Regional QLD

The Smartline Report – June Edition

The month in review: Regional QLD

By Herron Todd White
June 2016

In Toowoomba, the residential market has shifted from stable to showing the early signs of regressing. For the first time since 2011, the median house price has decreased from $378,000 in the last quarter of 2015 to $359,000 in the first quarter of 2016. In line with this, the volume of sales has also declined. However, while investor interest appears to be easing parallel to the slowing market indicators, the capacity for long term capital gain remains attractive to first home buyers, upgraders and renovators due to Toowoomba’s relatively affordable price points.

Across Toowoomba, following the declining mining and coal seam gas industries and associated job losses, the property market has passed its peak with agents reporting reduced buyer enquiry and extended selling periods. However, while some sectors are performing better than others, there is no specific property type outperforming the broader market. Price segmentation over the 2016 financial year shows the majority of sales recorded – that is 41% of all house sales – to be between $300,000 and $400,000, the price point which encompasses the median house price and consistently proves most active, while sales less than $300,000 and sales between $400,000 and $500,000 constitute approximately 20% of all house sales.

Overall, the relatively strong sales and price growth demonstrated in 2015 have not been met with equal enthusiasm in the first half of 2016. A cooling of the market may stabilise before a significant decrease in value occurs with the construction of the second range crossing and the QIC shopping centre development acting as catalysts for future economic growth across the region.

Sunshine Coast
In the first half of 2016 the Sunshine Coast market has tracked along reasonably well after a pretty slow start in January. We have had a reasonable start to the year with good activity in most sectors. Some grey clouds have however started to appear on the horizon which is not a major cause for concern as yet, but is something to be aware of.

The upcoming federal election has the potential to be a bit of a game changer. The various policies being proposed, including the reduction in negative gearing, have the potential to significantly impact the property market. Combined with the general uncertainty of an election period, the decline in confidence could have a significant impact.

Entry level properties in most sectors continue to perform well, typically those along the coastal stretches and areas close to amenities. This is the case for housing and units as well as entry level prestige dwellings. Time on the market

has decreased and improvements in values have occurred. We do not believe there have been any major problems with this market other than limited stock levels that has effectively curbed sale volumes with some resistance to new pricing.

The unit market has the additional facet of body corporate fees. Complexes that have fairly low body corporate fees have done pretty well however if body corporate fees are high, the market drops away. Larger permanent style units and also larger townhouses and small lot housing have improved on the back of empty nesters wanting to downsize.

We have seen an improvement in the rural residential market however it has certainly been at a slower pace than that of the housing and unit markets. Some reasonable buys remain given the discretionary nature of these properties with the ability to purchase at below replacement.

When looking at the prestige market, entry level has performed fairly well but above say $1.5 million the market tends to thin out 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.

The Sunshine Coast University Hospital continues to be a massive driver. It was due for completion in late 2016 but has been delayed to 2017. There are other projects on the agenda such as the new Maroochy Town Centre and Aura from Stockland (formerly Caloundra South) but these projects are market led. Jobs and more importantly, creation of jobs, will be critical for the coast going forward.

Hervey Bay
Based on our market research from 1 October 2015 to 31 March 2016, the median price for property in Hervey Bay on an allotment size not greater than 1,500 square metres is $320,000. This is an increase of $10,000 for the same period 12 months ago. The average price for the period is $329,199 compared to $316,697 for the same period last year. The volume of sales is lower by approximately 83 sales which could be a result of not all 2016 sales being recorded.

Entry level property is continuing to be affected by house and land package deals creating a price ceiling for existing, established stock. Developers continue to supply product with approximately eight estates releasing further stages. Until stock levels decline, there is likely to be limited growth in this market. The end of the $12,000 grant for new land or new house and land packages under the Building Better Regional Cities Program grant on 30 June 2016 may see some slow down in sales rates for the eligible estates.

