Regional Qld market update

The end of financial year has been and gone, we all bought our new large screen TV’s as the retailers gave hefty discounts to move them out the door. However, it seems you can still get them for a song even after the EOFY sales have meant to have finished. Consumer confidence rose 3.7% in the month of July however businesses are still doing it tough. The unemployment rate has been creeping up and over 5% since its may low of 4.9%.

It will be interesting to see August statistics as economist talk down the lynch pin to our economy, mining. Deloitte Access Economics have made a bold statement that the mining boom will be over in just 2 years. This is obviously a vast contrast to what we have all read and educated ourselves on for some time now. I have provided commentary on this topic as has Terry Ryder. PPI’s Facebook page has all that you need to inform yourself otherwise.

The question is, has the low consumer confidence over the past couple of months hit the ever buoyant mining regions of Queensland? Arguably, yes it has. Whilst the EOFY period is traditionally slower in investment sales as people finalise their financial position and set goals for the year to come, the property industry generally gets a little breather. However it has been a deeper breath than usual as it appears the former Qld Labor Governments $10,000 new home boost didn’t boost overall new home starts, it appeared to have brought many buyers with the intention to purchase is 2012, to do so in the first 4 months of the year. Many people have experienced reduction in sales south east Qld of nearly 70% since the boost ended. For the sake of humanity, I refuse to believe that we can be encouraged to buy a house in order for the cash gain of $10,000. As such, I am left with the opinion that this boost only brought buyers forward.

Going Into the regions now for an update as I see it. Overall, we have seen rental prices increase for a number of reasons. Many purchases from last year and the start of this year have finished construction and added considerable amounts of new stock to the market. Camps that were planned have seen stages of completion so companies moved out of houses and into the camps. BMA (BHP & Mitsubishi Alliance) have intensified their debates with the unions and this has seen a pause in new contracts being issued. With 6 (previously 7 prior to the Norwich Park closure) mines in the Bowen Basin they are a major employer and create a lot of demand for service related industries also.

Mackay regional council has been inundated with building approvals and is struggling to keep up. Very limited land is available that would be ready to build on within 3 months as sales of new estates is at an all-time high. New 4 bedroom homes are being sold in the low to mid $500,000 range in many estates. Rents seem to be going well with similar housing achieving in the low to mid $600 per week range. However many rental appraisals have come down below $600 from the local agents and this may be in anticipation of more stock coming on the market from the glut of builds this year. However I stand by my prediction that Mackay is an outstanding investment. Just don’t expect a BOOM, the only reason that it will boom are investors. And that’s not a real boom. Long term steady growth is achievable in Mackay and that’s what we should be expecting. Land developers are only putting their prices up because we are paying it. Let me say, they’re making hay while the sun shines. As competition increases in land supply, it will be good to see the arrogance and feeling of self-importance of land developers be levelled once again. Mackay still sits proudly as a growing regional hub with no factors that would see a construction workforce misconstrue what is really happening.

Gladstone has seen a cautious buying market as many more land developers release their stock compared to last year. We are being hounded by developers in Gladstone to sell their product, considering last year they didn’t want to know anybody associated with investors their tune sure has changed. The rental marked has subdued and you can now rent a new 4 bedroom house for under $600 per week. Perhaps an oversupply due to investors buying in on the hype and not looking properly at the long term fundamentals? This is still a market that I suggest to stay away from if you don’t have thick skin. Many more development sites are also now for sale compared to last year. The justification of spending $530,000 - $560,000 ($100,000 over the states median sales price) to get a rent of $600 per week doesn’t look that great to me. But maybe I’m just spoilt for choice?

Moranbah would have to be one of the most interesting case studies of QLD at the moment. Making headlines only 12 months ago about the lack of disparity of rents with Gold Coast mansions to not coming to a standstill and having over 150 properties to rent at any one time. Poised as the fastest growing region on the continent, how could this happen? This is mainly due to the BMA and union led disputes. Again, I bring reference to another post about this. The ULDA has released their land at the wrong time also. It seems the take up of their original target market being locals and small businesses was miniscule. With the council looking to lodge a Development application in the future for residential lots, it appears Moranbah may be able to breathe again and get back some life and attract the families back. People are underestimating the importance of this to happen so the town can be a vital hub to the colossal number of projects around it. Rents are still high at $1000 plus per week for good units and up to $2000 per week for houses. If they can stand this time, I believe they are here to stay. However at least now people can buy some affordable housing and the town can continue to grow properly so it can serve the region for decades to come. I still tip a good buy in Moranbah as a good long term investment.

Emerald Is doing its usual cycle that I am use to. Six months hot and six months a little cooler. BMA has inevitably had an effect on the town in the short term. Couple that with some more stock coming on the market and we have seen rents on 4 bedroom houses shrink to $750 or so per week from their highs of $900 - $950 just 4 months ago. I don’t like saying it, but I told you so. It was inevitable. The Emerald market was not ready for a steady $900 per week. The market fundamentals just weren’t there to support it long term. Argue with me if you will however for a purchase in the high $400,000’s with a rental return of $750 per week, this still has to be one of the best investments around that I can find for a typical 4 bedroom house. This is also due to the long term fundamentals that are at play in this regional hub were poise it for long term population growth with a very high median household income and company support for accommodation. There are a few estates coming online in the future which will see a broader range of property investment opportunities. If you’re not getting value in Emerald right now, then wait for the right one, it will come. Again, I couldn’t recommend a better place to invest with a 5-10 year perspective. We haven’t seen any impact from the Alpha mines yet and I believe it will be a couple of years from now until we do.