Gladstone Region Highlight Report 2013 Q1

GLADSTONE REGION OVERVIEW

The Gladstone Region Highlight Report analyses the performance of the residential real estate market within the defined Gladstone Regional Council. The report contains detailed investigations into three sub-markets within the region which include the Gladstone City Area, Tannum Sands Area and Agnes Water Area. Results of these investigations are intended to identify trends and commonalities that exist between each sub-market, though most importantly to gain an appreciation of the underlying drivers of each particular market.

The Gladstone Regional Council is located around 550 kilometres north of the state capital Brisbane and 100 kilometres south-east of Rockhampton. Population estimates provided by the Australian Bureau of Statistics indicate that the region has experienced the second fastest growth in Queensland between June 2010 and June 2011, achieved through an annual growth of 3.5 per cent. The region also recorded an average annual growth rate of 3 per cent in the ten years to June 2011.

The regions thriving economy is largely attributed to Queenslands largest multi-commodity port, situated on the periphery of the Gladstone City Area. Other core infrastructure including a nexus of rail and highways, the Gladstone Airport, refineries and a list of other production facilities and industrial titles underpin the region as being the most significant resource service centre in Australia. It is estimated that the total project committal as at March 2013 to be in the vicinity of 45 billion. This accounts for projects that are either completed or under constructions as well as projects that are under study or that have been committed. These projects include core infrastructure, major industry, commercial property and land development in addition to various community projects. The sheer size and longevity of such projects is placing increasing pressure on the regions property markets to accommodate an exponentially growing workforce.

AGNES WATER AREA

The Agnes Water Area encompasses the suburbs of Agnes Water, Seventeen Seventy, Round Hill and Captain Creek. The Agnes Water Area house and land markets have been somewhat volatile since the economic downturn in 2008. The house market has been, in general, trending upwards and is currently hovering around pre-2007 levels. Sales levels have picked up since the April 2011 six month period, as steady levels are expected to continue. The house market recorded a total of 51 transactions for the October 2012 period, down nine per cent from the previous six months. This is in line with the previous two periods, which recorded 45 and 56 transactions. The land market in the Area has moved similarly to the housing market, experiencing some minor lag while remaining less volatile. Historically, land sales have accounted for a good percentage of the total market in the Area, with this trend continuing in recent years, where the land market outperformed the housing market by 19 sales in the October 2011 period. In the most recent October 2012 period, the land market recorded 46 transactions, a drop of 13 per cent on the previous period. The unit market has been reasonably stagnant in recent times, with the Area recording 17 unit transactions for the October 2012 period.

With its close proximity to major mining operations, the Agnes Water Area property market is feeling the flow on effects from the resource boom, with a large amount (roughly 60 per cent) of enquiry and purchases coming from nearby Gladstone and the surrounding region. A majority of these are employed by the resource sector and are looking to invest their money, while others are looking for a quieter sea change. Buoyed by this investment, the housing market has experienced a three per cent boost in median price for the period, recording a median price of $368,000 for the October 2012 period. It is expected in the coming months this figure may continue to rise, as higher priced property garners more interest from cashed up buyers, evidenced by the Price Points Chart indicating sales of at least $500,000 accounted for 25 per cent of transactions for the October 2012 period.
The Land market in the Agnes Water Area has been a historically reliable performer, accounting for approximately 40 per cent of transactions over the previous three years. Recently the median price has dipped slightly after a strong showing in the April 2012 period, falling six per cent and finishing at $179,500. Blocks of land larger than 1000sqm have consistently been the most popular product among buyers, accounting for 74 per cent of transactions in the October 2012 six month period.

TANNUM SANDS AREA

The Tannum Sands Area is defined by the suburbs of Tannum Sands, Boyne Island and Benaraby. Since the Global Financial Crisis the Tannum Sands Area has experienced rapid growth, recording huge median price growth in a short period of time. Sales levels similarly grew swiftly from 2009 through to 2011, however have come back significantly in 2012. With such rapid rises through 2010 and into 2011, it was always going to be hard to sustain this growth. As such, in the 12 month period to 31st October 2012, sales volumes have fallen a staggering 45.5 per cent, while median price has continued its growth, recording a 6.4 per cent increase over 12 months. Sales figures in the unit and land markets suffered similarly, with each falling 71.4 per cent and 48.1 per cent respectively (however occupying a much smaller section of the overall market).
The House price Points chart reiterates the trend of ever increasing pricing in the area, with the sub $500,000 price range contracting significantly over the past two years. With the October 2012 half year period producing yet another record median price at $545,000, it lays further claim to unaffordability in the area. There has been a notable expansion of the $700,000 plus price range, growing eight per cent in the October 2012 period. Unsurprisingly, the $500,000 to $599,999 category continued to occupy the majority of transactions with 38 per cent.

