The month in review: Regional QLD
By Herron Todd White
Toowoomba’s residential market has continued to soften, showing a further decrease in median house prices across the Toowoomba urban area (postcode 4350). The June 2016 quarter gave a median of approximately $350,000, down from approximately $370,000 in the March 2016 quarter. To date, the September 2016 quarter is returning a median house price of approximately $330,000, however this is based on a limited volume of settled sales transactions and should be treated with caution.
While this is proving to be a slowing market, the capacity for long term gain remains attractive to first home buyers, upgraders and renovators due to Toowoomba’s relatively affordable price points.
Price segmentation of residential properties over the past 12 months shows that 40% of all house sales recorded are between $300,000 and $400,000, the price point which encompasses the median house price and consistently proves most active. Sales less than $300,000 and sales between $400,000 and $500,000 make up approximately 20% of all house sales respectively. Properties in the price range exceeding $700,000 appear to have the least movement, however see strong interest and sale prices. This high end property market is restricted as a result of limited supply and limited land in higher end suburbs such as Redwood, East Toowoomba, Middle Ridge, Mount Lofty and Prince Henry Heights.
The majority of buyers in the median price range consist of local and non-local owner occupiers and investors. However, investor interest appears to be easing parallel to the slowing market conditions and increasing vacancy rates. Buyers in this price range are able to acquire a range of different homes consisting of 2-, 3- and 4-bedroom, brick and timber, older and recent. These types of properties are spread across older suburbs such as Newtown, Centenary Heights, Harristown, South and North Toowoomba, ranging all the way through to brand new sub divisions in areas such as Glenvale and Cranley, situated further from the CBD.
Overall, while the relatively strong sales and price growth demonstrated in 2015 has not been met this year, the current cooling of the market may stabilise with large infrastructure projects currently under construction, including the second range crossing and QIC shopping centre development acting as catalysts for future economic growth across the region.
The market remains active at present with good volumes of sales across most price points. 2015 saw approximately 194 sales of low density residential vacant land with 35% of these in the $150,000 to $175,000 price range. To date in 2016, there have been approximately 65 recorded vacant land sales with 32% being in the $175,000 to $200,000 price range. We caution readers because the house and land package market in Hervey Bay is strong and a large number of vacant land sales are not recorded.
The improved market although active is showing very little price growth. Since January 2015 the average price for residential homes in Hervey Bay has fluctuated between $320,000 and $340,000. We note that this is for low density residential homes only and does not include larger acreage properties. In line with the average pricing, the most active price range was $300,000 to $350,000 with 30% of the 1,620 recorded sales. House and land packages are mostly targeting this range with the aid of local and state government incentives helping to attract buyers.
Although most sales are in the lower price ranges, there has been an increase in activity for higher priced property from 15 sales in 2014 to 39 sales recorded above $700,000 since January 2015. These include acreage and small rural properties. 16 of these sales were in the Dundowran Beach locality and include three sales between $1 million and $1.25 million. Although there is a smaller buyer pool in this price range, these sales are very encouraging for broader market confidence.
Like most coastal areas, the Sunshine Coast has an array of different property types which appeals to a number of different sectors of the marketplace. That in itself would be difficult to work out, but combine this with how each of these sectors is actually performing and it really does become confusing.
It is fair to say that the entry level for each of these sectors has been performing pretty well. It is only when you move into the high value bands that the markets begin to thin out. To try and provide some clarity we have broken up the Sunshine Coast into the two main sectors being coastal and hinterland.
When looking at the coastal areas for housing, the main feedback we’re receiving is that the sub $750,000 market is most active which can be broken up into first home buyers active in the sub $500,000 level and upgraders above this. Homes tend to be of older style product close to the beach and modern homes on sub 500 to 600 square metre allotments within estates (although some estates are sub 300 square metres). For units we’re talking more in the sub $400,000 level with once again first home buyers being pretty active. These units usually comprise older townhouse product and smaller walk up unit complexes.
