The month in review: Regional QLD
By Herron Todd White
2018 looms as an interesting year for the Toowoomba market. 2017 saw a continuation of 2016 trends with slowing levels of sales activity and some value stabilisation following the boom period from 2014 to mid 2015. Although sales activity has been steady across the board, the market has continued to be multi-speed and property specific. There has been little consistency with variations in sale prices and buyer interest making it difficult to establish well performing suburbs and specific property types. This is expected to continue throughout 2018.
Toowoomba is currently a hub for major infrastructure projects including the Toowoomba Second Range Crossing road construction expected to be completed late this year and the recent completion of QIC’s Grand Central Shopping Centre extension. Also in the pipeline benefiting the Toowoomba area will be the imminent Inland Rail Project.
In terms of the residential housing market, it is expected that values may remain relatively stable on the whole throughout 2018 despite these projects. The rental market is in a balanced situation with vacancy rates of around 2.7% as at December 2017 keeping investors interested in the region, albeit to a lower level than that observed from 2013 to 2015. The infrastructure projects are believed to have assisted in holding vacancy rates low with many employees living in the Toowoomba area through the construction phases. Vacancy rates are expected to remain relatively low throughout 2018.
Key development areas continue to include the suburbs of Glenvale, Cotswold Hills, Torrington, Kleinton, Highfields, Cambooya and Westbrook with a mix of owner-occupier and investor orientated estates under development or planned.
Smaller lots than the traditional 600 to 1,000 square metre parcels are being developed within Toowoomba. The acceptance of this small lot product appears to be growing and is expected to increase in popularity in the future.
There are concentrations of small lots, units and duplex buildings in some of the above mentioned development areas which could result in an oversupply of product as infrastructure projects come to a close and workers vacate.
West of Toowoomba, towns within the Surat Basin following the decline of the construction phase of the mining and gas boom have experienced significant declines across the board. These towns are all either regressing currently or have reverted to levels which are more aligned with their predominantly rural based economies. This stabilisation is expected to continue in 2018 with a remaining over supply situation in the unit sector, improving interest for dwellings from owner-occupiers, the relatively inactive Roma market, and stabilising Chinchilla and Miles markets. Dalby is showing good signs of stabilisation with a strong occupancy rate currently being enjoyed leading to positive movement in rents.
The Sunshine Coast property market finished 2017 on a strong note, with good levels of activity and increases in values experienced across the coast in most sectors. Once again and much like 2016, the past 12 months have exceeded expectations with growth in values across the board. Capital growth in the residential property market on the Sunshine Coast is expected to continue, however we’re expecting it to ease over the coming year.
Dwelling sales within the coastal corridor between Maroochydore and Caloundra, particularly the sub $700,000 price range, are expected to continue with increased demand as a result of the growth in infrastructure around the Sunshine Coast University Hospital. Stock levels continue to remain very low.
Stocklands’ Aura development located to the south of Caloundra and the Harmony Estate at Palmview are continuing to generate strong interest from both owner-occupiers and investors. These developments will provide the Sunshine Coast with large scale residential land subdivisions within relatively close proximity of the new hospital and the centres of Caloundra and Maroochydore. Earthworks continue at Oceanside, which is the only significant undeveloped greenfield site remaining between Maroochydore and Caloundra. Once completed, this development will comprise a mix of single unit dwellings, medium density residential units as well as a retail and restaurant precinct.
The majority of residential development particularly in the new larger estates is primarily targeted towards the entry level market with residential lots getting smaller to improve affordability. 2017 has continued to see the emergence of dual key dwellings comprising of an attached 1- or 2-bedroom unit targeted at investors, however this type of product has seen the impact of APRA’s policy changes to investor lending. These changes have effectively limited the number of interest only investor loans. This is probably the area of concern for 2018 as there are early signs of over supply of investor product and an easing in rents in some areas. The resale market for this type of product is still relatively untested through local agents with the majority of these properties constructed by interstate investors.
The northern coastal areas of the Sunshine Coast and the prestige market in the Noosa area are expected to continue to see some growth throughout 2018. The strong markets and confidence of Sydney, Melbourne and more locally, Brisbane, are having a positive impact in the area. This is due to the perceived bang for your buck here compared to the capital cities. The lack of vacant land and new subdivisions in the Noosa region is also helping to underpin values in these areas.
Units lagged behind the housing market through most of 2017 however agents have been reporting good levels of interest in units, particularly owneroccupier units within smaller complexes with low body corporates. This swing to permanent unit living has been reflected in the number of new unit complexes under construction or proposed that directly target this market.
The lifestyle and rural residential market has also improved with upgraders being active in the area. The railway townships have also improved with affordability being the key and also lot sizes being greater.
Overall, 2018 is expected to continue in much the same way as 2017 finished and it is predicted to be another good year for the residential property market on the Sunshine Coast. Will it be as good as the past 12 months? We will have to wait and see.
2018 is likely to be a gradual continuation of last year for the residential market on the Fraser Coast with slow capital growth and stable rent returns. Supply and demand for house and land packages is expected to remain fairly balanced with house prices still very competitive and reasonable in this sector. The supply of vacant land is rising in Hervey Bay with the completion of a few smaller in-fill estates and it will be interesting to see how quickly these sell in the short term. There is a risk of oversupply however this will depend on the volume of lots and the timeline which developers release each stage. The construction of new homes for mostly local residents is expected to be on going and will continue to provide steady employment for local tradespersons and businesses. The increase in sales of dwellings over $500,000 is expected to continue with the expansion of medical facilities and allied health providers relocating to the area. Unit prices are likely to remain flat to stagnant overall, however demand for townhouses and on ground style units will continue to remain steady with selling periods of up to three months.
