The month in review: Regional QLD
By Herron Todd White
The growth demonstrated in sale prices in Toowoomba over 2014 looks set to continue into the early stages of 2015. However, there is rising speculation surrounding the longevity of this upswing.
While the Toowoomba residential market has traditionally benefited from its location as the gateway to the Surat Basin, the reduction in mining activity and low energy prices may lead to a stabilisation of values in the residential market. This volatile industry activity aside, the hype surrounding the Brisbane West Wellcamp Airport and the proposed Toowoomba Range Bypass Road is likely to sustain development activity and property enquiry in the this sector, particularly from absentee investors.
Suburbs such as East Toowoomba, Middle Ridge, Kearneys Spring, South Toowoomba, Mount Lofty, Darling Heights and Rangeville are expected to record more stable growth than new developments across the western suburbs based on a history of gradual capital growth over the past ten years and the reliability of the established schools and other desirable attributes in these suburbs.
At present, the demand for new investor product, that is new units and houses, is at a proportionate level to the supply. However, it is not known how the non-traditional lots, such as small land parcels less than 400 square metres, will reabsorb into the re-sale market. This has resulted in limited local demand and the potential for an oversupply of this type of untested product in the future. Without the influence of owner-occupiers, the amenity of these estates can deteriorate over time.
In 2014, the Toowoomba property market outperformed recent years in terms of value growth. With a slowing resource sector, there may a slight slowing in the market towards the second half of 2015.
Generally we finished off 2014 with a low level of sales activity and softening prices across the region. The year ahead starts with a large amount of uncertainty for most of our resource and mining industries. Numerous industries are reporting salary cuts, job losses and general restructuring and downsizing.
Housing prices in Rockhampton City worth keeping an eye on include the usual blue chip area such as Wandal, Allenstown, Frenchville and Norman Gardens for price points below $400,000. For the better quality top shelf stuff, the suburbs of Norman Gardens and The Range come to mind.
Gracemere is still feeling the effects of an oversupply of new housing construction in the past two to three years creating a significant rise in vacancy rates and a drop in house prices. Lessons from the past should be taken on board however it appears this may not be the case with the new Livingstone Shire Council. Although we encourage growth and construction within the region, the recent approval of the Pines housing development, one of the biggest land releases on the Capricorn Coast to date, poses a massive risk of delivering another Gracemere scenario with supply likely to outweigh demand. In summary, 2015 will more than likely be a very challenging year with a lack of any obvious signs to suggest a market recovery this year.
Today I have the unenviable task of predicting the year ahead for the Mackay property market. 2014 saw value levels across the Mackay region fall for the first time in a very long time. Uncertainty in the mining sector coupled with job losses, cancellation of projects and general downturn in the coal industry definitely had an effect on Mackay housing.
While house values are off around 10% to 15% (some pockets higher) the rental market has suffered even harder with rental values down 30%, and vacancy rates blowing out in excess of 8% to be the highest in regional Queensland.
So what will happen in 2015? It kind of feels like the day after or the hangover period. Sales activity started to increase at the latter end of 2014, although at reduced value levels. Local agents are reporting early into 2015 that there is strong buyer enquiry out there, however everyone is in search of a bargain, putting further pressure on values.
It is difficult to get a gauge on the general Mackay economy and therefore the effects it might have on the Mackay property market. Anecdotal evidence is mixed with just as many businesses saying they are flat out as saying they are quiet and feeling the pinch.
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. 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 until the mining sector and coal prices improve.
Completion of the expansion to Stockland Hervey Bay and the new St Stephens Private Hospital has increased confidence in Hervey Bay and helped to lift its profile as a holiday destination now appealing to a
more broader market.
The sub $350,000 market is likely to remain the most active sector with strong competition between builders offering House and Land package deals. This competition is likely to see little capital growth over the next 12 months.
Property values may being to show signs of growth in the $350,000 to $500,000 price range however buyers are still seeking modern homes with good ancillary improvements. Shorter selling periods of up to three months are also expected as supply begins to fall. The higher priced market is likely to experience a period of recovery for the first three to six months after falling throughout 2013 and 2014. Similar to the sub $500,000 market, buyers are looking for modern homes with extensive ancillary improvements and good locations.
Rental vacancy is likely to remain low which will continue to slowly lift rental rates. The sub $350,000 market remains attractive to investors with increasing returns and tax benefits for new package deal homes.
Unit stock supply has been gradually diminishing, however unit values are still predicted to remain low and affordable over the next twelve months.
The property market in Maryborough is expected to remain stagnant, with uncertain employment conditions keeping buyers cautious.
Most of the mining towns in the Central Highlands are still in significant decline apart from perhaps Dysart which seems to have found a bottom in the range of $80,000 to $100,000 for a basic 3-bedroom mine home. Sales are turning over regularly to locals in this range. This is off a peak of $450,000 for the same home. All other towns are still dropping with limited turnover and have not reached the level where locals are willing to re-enter the market.
Emerald has been the least hit from the downturn.
On average Emerald is approximately 10% to 20% back from the peak in early 2012. Values however still appear to be dropping with mortgagee in possession sales starting to increase and showing a larger drop. A basic modern 4-bedroom, 2-bathroom home is now selling at $290,000 from a peak of $425,000. 2015 may be the year for a cheap upgrade but with values still dropping we would recommend waiting until mid year and reassessing unless an obvious bargain comes along from a stressed vendor.
After a long period of significant market correction, the declines in values occurring in the Gladstone region are no longer as substantial and there are early signs in some market sectors of stabilisation. Sales activity has increased over the last few months mainly due to the much more realistic values after supply outweighed demand for most of 2013 and 2014.
The vacancy rate is currently sitting at 4.9% (according to SQM Research) and has remained relatively stable for the past three months. While construction of new homes in modern estates and new townhouse and unit projects has cooled over the past several months, new product is still being project marketed to investors. Vacant inner city units and townhouses are considered to make up the bulk of the above average vacancy rate.
In 2015 we consider that capital values in most market sectors will stabilise however the impact of the declining construction workforce switching to an operational phase associated with LNG plants is yet to be felt and there is potential for further price vulnerability when this occurs.