A SLOW RETURN Regional Qld house market update 5th May 2015 Synopsis $200 15,000 $150 10,000 $100 5,000 $50 2013 2015 2010 2012 2011 2009 2007 2005 2003 2001 $0 1999 0 2. Annual change in house price Regional Queensland 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% 2014 2008 2006 2004 -20% 2002 Regional property markets usually fluctuate more frequently than their capital city counterparts. This is what we call the ‘saw-tooth’ effect. This trend can be seen in the bar chart depicting sales volumes in chart 1 & the annual change in house prices via chart 2. $250 2000 Yet in recent years & despite advantageous macro conditions – such as lower interest rates & increasing overseas/interstate investor interest – house values across regional Qld have been falling. See chart 2. $300 20,000 1998 Since 2007, overall, house sales volumes across regional Qld have dropped. House prices – by & large – whilst increasing, have done so at a very pedestrian rate. $350 25,000 1997 Our first chart combines together the house sales & price results across the eleven major Qld regions. It shows a very strong market sales peak during 2003, with a resultant rapid escalation in house prices between 2003 & 2007. $400 Dwelling 30,000 sales (LHS) 1996 Some observations 35,000 1995 Much has been written about buying property in a Qld regional town. But how much of it rings true? Median dwelling price ($k, RHS) 1. Detached house cycle Regional Queensland 1994 Qld is Australia’s most decentralised state. One in three Queenslanders lives in a regional city or town. These towns, combined & depending on the stage of the property cycle, attract between 25% & 30% of the house sales across the state. 1 A SLOW RETURN Regional Qld house market update 5th May 2015 Chart 3 outlines sales volumes by each major Queensland region. It shows the average number of houses sold each year over the last decade & our estimates for house sales during 2015. Whist we anticipate that overall house sales volumes will increase across regional Qld this year – revisit chart 1 – very few areas will bat above their long term weight. Those that should include Cairns; the Fraser Coast & Toowoomba. Looking back, we find that, on average, house values rose just 4% pa across regional Qld over the last decade. Some regions outshone others, but during 2014 most saw house values fall. See table 1. End note The potential gains in terms of capital growth & rental returns can be higher in regional towns than in the more sedate, major Australian urban centres. But there is a higher element of risk. Surat & Bowen Basins are good examples. History also shows that it is often best to buy during a regional market downturn; or better still, in the balanced phase of the cycle – the bottom of the ‘saw-tooth’ – than during a recovery/upswing. Several regions are already in or should be in that balanced position soon. These include Townsville; Whitsundays; Mackay; Gladstone; Rockhampton & Bundaberg. Two Qld regions are in recovery – Cairns & Toowoomba. But this time around, regional Qld can expect a much more sedate upturn than it has had in the past. Think rolling hills, not a mountain range. 3. Detached house sales Regional Queensland Cairns Townsville Whistsundays Decade average (pa) Mackay Bowen Basin Rockhampton Calendar 2015 Gladstone Bundaberg Fraser Coast Surat Basin Toowoomba 0 1,000 2,000 3,000 4,000 1. Annual change in house price Regional Queensland Cairns Townsville Whitsunday Mackay Bowen Basin Rockhampton Gladstone Bundaberg Fraser Coast Surat Basin Toowoomba Regional Qld Decade avg (pa) Last 12 months 3.6% 3.9% 5.0% 2.9% 2.7% 5.7% 5.6% 2.7% 1.9% 7.2% 4.5% 4.0% 6.3% -0.6% -2.7% -7.9% -26.1% -3.1% -12.1% -1.7% 0.0% -10.3% 5.7% -0.6% 2 MATUSIK PROPERTY INSIGHTS Some bragging first A 26 year veteran in this business, Michael Matusik set up Matusik Property Insights in 1998. Since then, Michael & his team have advised on close to 600 new residential projects throughout the country. We have worked for over 450 property-related clients over the past 17 years & in essence, we offer four consultancy services: Michael is a qualified Town Planner with first class honours & is considered a thought leader in the housing industry. He is one of Australia’s first independent property analysts & is a member of the Future Housing Taskforce. Pertinent advice on a new residential development opportunity. This typically involves a briefing meeting, site visit & short report. Reports, training & Matusik Missive Matusik Property Insights (MPI) undertakes detailed residential consultancy work. Michael supervises all advisory investigations. MPI also sells market outlook & focus reports, conducts in-depth training sessions & publishes a regular newsletter – the Matusik Missive. To find out more about our Market Outlook & Focus Reports; Master Classes & a Matusik Missive subscription, visit www.matusik.com.au Consultancy services Our aim is to help de-risk a new residential project. We can also provide valuable