Regional QLD Property Market Update May 2020
Sunshine Coast Property Update
In January, Herron Todd White put together the 2020 outlook Month In Review across the property markets.
At the time, we stated it was very difficult to predict what may occur due to a range of macro and micro economic factors impacting the market. One of the major concerns was around the impacts of the bushfire crisis. There was also the impact of local and state elections during 2020 as future concerns. The underlying local market fundamentals were however strong and our overall thoughts were that we would likely see the market continue to show steady improvement during the year.
However, the COVID-19 pandemic, which was already impacting China at the time, continued to travel throughout Asia as February rolled on and the first cases were being reported within Australia. Impacts to our overall way of life were limited until mid-March when the first of a range of restrictions began to impact not only our movements, but also our relationship with property.
The following information provides some of the most up to date considerations, feedback and market evidence that we are aware of within the residential market.
Most markets on the Sunshine Coast experienced good levels of demand that resulted in increased sale volumes and upward pressure on values. When COVID-19 started to bite in mid-March, we were coming off extremely low stock levels. This was different to the most recent market downturn, being the 2008/09 global financial crisis when there was more stock on the market and there was some resistance to asking prices at that time.
We have seen sales enquiries fall. Early indications are buyers that rea still around are serious purchasers and appear to have been in the pipeline for a while. Some sales over recent weeks are:
- Buderim Meadows (south-east foothills) – Mostly renovated dwelling with a pool. Property expected to achieve $820,000 to $850,000. Sold within a week for $830,000 to an owner-occupier.
- Sunshine Beach – Large duplex unit listed since November in the low to mid-$3 million range. Recently contracted for low $3 million. Previously sold for $2.65 million in May 2019.
- Buddina canal front – Modern, good quality dwelling on a south facing allotment. Expectations in the low to mid-$2 million range. Sold at the higher end of the range at mid-$2 million.
Typically in markets where there is strong enquiry we see premiums often being paid. These premiums can be in the order of five to 10 percent. With the fall in enquiry and in some areas where stock levels are slightly higher, some sales are showing results where this premium has evaporated. Some sales examples are:
- Maroochydore – Modern, good quality dwelling on a smaller lot. Expectation was circa $800,000. Sold for just under mid $700,000.
- Wurtulla – Semi-modern brick dwelling listed for $569,000. Sold for low $500,000.
N.B: It will be extremely important to understand the circumstances of any sales that transact in this period once there is a recovery. Then, like the virus, we will be able to, in effect, quarantine those sales.
Since the government shutdown of non-essential services and the temporary ban on auctions and open inspections, it has been interesting to see how agents, buyers and sellers have adapted. Feedback is that it’s a bit of a mixed bag.
- One of the leading agencies on the central Sunshine Coast recently took eight properties to auction with seven selling.
- A $2 million plus purchase on the northern Sunshine Coast was completed to an interstate buyer via a video call and marketing material.
- Some properties have had limited interest because of the inability to physically inspect.
Agents have generally indicated that there have been no signs of a significant increase in property listings. They have not been flooded with vendors who have been panicked into selling their properties. Another interesting point is that there has been no increase in the number of owners with holiday rental properties wishing to sell.
For the time being, lower listing activity and the already low supply, coupled with softening demand, will help moderate any potential falls in value.
On the rental side, some holiday rental property owners have instructed their property managers to fill the void left by the non-existent holiday rental market and fill their vacancies with permanent rentals. We have also seen Airbnb holiday rentals being advertised for three to six month rentals on Facebook and other social media sites.
These investment and holiday home properties could come under increasing pressure should the restrictions be prolonged.
The big learning from trying to compare the COVID-19 impacts with those surrounding the global financial crisis is that they are nothing alike. The state and federal government stimulus packages on offer and continuing to evolve are unprecedented. The support being offered by the finance sector in business and home loan relief is also huge. The combination of all these strategies and the low interest rate environment are playing a massive part in minimising the damage to the economy of which property makes up an enormous part.
Speak with a Sunshine Coast Mortgage Broker today.
