The month in review: Regional QLD
By Herron Todd White
The unit market in Emerald is performing very poorly at present and given the current low level of demand, the high level of supply and the current vacancy rate, the signs are pointing toward further heartache for owners of units and townhouses in Emerald. The lowest unit sale for 2015 is a flood affected 2-bedroom, 1-bathroom townhouse for $115,000. Older 3-bedroom units are selling at around $150,000 and modern 3-bedroom units at around $220,000 to $250,000, down from a peak in 2012 of $400,000. Units have been the hardest hit in the current slow down with an oversupply, lack of investor interest and most purchasers, being owner occupiers, preferring a house.
The unit market has undergone a gradual absorption of excess stock over the past five to six years after a long period of oversupply and retracting sale prices. There is currently reasonable demand for onground unit stock located close to the CBD and beach. Depending on the location and overall improvements, the difference in sale prices between new and older existing units appears to be minimal. For example, onground circa 1990 2-bedroom, 1-bathroom units may sell for only $20,000 less than a circa 2007 modern 2-bedroom, 2-bathroom townhouse in a similar location. It appears that the demand for onground units appeals to a wider market and is likely to appeal to an older buyer (with many retired residents on the Fraser Coast).
Most of the older unit stock in original condition predominantly sells from $190,000 up to $230,000. Newer units may typically sell for between $250,000 and $330,000, with higher priced stock above this range selling for $380,000. Buyers in the unit market comprise a mix of investors and owner occupiers, with most units selling within six months of the original listing. Going forward, new unit development is considered eminent with affordability being a key factor for selling prices in order to achieve a steady sale rate.
Unit sales in the Bundaberg town area have been slow over the past six months with just under 30 sold. Prices range from $107,000 for a 1-bedroom, 1-bathroom renovated unit from the 1970s to a circa 2005 3-bedroom, 2-bathroom unit with 2-car built-in garage for $300,000.
The construction of new unit stock is sporadic and is mainly four pack complexes with some larger ones depending on the size of the parent block.
Median rentals range from $225 per week for 2-bedroom units to $280 per week for the larger 3-bedroom units. Yields are around 5%.
The unit market in Gladstone is performing very poorly at present and given the current low level of demand, the high level of supply and the rising vacancy rate, the signs are pointing toward further heartache for owners of inner city units/apartments and suburban townhouses in Gladstone.
Demand for near new, modern apartment stock is extremely limited. Only two sales of modern apartments in Gladstone have occurred in 2015 to date. Both of these sales showed declines of between 45% and 50% from sale prices that occurred in the peak of the market in 2011 and 2012.
The market for older townhouse and unit stock in suburbs around the city has been fairly active over the past several months. Values however are also showing very significant decreases of between 40% and 50% from the prices achieved in the peak of the market. There have been 13 sales to date for units or townhouses of older age (typically over ten years old).
Over 900 new units or townhouses were built over the five years between the beginning of 2010 to the end of 2014. The initial surge in construction activity was to combat the severe accommodation shortage occurring because of the LNG boom. Most of these were purchased by investors on off the plan contracts and the completion of many of these projects occurred well after the market had peaked. Despite the oversupply of unit products in Gladstone we are aware of a number of projects that have recently started marketing units off the plan and there is another fairly significant townhouse development which has commenced construction.
Another worrying sign for the unit market in Gladstone is the vacancy rate which has been steadily climbing over the past several months. The vacancy rate peaked in December 2013 at 10.2% and has generally fallen until around January 2015 at which time it started rising again. The vacancy rate currently sits at 6.8%, the highest it has been since May 2014.
Major companies associated with the LNG construction have recently started selling off surplus housing stock in Gladstone. We know a number of these companies hold significant stocks of units and it is only a matter of time before the stock on the market increases.
With the number of workers on Curtis Island decreasing by the week, the outlook for the Gladstone market in general is dim, however close attention should be paid to the unit market as it is likely to take the hardest hit.