market intelligence – the power to know what the market wants, & where it wants it. This insight can significantly increase the sale-ability of your project. We welcome enquiries from developers at any stage of the project, however, we provide the most value at the beginning, in your planning stages. However, it’s never too early or too late to contact us. 1. New Project Advice 2. Project Positioning An in-depth analysis outlining the rationale & need for the given project/property in the general area. Best used with due diligence; potential end buyers, especially investors; other property-related professionals; potential joint venture partners & to help sell the subject site. 3. Matusik Advocacy Matusik advocacy support is limited to our Project Positioning clientele. Advocacy clients may choose from a range of Matusik promotional products & services. We offer exclusivity – in terms of public support – for our advocacy clients – terms & conditions apply. 4. Presentations & Workshops Michael Matusik is also available as a speaker for real estate events. His presentations are insightful, fact based, engaging & candid. We often bundle a tailored public report in with our speaking engagements. An attractive progressive payment plan is also available. For a free consultation & quote: Email [email protected] Phone (07) 3368 2878 Website www.matusik.com.au 3 IMPORTANT NOTES Matusik Property Insights Pty Ltd Unit 12, 65-69 Macgregor Tce, Bardon Q 4065 PO box 1175, Kenmore Q 4069 07 3368 2878 [email protected] www.matusik.com.au RISKS OF INVESTING IN PROPERTY Direct investment in residential property, like all investments, involves a number of risks. If these eventuate, your income might be lower than expected. There may even be none. In addition, the capital value of your investment could fall. The key risks of investing in property are outlined below: The property purchased may not provide the income or capital gains the asset was expected to produce. There is a risk that your property may, for periods of time, lie vacant & hence not generate income. Maintenance & repair costs are the investor’s responsibility & can vary, and at times be significant. Such costs are sometimes recoverable from rental bonds or under insurance policies. There are a number of factors that affect the general property market including increases in supply & falls in demand; the cyclical nature of property values; increases in taxes & operating expenses; overall economic conditions; demographic changes; changes in town planning laws; casualty & condemnation losses; environmental risks; regulation on rents; detrimental new developments in the area; increases in interest rates; similarly, inflation & changes to bank funding policies. Gearing increases the volatility in the value of your investment. In the early stages of residential investment, a significant fall in the property’s value may see balances fall to less than the total amount of borrowings. DISCLAIMER This missive has been prepared by Matusik Property Insights Pty Ltd. This content has been prepared without taking into account the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation & needs, and if necessary, seek appropriate professional advice. Information herein includes material obtained from third parties considered to be accurate. Whilst this information has been carefully compiled, no warranty or promise as to its correctness is made or intended. Interested parties should undertake independent inquiries & investigations to satisfy themselves that any details herein are true & correct. In addition, no forecasts are being made about potential capital gains or rental returns. Past information about capital gains or rental growth does not imply such gains or growth will be made in the future. Matusik Property Insights Pty Ltd disclaims all liability for any loss or damage suffered by any person of, or in connection with, the provision of information herewith, or the purported reliance thereon by any person. This missive is valid for six (6) months from date of issue. COPYRIGHT & TRADEMARKS Increases in interest rates often increase the cost of borrowings. Reprinting, republication or distribution of any portion of this document is strictly prohibited without the written permission of Matusik Property Insights Pty Ltd. Changes in laws or their interpretations including taxation, superannuation & corporate regulatory laws, practice & policy could have an impact on your investment. You should seek professional tax advice before investing in residential property. Seven Reasons Why, Property Pick, Ten Things You Need To Know About & Property Rationale are trademarks of Matusik Property Insights Pty Ltd. Registered copyright nos. 103812, 10353 & 10354. Registration pending on Property Rationale. All rights reserved. TYPICAL DATA SOURCES Matusik database; Qld Government; Qld RTA; REIA; REIQ; SQM Research; BCI Australia: ABS; realestate.com & RPData. 4
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