Rockhampton Property Update
To date, Rockhampton and the central Queensland region have been well insulated against the COVID-19 outbreak. Only eight confirmed cases have been recorded in the region, six of whom have recovered with two active infections remaining. Importantly, no deaths have occurred and the last positive case was recorded on 1 April, over three weeks ago. Despite these favourable statistics, the unavoidable impacts on hospitality, tourism and some retail outlets have been dire. Our local diverse economy however has proven to be a shining light, most notably the mining and construction industries which have to date managed to stay COVID-19 free and have been able to continue operations at close to full capacity, keeping jobs and the local economy ticking over.
It has to be said however that our local property market has experienced a direct impact on confidence levels and sales activity, with many buyers and sellers erring on the side of caution and hitting the pause button. Local selling agents report a noticeable drop in buyer enquiries and new listings, however there is no sales evidence to suggest a drop in prices or values at this point in time, particularly important after our market was beginning to experience a level of growth in the past six to nine months which had not seen for over seven or eight years.
In summary, if Rockhampton and the central Queensland region can maintain the low levels of positive COVID-19 cases, keep the major industries in operation and get back to some normality, then there’s a feeling our markets will hold up well against this pandemic. The risk going forward is the unknown on how long government restrictions will remain in place which will continue to produce a heightened level of concern and cautiousness from certain sectors of the market.
Speak with a Rockhampton Mortgage Broker today.
Gladstone Property Update
In order to tackle the subject of how the Coronavirus pandemic will affect the Gladstone property market, we decided to take a look back at how the global financial crisis affected the market in Gladstone as it is considered the most similar global event in our recent history.
In the calendar year of 2009, the median house price in Gladstone dropped by approximately four percent to $368,000. In 2010, the median price jumped back up approximately six percent and the year after that, jumped a further 15 percent on the way to the biggest boom in Gladstone’s history.
In terms of price, the global financial crisis was just a minor blip on the market trend lines for Gladstone. The city’s industrial base held it in good stead and the impact was minimal compared to other regional Queensland locations. The volume of sales did however drop substantially in the region after the global financial crisis. Volumes dropped from 1,718 (house) sales in 2007 to 903 in 2008 and 1,070 in 2009. We can draw some comparisons from what happened after the global financial crisis to what we predict will happen during and after this pandemic in the Gladstone region. Agents are reporting reduced enquiry levels and while sale transactions are still occurring, the sales rate is much lower than the norm for most agents. We predict that volumes will drop for the foreseeable future until most restrictions have been lifted and the number of cases further declines. While there has been a fall in confidence levels, Gladstone has been lucky with only one confirmed case in the region. In terms of value levels, we do not expect to see any drops in value in the Gladstone region. Gladstone has had its significant downturn. The median price in the peak of the market (2012) was $470,000. This dropped approximately 37 percent to $295,000 in 2019. The limited data for 2020 shows the median house price at $305,000, which is in line with previous market commentary indicating the Gladstone market is on the road to recovery.
There is a significant gap between the current median house price ($305,000) and the median house price as at 2009 ($368,000) after the global financial crisis hit. The two dates in time differ slightly in terms of stages of the property cycle, however anecdotal evidence does show that after just one year and only a four percent fall, prices started rising again. We believe that Gladstone has seen the worst of its declines in value and that value levels will hold firm with limited movement (either way) until this pandemic is over.
Parts of Gladstone’s economy do rely on tourism. The next stage of the East Shores precinct includes a cruise ship terminal. It’s too early to speculate on what the cruise ship industry might look like in the future, however anything tourism related will be hard hit in the years to come. While this will impact the Gladstone economy, we consider that the strong industrial bones of the city make it slightly more immune to the likely economic impacts of the Coronavirus and that the residential property market will come out stronger on the other side.
Bundaberg Property Update
Welcome to the COVID-19 edition of the Month in Review.
Starting on a positive note, there have been no confirmed cases of COVID-19 in the Bundaberg area since the beginning of last week. With the continuance of current social distancing measures, Herron Todd White has implemented a process of contactless inspections developed through the use of an app that enables us to inspect the interior of the premises electronically with the help of the occupants of the property in cases when we are unable to enter the premises due to concerns about COVID-19 infection of the occupants. So it’s full steam ahead from our perspective.
The market remains steady at this stage of the pandemic. Sales appear to be holding firm even though news reports indicate negative feelings.
Rental demand is still strong and with the latest government laws announced recently, there is now better protection for both tenants and landlords.
New residential constructions are still being undertaken and builders are reporting steady demand.
Agents are reporting that there is a reduction of stock with some owners taking their properties off the market in the short term.
