Bundaberg Property Watch Q4 2011

The following Property Watch report is the result of an investigation into the historic and current market trends within the Bundaberg Local Government Area (LGA), with a specific analysis on the Bundaberg Coastal market comprising the suburbs of Burnett Heads, Bargara, Innes Park, Coral Cove and Elliott Heads (as illustrated on page 3 of this report). It is important to note that the Bundaberg LGA analysis will exclude the aforementioned coastal suburbs to facilitate a market performance comparison of the two study areas. The aim of this report is to outline the recent performance of the house, unit and vacant land markets within each market.

Area Characteristics
Bundaberg is located roughly 380 kilometres north of Brisbane and 15 kilometres inland from the coastline. Bundaberg is situated on the Burnett River and has been a major service centre in Queenslands Wide Bay-Burnett region for over 130 years. The area is primarily supported by the sugar industry and the flow on effects from agriculture. The local real estate market contains housing stock to suit all tastes and budgets with the majority located within close proximity to the town centre and the coastline.
Bundaberg LGA House Market

The Bundaberg LGA housing market has recorded a stagnant median price in the years preceding the Global Financial Crisis (GFC) in 2008. The median house price recorded in the June 2011 half year period was $283,000, only $2,000 below the historic peak recorded in the corresponding period in 2010. A resale analysis was conducted to ascertain the returns home owners have achieved within the Bundaberg LGA throughout the June 2011 half year period. This analysis established an average annual capital appreciation of 5.2 per cent per annum. This product had an average holding period of just over seven years, indicating that the majority of growth achieved was attained prior to the GFC.
A total of 513 sales were registered in the June 2011 half year period, 400 sales less than that recorded in the June 2009 half year period. This 44 per cent softening in sales activity over the past two years is largely attributed to rising interest rates, increasing cost of living and the withdrawal of the First Home Buyers Boost, which provided a catalyst to buck the downward trend in sales activity at least for the six month period to June 2009. This trend was experienced across most markets in Queensland with exception to the sustained median house price evident over this period. There were no notable differences in the distribution of price points over this same period, rather a decrease in the sample size.

The prevailing median house price in a market of subdued sales activity suggests that the first home buyers segment has lost traction since the June 2009 half year period, which coincided with increasing interest rates and the phasing out of the First Home Buyers Boost. Perhaps another contributing factor to the current median price are vendors who are holding onto property for longer periods of time, unwilling to discount their price expectations to meet the market. The most active suburb in the six months to June 2011 was Kepknock which recorded 43 sales. Kepknock has consistently performed within the top three most active suburbs since the June 2009 half year period, with Bundaberg North and Avenell Heights trailing close behind over the same time period.

Bundaberg LGA Unit Market
The Bundaberg LGA unit market has demonstrated a sensitivity characterised by changes in economic conditions over the past three years. As one would expect, the median unit price experienced a noticeable correction during the December 2008 half year period when the implications of the GFC begun to take effect. However, with the introduction of government stimulus and relatively low interest rates, the median unit price begun to re-emerge to record highs, registering a median price of $270,000 on the back of historically high transactions for the June 2009 half year period. Since then, the median price has corrected considerably and has remained stagnant at $249,000 for the past year to June 2011. A resale analysis for units within the Bundaberg LGA has revealed that residents who sold their units during the June 2011 six month period received an average annual capital appreciation of 2.8% per annum. This product had an average holding period approaching six years.

The number of transacted sales in the six months to June 2011 demonstrated a marginal increase of six sales from the previous December 2010 half year period to record a total of 71 sales. The current level of activity is 39 per cent below the five year average sales rate of 117 sales, and 56 per cent below the historical peak of 162 sales recorded in June 2009. The most active suburb in the six months to June 2011 was Avenell Heights, with 11 of the total 71 transactions. Avenell Heights has consistently performed within the top three most active suburbs since the June 2009 half year period followed closely by Bundaberg South and Bundaberg North during the same period. With regards to price point distributions, the six months to June 2011 evidenced fewer transactions in the above $400,000 price from the previous June 2010 half year period. With that said, activity in the mid-range price brackets was more prominent in the June 2011 half year period, hence the same median price recorded at the end of both periods.