Rockhampton has traditionally had a very small sector of its markets represented by attached residential units. This was until mid 2005 when we saw the first major high rise unit development in over 30 years occur along the river front precinct known as Victoria Parade. Since then there has been a significant boost in unit construction with six major complexes built, all concentrated on the same river front precinct. A brief summary is as follows:
• Waterfront – 2005 (13 unit complex over six levels). Permanent occupancy only.
• The Rocks – 2007 (28 unit complex over nine levels). Permanent occupancy only.
• The Edge – 2009 (77 unit complex over 12 levels). Restaurant and short term accommodation.
• Quest – 2012 – Predominantly short term accommodation with little sales evidence to date.
• Empire – 2014 – (138 unit complex over 12 levels). Restaurants and short term accommodation.
• South Bank – 2014 (54 complex over eight levels). Permanent occupancy only.
Further to this The Gallery is current calling for expressions of interest and is expected to start construction in early 2016. The complex will comprise 62 units over nine levels.
Over this time we have seen the average size of units decrease with a focus on the bottom line. Smaller units equals more units and these have proven to be very attractive to the market. In 2005 we saw large spacious 3-bedroom units (160 square metres plus) selling from $330,0000 off the plan compared to Empire where much smaller 1-bedroom units of 50 plus square metres have sold for $330,000 off the plan.
Despite the significant boost in unit numbers over the past ten years the attached residential space still reflects only a very small percentage of the entire Rockhampton and surrounding residential markets. This has been a key factor in the successful marketing and solid sales rates which have enabled these developments to get out of the ground. Looking forward the notable downturn in the resource industries across Central Queensland and general lack of confidence across the market may result in an extended period where the Rockhampton skyline remains unchanged for some time into the future.
Units in Mackay have had a roller coaster ride over the past five years. On the back of historic low vacancy rates for standard residential and high occupancy rates for motels and serviced apartments a large number of units, ranging from smaller duplex, triplex and quadplex complexes to large scale highrise unit complexes were thrown into the mix. During the planning and construction phases, the market in Mackay turned quite sharply and quickly on the back of the downturn in the resource industry. Standard residential vacancies some two to three years ago were below 1%, and now hover just over the 9% mark. Rental values have reduced significantly on the back of this reduced demand and fallen in some instances up to 40% from previous highs.
One area of concern is the highrise unit market. There were previously four highrise towers within the Mackay CBD: The Rivage contains 59 1-, 2- and 3-bedroom units; Lanai comprises 80 1-, 2- and 3-bedroom units; The Crown contains 43 2- and 3-bedroom units; and Fusion comprises 31 2-, 3- and 4-bedroom units.
In the past 18 months, there are another five highrise towers recently completed or nearing completion within the CBD or fringe locations: Rivermarque; Riviera Mackay; Carlyle Apartments; Pacific Sands; and Gateway Apartments. Rivermarque is a new eight level residential unit tower located within the fringe of Mackay CBD. The complex consists of 91 units being a mixture of studio, 1-bedroom, standard 2-bedroom and 2-bedroom dual key units. The complex is managed by Oaks Property Group. The Riviera complex has just been completed and is located on the northern side of River Street directly opposite Rivermarque. It consists of 64 1- and 2-bedroom units. Carlyle Apartments has recently been completed and provides 59 1- and 2-bedroom units plus 2- and 3-bedroom dual key units. It is located on the south eastern fringe of the CBD. The complex is managed by Oaks Property Group. Pacific Sands has recently been completed and provides 56 1- and 2-bedroom units plus 2- and 3-bedroom dual key units. These units are removed from the CBD and located in close proximity to town beach. Gateway Apartments has recently been completed and provides 56 1- and 2-bedroom apartments. These are located in the older residential suburb of West Mackay, removed from the CBD.
This construction phase has introduced a further 326 units into the Mackay market on top of the 182 existing units. Throw in another eight completed highrise residential towers at Mackay Harbour and it has become apparent there is an oversupply of highrise units. Most of the new completed units in the CBD were purchased off the plan in 2012 prior to the fall in the Mackay market. It will be interesting to see when resales occur the level of demand and prices that can be achieved in the current market.