When we look at the other end of the scale, the slower markets tend to be in the higher value bands, say above $1.5 million. The market is very much buyer and vendor specific with inconsistencies experienced and both weak and strong sales being recorded. More simply there are just less people running around with that amount of money to spend.
There are certain areas where the activity is strong up to $2 million. Brisbane, Sydney and Melbourne buyers are the most active as well as local upgraders. Some overseas buyers are coming back into the market with the lower Australian dollar.
When we cast an eye to the hinterland markets, the price point drops further with homes down to sub $400,000 within hinterland townships and sub $500,000 for homes on rural residential allotments. First home buyers and local residents upgrading into new or larger properties are the most active. We are also seeing people relocating from coastal areas to more traditional sized allotments. The unit market in these areas is typically thin apart from Nambour with limited levels of stock. Values tend to be trading in the sub $275,000 level and are typically townhouse and villa product.
Similar to the coastal region, the higher value $750,000 plus rural residential market continues to remain patchy and very much buyer and vendor specific. Once again, there are certain areas where the activity is strong up to $1.3 million and then it thins out. The big benefit for these properties is that there is an ability to purchase at below replacement cost which is always attractive.
As you can see from the above, the Sunshine Coast market is difficult to gauge. At the moment there are a number of good news stories which are still creating interest in the region.
It really doesn’t matter which market sector you pick, most have had increased sales activity over the past couple of months and the main reason is that it is so cheap! Values in Gladstone have not been this low in over a decade.
The most active market sector is the sub $250,000 sector. Purchasers in this price bracket comprise mostly owner occupiers, many of whom are first home buyers. This type of money will get you an older, modest 3-bedroom high or low set home. The established suburbs of New Auckland, Clinton, South and West Gladstone are where most activity is occurring.
Another active sector is for modern 4-bedroom homes. There has been a new wave of sales for standard 4-bedroom, 2-bathroom homes in modern estates selling for sub $300,000 however most of the stock is priced above this.
Investors have also re-entered the market. There have been a number of 1980s and 1990s 2-bedroom townhouses sold in and around the central suburbs of South and West Gladstone. The value level for this stock is mostly sub $100,000.
Property with the lowest amount of activity is and always has been the prestige market. Prestige dwellings are generally tightly held which of course is why there is limited activity. We are aware however of two prestige homes currently on the market which have garnered good interest according to selling agents. Pricing and buyer feedback on these properties suggests that the prestige market has finally caught up with the rest of the market and is now at a more realistic pricing level.
The Emerald residential market currently is considered a buyer’s market with the best purchasing conditions seen in over a decade. All price sectors are active as residential values have come back on average 30% for houses and up to 70% for units. Agents are still reporting a constant flow of new rentals and selling periods for properties appear to have shortened.
Mortgagee in possession sales in Emerald still appear to be minimal. Many first home buyers are active and job vacancies remain steady as the worst appears to be behind us. The $220,000 to $350,000 market appears to be holding now as new home buyers can buy a good quality, modern home in this range depending on the area of town they choose to live. Most investors are still local with a few multi-unit properties starting to move.
Upon reflection of our market, it would be fair to say that price point or location are not determining factors in either the most or least active sectors of the market in the Rockhampton region at this point in time. More so, the buyer profile and presentation of the property is determining activity or lack thereof in the local market.
The buyer demographic most active in this region over recent months has mainly been owner occupiers looking for either a first home or upgrading under favourable buyer conditions with record low interest rates and affordable housing prices. These buyers, whether they are first or subsequent home buyers, are drawn to well priced and well presented dwellings, ready to live in with no renovations or repairs required. Price points vary considerably for this active market sector, but we are typically seeing first home buyers at prices up to approximately $300,000 and upgraders from $400,000, depending on their financial backing.