With the area being a popular location due to its beachside charm, and relative close proximity to Gladstone, (approx. 20mins) it has proven an attractive location for investors, tenants and residents alike. This has continued to fuel an undersupply amidst the obvious underlying demand. This has allowed vendors the opportunity to remain on the market at a price that will likely meet their expectation. Efforts are being made to meet the demand in the area, with approximately $178 million worth of residential construction projects currently in the works, which cover a mix of residential subdivisions and mixed use developments. As these products begin to be released to the market, the area should see a correction in pricing.

Rents in the area have also exploded, with three and four bedroom house median rents rising $150 and $140 a week respectively in a single year from December 2011 to December 2012. In the same time the number of bonds lodged grew eight per cent and 13 per cent for the same housing types.

GLADSTONE CITY AREA

The Gladstone City Area comprises a total of 12 suburbs, stretching from the established Gladstone City and neighbouring suburbs right through to the newer estates in the south-west boundary. Collectively, these suburbs represent the urban footprint of the regions core.

The Gladstone City Area property market is currently in a correctional phase after its strong growth leading into 2011, and the consequent boom ensued. Sales activity decreased dramatically across all markets, with the unit and land markets the most severely hit. In the six month period to October 2012, the house market recorded 315 transactions, a drop of 13 per cent on the previous six month period. The land and unit markets recorded falls in transactions of 52 per cent and 58 per cent respectively when compared to the April 2012 six month period. While these drops in the number of transactions is significant, it should not be read into too much, as it is more a result of a market correcting itself after massive growth, as opposed to a weakening market. This is combined with a likely undersupply in the market, as demand seriously outweighed supply over the past 18 months.

The median house price has come back five per cent from the April 2012 period, finishing the October 2012 six month period at $449,500. Similarly, the unit median price has also dropped, falling 14 per cent to record a median price of $335,000. The land market, however, continued it remarkable growth to record a median price peak of $276,000, representing a further four per cent increase. This increasing median price is in line with what is happening in the Gladstone City Area, as availability of land in the Area remains competitive, with cashed up buyers still willing to pay a premium.

In the housing market in the Gladstone City Area, the flow on effects of the resource boom can be observed clearly by looking at the House Price Points Chart. Where in the October 2010 and the April 2011 six month periods the most popular price range was from $300,000 up to $499,999 (which occupied approximately 75 per cent of the market), this price range fell out of favour with buyers, replaced by$400,000 to $599,999 price range which saw a far larger number of transactions in recent times. This equates to an obvious reflection in the growing median price in the Area being pushed up by higher than average wages fuelled by the resource sector.

From December 2010 to December 2011, rental prices in the Gladstone City Area soared, with all dwelling types experiencing exceptional growth in median weekly rents. During this time, three bedroom units experienced an increase in weekly median rent of 67 per cent, while two bedroom houses rose 61 per cent. The category that performed the worst overall was three bedroom townhouses, which experienced a 16 per cent increase in weekly median rents. Looking forward to the following year, it is a much different story. While the rents being achieved are still high, the weekly median rents figures in terms of growth have been much more subdued compared to the previous 12 months. Interestingly, three bedroom townhouses (which was previously the worst performing category) performed well compared to others, again recording 16 per cent growth where many other categories experienced growth in single digit figures.

While Gladstone remains central to Australia and Queenslands mining activities, housing is going to remain at the forefront for local residents both in terms of affordability and availability. The Queensland Government is working with major mining companies to combat this issue and implement housing strategies for the Area. The flow on effects of this are beginning to be seen, with a recent increase in transactions in the $300,000 to $399,999 price range (up 12 per cent in the October 2012 period). However there is an obvious (and expected) lag time for these strategies and projects to come into effect. The outlook, however, is positive; as more dwellings are delivered to the Area there should be a softening across the board for median prices, as well as rental prices.