Toowoomba Property Watch Q4 2012
The following Property Watch report is an investigation into the historic and current residential real estate market trends of the Toowoomba Area defined by the suburbs within the 4350 postcode.
Positioned as the gateway to the Surat Basin one of Australias most significant resource provinces the Toowoomba region boasts a resilient and diverse economy outside the nexus it has with the resource sector. The regions economy is underpinned by major enterprises which include health and community services, education, transport and agriculture. Sustained activity in these industries have been keeping the local unemployment level in check and perhaps the most enviable in the state, offsetting the slowdown experienced across the regions other major industries such as manufacturing and retail. With that being said, there are several retail projects currently under construction and in planning for the area. The eagerly anticipated $130 million redevelopment proposal of the Grand Central and Gardentown shopping centres by retail giant QIC is earmarked to deliver not only a more dynamic retail offer, but an estimated 1,500 construction jobs and approximately 1,000 retail jobs once completed.
The Toowoomba Area house market registered 875 settled transactions in the six months to 30 June 2012, representing a marginal 4.2 per cent improvement from the previous June 2011 half year period. Low sales volumes preceding the phasing out of the 2008/2009 First Home Owners Grant (FHOG) Boost, reflects a lack of certainty in the market, consistent with many regions across the state. A house price point analysis indicated that despite growth in the median price over the June 2012 period, 47.2 per cent of transactions were recorded in the sub $300,000 price range.
Activity in the more affordable price points is likely to remain unchanged in the foreseeable future, as first home buyers and downsizers looking to deleverage drive enquiry for entry level housing. Investors are becoming increasingly attracted to the long term prospects of the region but more so in the tight rental market. House rents have increased on average 5.6 per cent over the year to September 2012 with on the market evidence indicating a very low vacancy rate at just 1 per cent. This particular buyer segment is also likely to target entry level housing in an attempt to firm rental yields and limit their exposure to debt.
The performance of the Toowoomba Area vacant land market is traditionally a sound proxy for the expected performance of the property market in general. The shortage of affordable house and land options in the city (within the 4350 postcode) has restricted construction activity since the stimulus driven 2008/2009 period, resulting in rigid competition for construction contracts. Construction tenders are thus likely to enable developers to deliver new stock to the market at a price point below the current median of $160,200 recorded for the June 2012 period. The $150,000 to 169,999 price range accounted for 42 per cent of total sales over the June 2012 period, reiterating the markets appetite for affordable land. With a growing trend of buyers looking to purchase smaller lots to meet budget and lifestyle requirements, it is expected that a majority of new stock to come to market beyond 2013 will be delivered on sub 600 sq m lots. Major residential subdivision has been approved in the suburbs of Wilsonton and Glenvale with such projects earmarked to bring a diverse housing mix to the market. On this basis, activity in the sub $150,000 price range is likely to increase from 20 per cent of total sales over the next year, as developers exploit the opportunity to address pent up demand for well-priced, well-positioned land.
It is anticipated that land sales will begin to trend up over the coming years on the back of the revamped FHOG introduced on the 21st of September by the Newman Governments 2012/13 budget. The $15,000 cash handout for purchases of new/ off the plan property together with transfer duty exemptions for land purchased below $250,000 is sure to be a significant draw card for first home buyers. First home buyers can also benefit from low rate mortgage products on offer, so to investors without the capacity to purchase outright. Improved mortgage affordability influenced by a 1.5 per cent softening in the cash rate since November 2011 (currently 3.25 as at November 2012) is anticipated to drive enquiry levels for both new and established markets, especially from first home buyers. However, competitively priced house and land packages that can demonstrate a superior value proposition to the established market will perhaps see a majority of market participants turn to new homes.