Stay safe and keep washing your hands.
Speak with a Bundaberg Mortgage Broker today.
Mackay Property Update
This month we take a look at the effects the current COVID-19 pandemic has had on the Mackay property market. At time of writing, Mackay has registered nine cases, all of which have been people returning from overseas, with no community spread recorded. We have been very fortunate to have limited cases and it’s been a credit to the whole Mackay community for strictly adhering to the social isolating and other health advice given.
So how has the Mackay market coped so far? Firstly, let’s have a look at the Mackay economy and the effect government restrictions have had. Mackay’s major industries are mining located in the Bowen Basin and associated service industries, government services plus major infrastructure projects currently underway. All of the industries have been declared essential services and have continued to operate throughout the current crisis. Couple this with other professional and financial services and the majority of the Mackay economy has continued to operate, however other industries such as hotels, restaurants and cafes, sporting facilities and gyms have been forced to close as have the majority of retail outlets in major shopping centres, resulting in job losses and uncertainty in these industries.
The majority of agents have all been in basic agreement about the effects of the current pandemic. All agents report reduced buyer enquiry and lower sales volumes during the first five weeks of the restrictions, however, the sales volumes were not significantly lower and property values appear to be holding steady, with sales during the period showing no real material change in value. While buyer enquiry has declined, it has basically removed tyre kickers, with almost all enquiry now from genuine purchasers looking to enter the market. The common consensus is that a cautionary approach is being taken just to see the full effects of restrictions. They all share the common opinion that it appears that the worst of the restrictions are currently implemented (subject to massive outbreak) and that those who currently have jobs in the major sectors are more than likely going to keep them through this period. It is our opinion that the market will be placed into a holding pattern, with no real change in market values and that the momentum built up over the past 18 months prior to restrictions will carry on after the pandemic passes by.
One property market segment particularly affected by the pandemic is the rental market. The Mackay rental market was already tight with vacancy levels under two percent. Agents are reporting greater interest, particularly from fly in fly out workers who have been unable to travel due to restrictions and will be further hampered by the effects of Virgin’s possible closure.
Speak with a Mackay Mortgage Broker today.
Hervey Bay Property Updates
Active yet cautious is how we would rate the property market on the Fraser Coast at present. The Fraser Coast currently has ten recorded
cases of COVID-19, eight of which were reportedly acquired overseas. Generally, the public appears to be adhering to restrictions regarding travel and social distancing. The retail sector targeting the tourist market has been significantly impacted due to the travel restrictions and the once bustling cafes, restaurants and hotels are now take-away only. The Easter long weekend would normally see our beachfront caravan parks full and the foreshore active with social BBQs and picnics.
As a property valuer, access to a property to undertake the inspection is a key component to the valuation. Over the past month, obtaining access has become more difficult as some occupants are unwilling to open their homes to a potential external source. We have however adapted our business to deal with this scenario by utilising technology to undertake a Contactless Inspection through an app that enables us to communicate with the occupant who in turn provides photographs and details of the property’s internal condition in order for us to make our assessment.
I have been regularly asked at inspections, “What is the market doing? Is it going down?” We are finding an increase in sentiment that the market is falling which is currently not the case and unfortunately shock media has created this theory. Any new sales over the past month on the Fraser Coast appear steady and do not indicate a falling market. As a consequence of this negative sentiment, local agents are reporting that the number of appraisals and listings is falling as owners become reluctant to list their property, thinking it is a bad time to sell. Vendors are also beginning to lack urgency, thinking that if they wait a month or two, restrictions may be lifted and market sentiment may have improved. Yes, it is more difficult to market but some agents have adapted well by increasing social media profiles and utilising technology to provide virtual tours, and buyers and sellers are still active. Some speculative buyers are already using COVID-19 as a reason to submit a low ball offer, however at this point, vendors are holding firm. With active buyers still evident, the fall in listings could see an undersupply in the coming months, which can potentially result in higher prices being achieved. Any forced or quick sales at this time will, unfortunately, have a negative impact on our market in months to come.