We would expect the 2018 Bundaberg residential market to continue with a stable rate of sale and median sale price. There is little evidence to suggest a market movement whether it be positive or negative which has been the case over the past few years. Bundaberg is a relatively compact residential market with its main advantage being its generally low cost of housing compared to other regional cities.
In 2018, we expect to see more firming in the market similar to 2017. Better quality houses in the Emerald market experienced a 5% increase in the second half of 2017. In 2018, it’s possible we will see a 5% to 15% firming by the end of the year. The resource sector is positive with increased employment, large capital expenditure projects happening, wages increasing, rents increasing and sales starting to push the upper end of the current market range. While coal prices remain up, the positive trend will continue. If we revisit the boom days of a labour shortage, this has the possibility to see the market firm sharply. We are noticing motel occupancy, job advertisements and skills shortage all coming into play. A house in Emerald which sold right at the peak of the market in April 2012 for $462,000 is now under contract for $359,000 which is still back 22.5% from the peak, but up from the general market fall of 30% to 35% at the bottom in 2016. We have a positive outlook for 2018 and hope for a sustained steady firming.
The Gladstone market saw many positives over the course of 2017 with increased sales volumes, declining vacancy rates, reduced days on the market, multiple offers being made and an increase in new dwelling construction. In the later stages of 2017, rents also began to rise. Taking all this into account, the only conclusion is the Gladstone residential market should see some increase in values in 2018.
There are still negatives associated with the Gladstone market. Much like Mackay and Emerald, there are harsh lending policies from several major banks on the 4680 postcode. The downturn from 2012 to 2017 saw sharp declines in values (up to 50% for dwellings and 80% for units) resulting in a general lack of equity for potential purchasers. While the local economy is slowly recovering, employment markets remain tight and there are no major confirmed infrastructure projects on the horizon.
We believe the positives outweigh the negatives and that there are many green shoots throughout the market heading into 2018. We expect to see minor price growth (probably around 10%) over the course of 2018.
After almost four years of continual decline in the local Rockhampton and surrounding residential markets, it is with a renewed feeling of confidence and optimism that we anticipate that 2018 will be the year of the regions. Yes, that’s right – a feeling of change is in the air, primarily on the back of people’s attitudes and an increased level of confidence amongst buyers and sellers.
Towards the back end of 2017, we saw the Queensland election play out with a renewed majority government sworn in. Central Queensland has since seen an improvement in coal prices, continued strong performance across most agricultural and rural sectors, vacancy rates have reduced in most markets, rental prices have seen a slight improvement and sales activity, albeit still at historically low prices, is on the increase. These factors combined with a number of major infrastructure projects currently on the cards including Adani Coal, Rockwood Weir, Mount Morgan Mine and Great Keppel Island will hopefully come to fruition during 2018 providing a major boost for employment across the region which in turn will lead to an improved economy and hopefully some long awaited growth in our residential markets.
It’s that time again when we grab the crystal ball and try to predict the year ahead. I have been thinking about what to write in this column for some time now and it’s actually been a bit tricky!
On the positive side, we saw the market stabilise during 2017 with increased sales volumes, less time on market for sales and general optimism returning to the market. The general consensus seemed to be that the worst was behind us and it was onward and upward from here. Economically speaking, Mackay is definitely on the improve with greater confidence in the resource sector and major capital infrastructure projects in the Bowen Basin given the green light, resulting in increased employment opportunities. In Mackay, large infrastructure projects continue with the Mackay Ring Road construction to ramp up, general construction increases as well as a number of other projects. Interest rates continue to be at historic lows. Weigh all this up and the only conclusion is that the Mackay residential market should increase in 2018.
However, on the negative side, as stated in our yearly wrap up last year, there are still a number of hurdles the Mackay market will need to overcome before we see any material or substantial growth in values. Firstly, harsher lending policies of the major banks for postcode 4740 are still in effect. Also, the downturn in the market saw significant value loss, with the average loss in value of dwellings being around $100,000 and higher. This in turn has eroded a lot of equity for potential purchasers. A common theme from local agents and punters is they would love to buy in this market, however due to the drop in value of their existing house, don’t have the deposit or ability to purchase.
Overall, we think the positives will outweigh the negatives and the Mackay residential market should see a modest increase in value throughout 2018.
The year ahead is likely to see improving economic conditions in Townsville, which in turn is likely to see the residential property market continue to consolidate with increased market sentiment.
Major projects already underway include the Townsville Stadium, Ross River Solar Farm and Haughton pipeline duplication with a score of other projects mooted to commence during 2018. We are seeing the trending rental vacancy rate continue to tighten from an oversupplied market at the beginning of 2017 of over 5.5% to a trending vacancy rate at the end of December 2017 of just over 3%. This trend is likely to continue as people move to the region on the back of these major projects.
The inner city 4810 postcodes are showing signs of starting to pulse again and this is likely to continue throughout 2018. Historically with an improving residential market, these inner city locations are the first to see movement before it ripples through to the outer suburbs. Whether we see this ripple effect take place this year will be highly reliant on factors such as unemployment, job security and population growth.
Overall our feeling is that 2018 will see an increased level of activity in the residential market with prices remaining stable and the rental market continuing to consolidate within a more balanced market range.