Rental demand appears to have stabilised after a period of growth, however supply remains tight. Generally a new 4-bedroom, 2-bathroom home can achieve in the range of $350 to $370 per week rent.

There appears to be increasing confidence in the higher priced market with approximately 25 settled sales over $600,000 since 1 October 2015. We are also aware of a recent contract at $1 million for a Dundowran Beach property and another at $940,000 for an Esplanade property in Urangan.

In the first quarter of 2016 we saw another softening in the market across the Central Highlands which includes the towns of Blackwater, Emerald, Capella, Clermont, Moranbah, Dysart and Middlemount.

The first half of 2016 was predicted to show us exactly where we are at after a massive scaling back in the resource sector. Things now appear to be near the bottom for the time being if not already there.

The local resource sector has been relatively stable with no drastic employment or wage cuts recently. There has actually been some slightly positive news on the horizon but this has only been talk so far. The Adani project continues to linger in the background and if it was to go ahead it should definitely stabilize our markets and put a definite halt on the slide and possibly a line in the sand where we can say it has bottomed.

Strata units and multi-unit properties across the region have been the hardest hit. We are seeing some vacant land sales in the fully mining dominated towns at $15,000 to $20,000.

These are mostly being purchased by speculators. We are seeing values back near 2004 and 2005 levels just after the boom began.

There does not appear to be any possible capital growth in our markets for the foreseeable future but some purchasers are starting to speculate and prepared to buy and sit. Even a small boom in the resource sector down the track could see some handy capital growth returns for those purchasing in the current market. Some say it will definitely happen, it’s just a matter of when.

The residential market for houses and units has remained steady and consistent over the past six months with overall confidence being subdued. The rate of mortgagee in possession valuations has remained steady and is tracking to current market expectations.

There are a few major upcoming developments in the pipeline including commercial and residential developments along with the waste water treatment plant and plasterboard manufacturing plant at The Port. As these developments move forward confidence in the market should lift throughout 2016.

In the outer rural residential sector, sales have been occurring on a slow to static basis over the past six months. Affordability is considered to be a major factor. Buyers are mostly owner-occupiers with the majority of sales under $250,000. Residential housing predominantly consists of older dwellings of various styles and standards, as well as larger rural residential home sites on the outskirts. Overall, properties in rural locations appeal to a smaller market sector and typically take a longer time to sell.

The Gladstone property market and local economy have continued on a downward trend for the first half of 2016. Major employers in the region have cut hundreds of jobs in the past six months. Rio Tinto Yarwun has just completed the latest round of redundancies and NRG (power station) and QAL (refinery) completed their cost cutting measures earlier in the year. In addition, there are still several thousand local employees working for Bechtel on Curtis Island, 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 over-supplied property market in the Gladstone region. Despite early signs of stabilisation at the end of 2015, the market for established housing appears to be continuing to fall in 2016. Sales of units and townhouses have picked up marginally over the past several months however value levels are showing very significant declines in value.

Vacancy rates in the Gladstone region have continued on their upward trend. The most recent data indicates a vacancy rate of approximately 11%. With the number of recent job losses, it is expected that this rate will continue to climb. This rate has also had a flow on effect to rental levels which continue to decline.

Current market conditions feature a significantly large number of properties for sale and for rent, significantly declining rental levels and high vacancy rates. The market remains liquid albeit there has been a relatively low number of sales over the past six months. Mortgagee in possession sales activity is also increasing. These factors are adversely impacting the marketability and value of all property in Gladstone.

As predicted in January, to date 2016 has proven to be a difficult year for the Rockhampton and surrounding residential markets. We have continued to experience a slow down in almost all sectors of the market with the overall number of sales reducing and values softening. A genuine lack of investors has seen the market relying on local first home owners and young couples upgrading from their first or second home.