The most active market in Hervey Bay is below $450,000. This market includes established and new house and land package homes. Local builders supplying base level housing have reported some decline and demand from interstate purchasers and investors as a consequence of travel restrictions. Builders supplying the local owner-occupier market are however reporting steady construction demand with ample contracts to see them in work for many months to come if not well into next year. The higher priced property market above $600,000 remains active, however has a smaller buyer pool and generally requires a longer selling period. The rental market in Hervey Bay has been strong for a number of years and Maryborough property owners are now also experiencing the benefits of strong demand and low vacancy levels. This is unlikely to change in the foreseeable future.
Hervey Bay has long been seen as a tourist destination, heavily reliant on the travel dollar and interstate migration. The region has also seen a considerable improvement in our medical sector which has been growing at a rapid rate over the past five years and can now offer services that in recent years, recipients had to travel to metropolitan areas for. Our climate, location and affordability are aspects that are now more appealing than ever for anyone wanting to relocate, seeking a change in lifestyle and to help minimise the risks that come with more densely populated areas.
Speak with a Hervey Bay Mortgage Broker today.
Townsville Property Update
The Townsville residential property market has experienced a slow down in activity following the onset of the Coronavirus lock down restrictions, although we are currently seeing a very low infection rate.
Anecdotal evidence suggests that there are currently less buyers in the market, some sellers have removed properties that were listed for sale and some contracts of sale didn’t proceed following the initial onset and lock down restrictions. Broadly speaking, to date we have not seen any evidence of decreases in value levels.
Although being impacted by the current circumstances, our economy is well placed to recover compared to other locations. We are not a tourism based economy and our workforce is bolstered by industries such as defence, public administration, health care and education. These sectors have been generally able to adapt and continue working as normal.
Our current feel of the market is that the first home and entry level buyers are likely to be most impacted at present due to the lock down restrictions impacting job security, whilst job security of upgraders and downsizers is likely not being as heavily impacted.
Looking to the future post lock-down restrictions, if retail and hospitality businesses forced to become dormant can re-open again we believe the market will return to post Coronavirus activity, however if this does not transpire, then it is likely to have lasting effects on our market.
Whitsunday At the last census in 2016, the Airlie Beach and Cannonvale Urban Centre Locality (the suburban Whitsunday area) had a population of 9334 and approximately 18.7 percent of the workforce was employed in the industries of accommodation, scenic and sightseeing transport and cafes and restaurants. Approximately 5.6 percent of the workforce was employed in coal mining. From these percentages it can quickly be appreciated that the local economy and the local residential property market relies heavily on employment generated from tourism and is supported by drive in, drive out coal mining employees. These percentages would have been fairly similar immediately prior to the pandemic.
The local tourism industry in the Whitsundays has effectively been shut down by the pandemic. Tourists are unable to visit, tens of thousands of room nights and tours have been cancelled, many flights into the region have been suspended, ferry services to the islands are suspended, Hamilton Island is closed and cafes and restaurants in Airlie Beach are providing takeaways to locals only. Mass job losses have occurred.
There has been no change in the value of standard residential homes in the Whitsundays, however given the state of the local economy it is reasonable to conclude that the residential property market may be adversely affected in the wake of the pandemic.
Despite the grim outlook, local agents report that enquiry levels remain reasonably active for typical houses and units. Sales are still occurring albeit at lower volumes.
We have noticed that former short term holiday accommodation is currently being offered for long term occupation, however there has been no appreciable decrease in weekly rental rates so far.
Our concerns in the aftermath of the pandemic will be: the reduction of flights and the cost of flights into the region, particularly if Virgin Australia collapses; the absence of international tourists for an extended period after domestic travel restrictions are lifted; and the limited availability of holiday leave available to potential domestic visitors because their leave entitlements were used up through the pandemic. We believe that it will take some considerable time for the tourism industry to recover.
Residential property markets typically take some time to react to economic shocks. The longer the tourism industry suffers, the higher the risk of a reduction in standard housing rents and property values. It is unknown when and to what extent a downward correction will occur, if at all. The reality is that the key industry driver of the residential property market is in a very bad situation and the risk of a correction is now elevated. Any correction may be cushioned by housing demand from drive in, drive out coal mining employees because coal mining remains largely unaffected by the pandemic.
There is also a risk of a market correction for high value, luxury residential property in the Whitsundays. This market is typically driven by Sydney and Melbourne buyers and is influenced by the performance of those residential markets and the performance of the share market. Once again the availability and cost of flights from the southern capitals to the Whitsundays may be a future constraint in this sector.
Speak with a Townsville Mortgage Broker today.