Mackay Unit Property Watch Q2 2012

MACKAY UNIT MARKET OVERVIEW

The following report is the result of an investigation into the historic and current market trends of the Mackay unit market. Specifically, the report will highlight the recent performances of three distinct markets within Mackay with due consideration of the wider economic climate. Mackay City, Mackay City Fringe and the defined Mackay Urban Area unit markets will be investigated for the purpose of comparative analysis and are depicted by the map to the left. A list of all the suburbs included within each area is provided at the back of the report.

Sales activity across all unit markets has experienced considerable growth in the six months to December 2011, outperforming the preceding June 2011 half year period by a notable margin. However, sales volumes for the December 2011 half year period were down across the board from that recorded during the December 2010 half year period. With that said, the Mackay unit market has demonstrated strong resilience throughout 2011, where many other coastal unit markets have endured some of the worst sales performances on record. In fact, the Mackay unit market has proven to be a tightly held market for some time now, with properties managing to uphold their capital value subsequent to the ramifications of the Global Financial Crisis (GFC) which transpired in 2008. This can be evidenced by remarkable average annual growth in the median price over the past five years.

The table in this report provides an overview of the top five performing suburbs within the wider Mackay Urban Area. Mackay City was the stand out, registering a total of 40 settled transactions in the December 2011 half year period, even though this represents a 13 per cent decrease in activity from the corresponding period in 2010.

South Mackay registered 21 settled transactions during the six months to December 2011, which was one sale greater than that recorded in the corresponding period in 2010. Sales activity in the other suburbs was relatively low, with Andergrove recording a softened annual change of 33.3 per cent. Conversely, East Mackay recorded uplift in sales activity to record a positive annual change of 33.3 per cent.

MACKAY CITY UNIT MARKET

The Mackay City unit market is tightly held in the sub $450,000 price range and though despite turbulent sales volumes since the incentive driven peak in 2009, it nonetheless continued to demonstrate resilience admits the property downturn. A total of 40 transactions were registered in the December 2011 half year period, representing a 38 per cent increase in activity from the preceding half year period. This uplift in sales activity is perhaps largely attributed to a combination of increasing rents and population growth deriving from the resource boom. Median rents recorded for the 4740 postcode have demonstrated solid growth over the past three years, recording an average annual rental growth rate of 5.1 per cent on aggregate across the unit market. It is anticipated that rents will continue to grow at this rate, as employment opportunities continue to drive demand in an undersupplied market. Interestingly the number of new rental bonds has progressively decreased over the past three years, with exception to a modest increase in new bonds for three bedroom units. The evidence appears to suggest that an increasing amount of people renting either one or two bedroom units are considering the option of purchasing, as prevailing rents near the cost to service an average mortgage.

Observing the Mackay City Price Points Chart in the report, it can be evidenced that a growing number of purchasers are transacting in the sub $400,000 price range. In fact, 83 per cent of all sales in the December 2011 half year period transacted within this price range. The December 2009 half year period was the last time this level of concentration was recorded in the more affordable price range and is reiterated by the acute decline in median price during this time. The relatively volatile movements in the median price since the December 2007 half year period is the result of sudden changes to sample size (sales volumes) over half year periods in addition to the sudden changes in buyer profiles (i.e. changes to the proportion of active investors, first home buyers and other owner occupiers in the market).

PRDnationwide Mackay has evidenced many units available on the market that were perceived to be a bargain or that represented good investment value were quick to move. Generally, units that were priced below $400,000 or demonstrated strong rental yields were highly sort after in the City, and were sold within weeks of their listing. However, as demonstrated by the subdued level of sales, there is an undersupply of stock that fall into this category.

MACKAY CITY FRINGE UNIT MARKET

The Mackay City Fringe unit market registered a total of 111 settled transactions in the December 2011 half year period, representing a 14.4 per cent improvement from the preceding June 2011 half year period. Activity in the
$400,000 to $600,000 price range during the six months to December 2011 has contributed to a resilient median price of $315,000.

MACKAY URBAN AREA UNIT MARKET

The Mackay Urban Area unit market registered a total of 155 settled transactions in the December 2011 half year period, representing a 17.4 per cent improvement from the preceding June 2011 half year period. A gradual shift in transactions to higher price brackets over the past three years has resulted in a buoyant median price.

MACKAY UNIT MARKET OUTLOOK

It is anticipated that many active market participants will maintain their price conscious mentality, resulting in stagnant sales activity at least in the short term. The pre-Christmas interest rate cuts (50 basis points in November and December 2011) resulted in a marginal lowering in variable mortgage rates from most lenders and cuts to both variable and fixed rate mortgage products. Whilst these rate cuts improved mortgage affordability to some extent, the biggest affect these cuts had was in improving confidence, with many would-be buyers transacting towards the end of 2011.

Settlements will continue into the early months of 2012, however with the recent liberation of the big banks and their decision to increase mortgage rates independent of the direction of the Reserve Bank of Australia, confidence may take a blow as the uncertainty settles in. Tighter lending practices together with the increasing cost of living may deter many from entering the market in 2012. However, with low rental vacancy driving high rental prices, many renters that have the capacity to take on debt are considering committing to a mortgage, especially if the property is priced correctly. Investors are also becoming active in the market, as attractive yields are almost guaranteed if the property can be bought at the right price.

Unfortunately, there is currently an undersupply of affordable property in this market, which may have positive implications for rental growth and capital values but not for sales volumes. Tighter lending criteria is also putting pressure on developers, who in many cases have exploited opportunities to service a market though have had troubles in securing finance. Many active developers in the market are required by the banks to achieve excessive pre sale commitments (up to 80 per cent) in order to gain access to finance. This is a direct consequence of the banks shedding risk, which is unfortunately having detrimental ramifications on the capacity of many developers to deliver their intended project/s, with most sitting on their hands until the debt market improves. With that said, strong market fundamentals will continue to underpin improvement in buyer confidence in Mackay, which will translate into stable improvements in sales activity in the short to medium term.



The suburbs that comprise the Mackay Urban Area are as follows:

Andergrove, Bakers Creek, Beaconsfield, Blacks Beach, Bucasia, Cleveland, Dolphin Heads, East Mackay, Eimeo, Erakala, Glenella, Mackay, Mackay Harbour, Mount Pleasant, North Mackay, Ooralea, Paget, Rural View, Shoal Point, Slade Point, South Mackay, West Mackay.

The suburbs that comprise the Mackay City Fringe are as follows:

East Mackay, Mackay, Mackay Harbour, Mount Pleasant, North Mackay, South Mackay, West Mackay.