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Location Location: Real Estate Investment Hot Spots in Queensland’s Mining Regions


The Real Estate Institute of Queensland’s (REIQ) CEO and Managing Director, Anton Kardash,
has provided an exclusive mining region housing market update for readers of Queensland Mining and Energy Bulletin.


Periods of strong growth and sales activity in the housing sector of Queensland’s mining towns have been experienced over recent years but now appear to be taking somewhat of a breather – as is often the case in resource-driven regions.

During the mining boom, towns like Moranbah, that are located next to large infrastructure projects, experienced high housing and rental price increases as there was simply not enough stock to offset demand for accommodation.

During this time, Brisbane’s housing market struggled as a result of the GFC and Queensland’s flood disasters.  Now it seems its Brisbane’s time to shine with the latest REIQ Queensland Market Monitor (QMM) data indicating our capital market has finally turned a corner.  The preliminary volume of sales increased nearly 40 per cent between the June quarter this year and the same period last year and both the unit and house markets are gathering steam with sales volumes much improved on the same periods in 2012.

Overall however, the September quarter and the upcoming Spring selling season is typically a great period for the Queensland real estate market. With such good price and sales results for the June quarter, as well as historically low interest rates, it’s shaping up to be another strong period as our market should maintain its current momentum.

“According to the State Government, Queensland’s coal passing through the major ports has returned to pre-GFC and pre-flood production in a further sign of a strengthening economy.”
“According to the State Government, Queensland’s coal passing through the major ports has returned to pre-GFC and pre-flood production in a further sign of a strengthening economy.”

In contrast, Central Queensland housing prices, across the board, have stabilised and the market is taking a breather.  The demand for stock has also stabilised mainly due to the fact that some mining towns are transitioning from a growth in development stage to a more operational, export phase.  However these areas are strong agricultural bases and have well-established resource sectors which will continue to help drive the State’s economy.

According to local REIQ accredited agencies, it is likely that these regions will pick up again in-line with the improving market in Brisbane and South East Queensland.

The rental market downturn seen in Mackay and Gladstone appears to now be present in other neighbouring resource centres. A vacancy rate of 3 per cent is generally considered to be the equilibrium point of supply and demand.

Mackay Region

The housing market in Mackay is currently being impacted somewhat by the increase in FIFO workers for the region’s mining sector and as such, over the June quarter, the median house price was steady at $430,000. As a benchmark, Brisbane’s median house price was $527,250.

While there remains steady sales activity with 209 preliminary house sales recorded over the June quarter compared to 226 in the March quarter, the numbers of investors in the market has reduced due to the softening rental market.

Agents continue to report an oversupply of rental stock, with additional stock coming on to the market and rental decreases are finally being acknowledged by landlords. Residential Tenancies Authority (RTA) data shows that June quarter median rents for three and four bedroom houses decreased by $20 and $50 per week respectively compared to the year before.  Not surprisingly, property investor interest has dropped according to REIQ accredited agents.

First home buyers had been relatively absent from the Mackay market over recent times due to the removal of the First Home Owners Grant, as well as previous property price increases. However with interest rates now historically low, as well as reduced demand, local agents say now is a good time for first-timers to make their move.

The median unit and townhouse price in Mackay increased 10.7 per cent over the June quarter and was up 1.6 per cent over the year.

Sales in new developments in the Mackay city area were partly behind these strong results. There were 26 preliminary unit sales in Mackay over the quarter with 11.4 per cent median unit price growth to $392,679.

Following on from a significant weakening of its rental market earlier in the year, Mackay recorded a relatively unchanged vacancy rate of 6.6 per cent as at the end of June. Agents have reported that the loss of jobs in the mining sector has left the region with a high unemployment rate, leading to an increase in the amount

of rental properties and significant falls in rental rates.

The latest RTA data shows that June quarter median rents for three and four bedroom houses decreased by $30 and $80 per week respectively compared to the year before. The neighbouring Isaac region saw a more profound decrease of $600 and $1,100 per week for the same property types. While investor activity has notably decreased, there are concerns about those individuals currently investing in property based upon the booming rental market conditions Mackay once experienced.