Bundaberg LGA Vacant Land Market
The Bundaberg LGA vacant land market has seen, in the main, consistent positive growth in median price over a five year time horizon, recording an average annual growth rate of 7.3 per cent per annum. This was higher than both house and unit markets which recorded 5.4 per cent and 2.5 per cent respectively. In the year to June 2011, the median land price has increased marginally at 2.8 per cent to record a final median price peak of $140,000.

Over recent years, sales activity has decreased considerably, registering 116 sales in the June 2011 half year period. This represents a 48 per cent softening from the previous year where a total of 224 sales were transacted in the June 2010 half year period. In the six months to June 2011, Branyan has recorded the most transactions with 17 sales, followed by Moore Park Beach (11) and Ashfield (9). These three suburbs have performed within the top five most active suburbs for the past three years to date. Analysis of the price point distributions has revealed the bulk of transactions have occurred within $100,000 to $149,999 price range, accounting for 40 per cent of total sales followed by 24 per cent within the $150,000 to $199,999 price range. Activity within the $150,000 to $199,999 price range has increased by 7 per cent from the year to June 2011, which has contributed to the marginal increase in median price growth over this period.

Bundaberg Coastal House Market
In the year to June 2011, the housing market has seen a correction in the median price, to register $352,000. This figure was $20,000 below the median price of $372,000 recorded during the June 2010 half year period, which historically was the highest median price recorded for the area. Whilst this represents a 5.5 per cent decline in median price growth for the year, the long term growth trend remains positive, recording 3.6 per cent growth over the five year period to June 2011. A resale analysis for house product over the six months to June 2011 has achieved an average annual capital appreciation of 4.1 per cent, a figure reminiscent of property performance a decade ago in which 4.2 per cent was recorded for the December 2001 half year period. This product had an average holding period of six and a half years.

Sales activity during the six months to June 2011 registered a total of 100 transactions, translating to a 28.6 per cent decline in activity from the June 2010 half year period. More importantly, 24 per cent of total sales transacted in the June 2011 half year period occurred within the $250,000 to $299,999 price range, compared to 11 per cent in the June 2011 half year period. The analysis suggests that a combination of both fewer transactions taking place in the market and a growing appetite for more affordable product is influencing the median price for the area which is analogous within the wider Queensland property market. The catalyst for improved sales activity, price growth and subsequent capital growth prospects will ultimately derive from renewed confidence in the market on the back of a more positive economic outlook.

Bundaberg Coastal Unit Market
The unit market has demonstrated a steady increase of 5.7 per cent in median price growth in the year to June 2011, recording a final median price of $370,000. On the eve of the Global Financial Crisis the unit market experienced a significant correction on the back of unsustainable upward pressure on prices, as evident in the December 2007 half year period. The market has since demonstrated steady median price growth despite subdued levels of activity. A resale analysis for unit product over the six months to June 2011 has achieved an average annual capital appreciation of negative 1.4 per cent per annum, a figure that hasnt been recorded for over a decade. This product had an average holding period of just over three and a half years, suggesting units purchased post GFC have demonstrated weak capital appreciation.

Liken to the house market, the number of transacted sales in the unit market for the June 2011 half year period demonstrated a considerable fall, registering just 21 sales. This represents an almost 50 per cent decline in activity from the June 2010 period which recorded 41 sales, just short of the five year average of 44 sales per annum. Price points for units in the year to June 2011 have shifted towards higher priced product, with 38.1 per cent of total sales transacting above $500,000 compared to 14.6 per cent recorded in the June 2010 half year period. Thus, the growth in median price over this period is a result of both fewer transactions recorded in the lower price ranges and an increased level of activity in the higher price ranges. This trend is supported by a relocation of cashed up workers from mining towns, in particular Gladstone, looking to escape the increasingly unaffordable state of the local market in search for regional centres that offer a superior value proposition and lifestyle offering. This segment of the market has the ability to sell an existing property in Gladstone at a relatively inflated price, which in turn enables them to purchase a more desirable dwelling in a more desirable location, hence the level of activity in the higher price range.