Selling agents have reported extended marketing periods with a notable lack of interest whether it be at open homes, internet or phone enquiry. The key message out there is that if you want to sell your home it has to be priced accordingly and the first two to four weeks is the key. Anything after that and you risk sitting on the market indefinitely and having to lower your list price significantly. As predicted it is the lower end of the market (sub $250,000) which seems to be at risk with a massive oversupply of listings and limited buyers.

Again recent investor suburbs such as Gracemere and Zilze are still very slow. Unfortunately the number of mortgagee sales has continued with sale prices often resulting in significant decreases. Once again better quality properties which have been well maintained and are located in sought after locations (parts of Norman Gardens, Frenchville and The Range) seem to be more saleable although they also need to be priced accordingly.

Looking forward, the Federal electron will present an opportunity for local stakeholders to raise concerns and call for solutions to the resource and local industries but the time for these promises to come to fruition is often longer than expected. 2016 will likely remain slow however there is some thought amongst the punters that we are now at the bottom of the market and from here there can only be one way up.

In January this year we wrote “There is still a relatively negative outlook among buyers and sellers in the Mackay region and market evidence suggests that property values are still declining in the short term. It is difficult to see any growth in values in 2016 without some big momentum shift in the Mackay economy. However it is hoped that some levelling will occur towards the mid to latter half of 2016.”

The first half of 2016 has been pretty tough for the Mackay property market on the back of a difficult 2015. The negativity seen in the market place is still evident, with property values still declining in the first six months, albeit at a much slower rate of decline than seen in the past two years. On the positive side, we have seen increased sales volumes (although at lower value levels) and the REIQ March Quarter Vacancy Report states that rental vacancies have dropped from 9.3% to 8.1%. This is a significant improvement and the lowest vacancy rates seen since 2014.

The downturn in the market has provided opportunities not seen in Mackay in over ten years. Previously, Mackay had one of the highest median house prices in regional Queensland, with housing affordability a major challenge. With the large fall in values and historic low interest rates, we have seen among others, first home buyers re-enter the market, able to buy average style highset homes in established suburbs for low $200,000s.

The main issue for the Mackay market is the negative sentiment. As stated in January, without some major momentum shift in the Mackay economy, it is difficult to see any growth in the market in the short term.

The first half of 2016 has seen residential entry level units weaken with limited activity. There still however appears to be steady sales in the family entry market, with some out of town property investors creeping into the market. The residential lifestyle properties appear to be holding steady.

We have seen some beach front land sell in excess of $1 million however the upper level unit market appears to be slow with very limited market activity.

There are new land developments just coming onto the market with beach fronts and good views, so make sure you tune in to future editions of the Month in Review to see how these go. All in all the Whitsundays appears to be holding steady.

At the halfway mark for 2016, Townsville’s residential property market remains at the bottom of the market cycle and continues to languish with low buyer and business confidence and job security concerns all impacting property market sentiment.

Talk and concern around the job losses of 800 people from QNI and the flow on effect to other local businesses has somewhat dominated the market during the first half of 2016 as it seeks some form of traction. With payments reportedly starting to trickle through to some of these workers, let’s hope it can provide some financial relief to these families and ease some of the anxiety within the property sector.

Demand within the new home and new unit markets remains low, compounded by ongoing affordability concerns with buyers only purchasing property they consider affordable based on their current economic circumstances and the ongoing cost differential between established versus new housing.

The rental vacancy rate remains elevated above balanced market conditions with our latest rent roll survey for April showing a trending overall vacancy rate of over 6%. Anecdotal evidence suggests that people who have lost jobs and have been unable to find employment again in the region have left Townsville and have left the rental market or placed their homes into an already saturated rental market.

Furthermore the current high unemployment rate is not attracting new people to the area to absorb this oversupply of rental stock.

It is likely that the remainder of 2016 will be subdued in the residential property sector as the low levels of sentiment filter through. There are definitely positives in the market if you are looking to enter the owner-occupier market for the first time with soft median houses prices and anxious vendors making it very much a buyer’s 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 – 2016. Australian Credit Licence Number 385325

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