Gladstone Region 

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Providing a much-needed boost to the state’s economy should Arrow CSG (Australia) Pty Ltd’s $15 billion Liquefied Natural Gas (LNG) plant at Gladstone go

ahead, it will be the fourth LNG plant on Curtis Island with a peak workforce of about 3,500 construction jobs and about 450 operational jobs for Stage One, increasing to 600 on the completion of Stage Two.  It is estimated that the plant will produce up to 18 million tonnes of LNG a year through a staged development.

Although the construction of liquefied natural gas (LNG) plants propelled Gladstone to the top performing major region of Queensland for the March quarter 2011, sales activity through 2012 remained steady.  According to the REIQ’s QMM publication, the Gladstone market held its ground over the 2013 June quarter in the face of reduced demand for property compared to previous years.

Gladstone’s median house price dipped 1.8 per cent to $437,000 over the quarter. Over the year ending June it fell 3.5 per cent. To put it in perspective, however, the median house price in Gladstone increased 20 per cent in the five years to June. By comparison, Brisbane’s grew by just 7.2 per cent over the same period.  The numbers of preliminary house sales in the region, however, increased 20 per cent over the quarter but were down three per cent compared to last year. The biggest fall in demand for houses over the past year has been in the over $500,000 price bracket.

Local REIQ accredited agencies say the peak demand period has passed and that the market is settling into more normal patterns of supply and demand.  The highest numbers of house sales over the quarter were recorded in Clinton, with 18 preliminary sales, and a median price of $400,000 for the June quarter.

The sales of median unit and townhouses  in the region were very low over the quarter – recording just 14 preliminary sales over the period.  The region usually records a small number of sales of this type of property per quarter, however, the overall flattening out of the market can no doubt be partly attributed to this result.

According to the State Government, Queensland’s coal passing through the major ports has returned to pre-GFC and pre-flood production in a further sign of a strengthening economy.  Transport and Main Roads Minister Scott Emerson said the 16.257 million tonnes (Mt) of coal that moved through Queensland ports in July was the highest total ever recorded for that month.  Last year, the second highest movement of coking and thermal coal in Queensland’s history – 180.165Mt in 2012-13 compared to 183.11Mt in 2009-10.  That trend has continued with coal volumes through our ports last month two per cent higher than the previous record of 15.932Mt in July 2009.

The rental market in Gladstone has seen improvement since the first three months of the year, although overall conditions remain weak. The region posted a vacancy rate of 4.6 per cent at the end of June, down from 5.9 per cent for March, but is still very distant from a rate of 2.0 per cent posted one year ago.

Emerald and Moranbah

Over the past 10 years the housing markets within Emerald and Moranbah have both undergone significant growth, particularly during the mid-2000s. AfterACCOMMODATION2 a notable surge during the 2011/12 period, housing market conditions appear to have cooled down over the past year.

The median house price in the 12 months to June 2013 for Emerald was recorded at $445,000, representing a 10-year growth of 218 per cent. Despite sales numbers falling over the past 12 months, Emerald’s median house price increased by 2.3 per cent.  Even more profound is the 10-year median house price growth within the town of Moranbah, up 468 per cent to $500,000. However the last 12 months had not been as fruitful for this town’s housing market. The numbers of sales and median price have both dropped significantly, indicative of how big of an influence mining activity has on the town’s housing market.

Though there has been talk of Central Queensland’s housing market being volatile, many investors expect the State’s resourcing towns to recover in the long term, despite being quiet at the moment.  Though a final cautionary note to investors is to not base their decisions on data alone.

 

SURAT BASIN and TOOWOOMBA

From Central Queensland to the Darling Downs, the Surat Basin area is set to undergo substantial growth as the world’s leading energy companies have plans to double and triple the size of the wells and operations in the region.  The State Government has also outlined plans to support economic growth in the Energy Resources Province.

The median house price in Toowoomba, a major service centre to the Surat Basin, increased 0.6 per cent to $315,000 over the June quarter.  Over the year ending June, Toowoomba also posted median price growth of 4ACCOMMODATION3.5 per cent. When you consider results over five years, the region also performed particularly well with a 17.2 per cent increase in its median house price over that period.  According to local REIQ accredited agents, the market is continuing to improve with demand increasing. There are also reports of some multiple offers taking place.  The predominant buyer type is upgrading owner-occupiers with the $500,000 to $600,000 price range doing well.

Investor activity is remaining robust due to the strength of the Toowoomba rental market. Demand for investment properties is coming from local investors as well as buyers from interstate.

