tenuously and with a pace of recovery that is incredibly slow, we now believe the market has reverted to the bottom of the cycle.

The volume of house sales has remained relatively steady throughout 2015, however the median house price has declined. Our impression is that buyers are only purchasing properties they regard as affordable based on their current economic circumstances, leading to a reduction in the median price of houses that are actually transacting.

Unit sale volumes fluctuated during the year with the median sale price for established units remaining relatively steady.

Vacant land sales have declined and median sale prices have softened slightly, reflecting a lack of buyer confidence in the market stemming from the subdued economy, as well as the wide price differential between new versus existing houses retarding the economics of new house construction.

The rental market has continued to demonstrate an over supply. It was our belief that during the course of 2015, the rental market would progressively return to the balanced market range following the construction of National Rental Affordability Scheme (NRAS) properties coming to a close. This however has not been the case, with the overall trending vacancy rate remaining above the balanced market range.

At the start of 2015, we predicted that the year ahead would remain cautious with the overall level of activity very much dictated by the local economic factors of unemployment and business confidence. While business confidence showed some improvement throughout the year, unemployment and job security along with limited local stimulus have heavily weighed on the direction and confidence of the residential property market.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2015. Australian Credit Licence Number 385325


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