On the flip side, the local investor market has been slower than it has been historically, with job security the obvious reason behind this changing trend in Rockhampton. Also, properties that appeal to investors generally would benefit from a maintenance program to attract tenants and enhance rental return. Given the volume of available housing buyers have been less inclined to spend their cash reserves on such maintenance and repairs.
While our local economy is typically quite diverse compared to our regional neighbours to the north, south and west with education, health and agriculture also major employers in the region, the mining and associated services industry downturn has had a significant effect on local investment. This has combined with higher rental vacancy rates which makes the region less attractive for the typical mum and dad investors.
Having said this, Rockhampton has historically been a less volatile market than other regional localities. Given recent economic conditions combined with the 2015 APRA changes to investor lending, it is possible that some investor activity will return to the local market as investing in capital cities becomes less affordable.
The Mackay residential market currently is considered a buyer’s market, with the best purchasing conditions seen in over a decade. The story of the Mackay market really is a glass half full versus glass half empty scenario. On the glass half empty side, we have seen values of residential properties fall 30% and higher in some areas on the back of the downturn in the resource sector, which Mackay is heavily reliant on. Rental vacancies have ballooned from below 1% to the current 7.7% which is actually down on the high of over 9%. Rental values have almost halved from the peak conditions in 2012.
On the glass half full side, we now have buying and renting conditions not seen since the early 2000s. This is becoming noticeable in the current market, with increased sales volumes (albeit at low prices comparatively speaking). The price point that appears to have most volume is the sub $300,000 and in particular the low $200,000 properties. For this price you can get an average quality high set dwelling in the established suburbs north of the river, or an older style Queenslander in average condition south of the river. Previously, Mackay was seen as a mining town being unaffordable and too expensive to live for people not associated with the mining industry. Couple these house prices with historic low interest rates and Mackay is now seen as a very affordable alternative to other coastal centres in Queensland.
The Whitsundays has two price points that are appearing active right now.
The first one is the budget market which is high $300,000 to low $400,000. At this price, you can expect to purchase:
• An older style 1980 to 1990 lifestyle property or a modern liveable shed between Cannonvale and Proserpine.
• A new 3- to 4-bedroom home in Cannonvale or Jubilee Pocket.
• An older, larger 1980s to 1990s home on a larger lot with pool or shed.
Buyers in this market are mainly investors and first home buyers.
The other market that is moving is the upgrade market with values from $600,000 to $800,000, which purchases:
• A larger dwelling with ocean views;
• A larger modern dwelling with pool or shed on small acreage.
The main buyers in this market are home owners upgrading with some investors and holiday home purchasers.
The unit market is the slowest in the Whitsundays at the present time. Within this market, the entry level unit market with values from high $100,000 to high $200,000 is the slowest and includes small 1- or 2-bedroom units in Cannonvale and Jubilee Pocket.
Buyers in this market are traditionally investors or first home buyers.
Townsville’s residential market remains slow with the most active sector being property priced under $450,000.
The median house price as at June 2016 was $335,000. The under $450,000 price bracket covers a wide section of the housing market with the upper end providing for modern homes in modern land estates. Buyers are mostly owner occupiers looking to upgrade the amenity of their property or move to a better location. Renovators are also active in this price bracket with the availability of tradespeople and the low cost of borrowing appealing to this type of buyer.
Overall affordability remains the key focus for buyers who must take into consideration their own financial and employment positions and are buying properties they perceive as good buying based on their current economic circumstances.
The slowest sector is currently the vacant land market which has seen a significant reduction in sale volumes over the past two years. This reflects a lack of buyer confidence in the market stemming from the subdued economy, along with the economics of building a new home versus the cost of buying an existing home.
The inner city unit market and the higher end residential housing market are also less frequently traded. This is due to a combination of thin volumes of stock on the market along with vendors willing to hold back going to market until conditions improve. Within the inner city unit market we have seen some recent sales by vendors unwilling to hold on for market improvement that have reflected significant decreases in value from purchase prices.