The median unit and townhouse price in Toowoomba increased 4.2 per cent to $255,250. Most sales were recorded in Kearneys Spring which posted nine preliminary sales and a yearly median unit price of $253,500.  According to local agents, the region’s unit and townhouse market remains undersupplied with any new stock sold very quickly.

Outside of Toowoomba demand for more affordable unit stock in Chinchilla has pushed its median unit and townhouse price up by 151.8 per cent in five years.

Rental demand in the Toowoomba region has eased, recording a vacancy rate of 1.8 per cent as at the end of June. Several agents had commented that it is a traditionally slower time of year but that the rental market is believed to have not been affected by mining activity. The region, together with Cairns, has the tightest rental market across the State as at the end of June.

According to the Residential Tenancies Authority, the median rent for a three-bedroom house in Toowoomba increased from $280 per week in June 2012 to $295 per week in June 2013.  The median rent for a two-bedroom unit increased from $215 to $230 over the same period.  The majority of bonds lodged for three-bedroom houses and two-bedroom units were both in Kearneys Spring.

TOWNSVILLE

Another major region, worth mentioning that services mining towns, is Townsville.  With lifestyle and community support available, Townsville is continuing to roll out its welcome mat particularly for families of FIFO workers.

The median house price in Townsville increased 0.8 per cent in the June quarter to $362,965.  According to local REIQ accredited agencies, the market in the region remained steady during the quarter and shows some positivity and promise of better times ahead.

A solid performer over the quarter in terms of median house price growth and preliminary sales activity was Annandale. The suburb posted a median price increase of 7.9 per cent to $442,500 over the quarter as well as 26 preliminary house sales – second only to Mount Louisa in terms of sales popularity.

The flattening out of the rental market is also having an impact on the local market with investor activity falling in-line with the reduction in demand for rental properties. However, some local agents report that the winter months are always slow and the reduction in demand is just a reflection of this historical ebb and flow of demand.  Because Townsville has picked up a lot of mining related business and with their diversified business structure, they seem to be a good investment for the future.


“Because Townsville has picked up a lot of mining related business and with their diversified business structure, they seem to be a good investment for the future.”


The median unit and townhouse price in Townsville reduced 11.2 per cent over the June quarter to $270,000. This median price, however, was impacted by the varying numbers of new and waterfront sold from quarter to quarter.  The highest number of preliminary sales was reported in North Ward, with 25 sales, and a median unit price of $312,000. Demand for units in the area is always strong given its desirable beachside location as well as its many tourist and entertainment amenities.

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Also, according to Herron Todd White (HTW), the Townsville unit market has been lagging behind the housing market. HTW believes that unit prices will remain relatively unchanged over the coming six to 12 months while the market continues to consolidate and factor in changes to strata titled insurance costs.

REIQ vacancy rate survey responses for the end of June indicated that Townsville now joins Mackay and Gladstone in the list of regions experiencing the effects of the mining downturn. The end of June saw a further weakening in vacancy levels for the region, with a vacancy rate of 4.5 per cent recorded. Job losses and underemployment are making it tough for residents, with one agent claiming the state of the rental market was the worst they have seen in 20 years. New investment stock and some NRAS properties are said to be affecting vacancy levels in the market.

Much is happening in Queensland’s mining regions with plans to rebuild communities, ensuring their resilience and potential economic growth.  China’s long-term commitment to Queensland has meant the development, growth and creation of a global supply of the State’s world-class resources, education, tourism, agricultural and building industries.

Premier Campbell Newman continues to highlight current and future Queensland business and industry capabilities as part of a trade and investment mission throughout Asia with China now recognised as Queensland’s largest trading partner.

With resilience and growth in their sights, the State Government is making promises to invest strongly intoregions such as Mackay and Gladstone with plans and proposals to improve infrastructure, roads, health services, education, social housing, flood mitigation and mining safety.  This positive growth should keep housing stabilised and open growth corridors for investors.

 


MT ISA ON A HIGH MARYBOROUGH ON A LOW

According to a recent report by the Residential Tenancies Authority, Mt Isa has bucked the State mining town trend with an average three-bedroom house rental rising from $540 to $580 per week.

The cheapest place to rent in Queensland currently is Maryborough, coming in at $255 per week, while Mt Isa was by far the most expensive averaging $580 per week as mentioned above. The average price of rental accommodation across the state currently stands at $350 a week.


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