The regional rental markets have proved the most volatile in the March quarter, with markets such as Townsville, Sunshine Coast, Gold Coast and Gladstone making significant moves.
This quarter Gladstone has stolen the spotlight with its long-awaited move into the healthy range, tightening from 4.2 per cent to 3.1 per cent, for the first time since December 2012.
This market has been gradually improving since it peaked at 11.3 per cent vacancies in March 2016. The inexorable downward trend has consistently suggested an improving market with rental supply and demand trends now the closest to intersecting in almost seven years.
With this continually improving rental market, it is unusual that the sales market has continued to fall, with the median sale price falling 3.6 per cent in the year to December 2018, to $270,000 and 37.2 per cent below the level of five years ago. We will watch and wait to see how this market develops.
The Townsville market was the biggest mover of the quarter, although this is very much expected with the floods removing a significant proportion of the rental stock. This market moved from a weak 4.3 per cent to a very tight 1.5 per cent. It’s important to understand that the market was steadily tightening before the floods occurred. The vacancy rate peaked at 7.1 per cent in the September 2016 quarter and since then has been trending downwards. As a result of this tightening market we were already starting to see rents push up in late 2018.
Our forecast for the Townsville market is that as rental stock returns to the marketplace, the vacancy rate will ease again, although we wouldn’t be surprised if it stabilises in the healthy range (2.5 per cent to 3.5 per cent) towards the end of the year and into early 2020. It’s common in these situations that workers stay on and look for new employment once the recovery work comes to an inevitable end.
Greater Brisbane: 2.2% (down 0.1 percentage points from 2.3%)
The Greater Brisbane market, which includes Brisbane LGA, Ipswich, Logan, Moreton Bay and Redlands, has held reasonably steady at 2.2 per cent. This market has delivered consistent vacancy rates since June 2017, with results ranging from 2.2 to 2.8 per cent for about eight quarters.
Brisbane LGA 2.5% (no change)
The Brisbane LGA vacancy rate for the March quarter has remained unchanged at 2.5 per cent. This market is tight, generally, but there are pockets where supply is in short supply. Again, this market has been reasonably consistent for five quarters with vacancies ranging from 2 per cent to 3 per cent.
Inner Brisbane (0-5km) 2.1% (down 1.9 percentage points from 4.0%)
Inner Brisbane has been the focus of significant media attention for the past few years, as considerable apartment supply has visibly overwhelmed demand levels. This oversupply peaked in March quarter 2017, when the vacancy rate reached 4.4 per cent. Since then the rental market has tightened steadily. The December quarter is typically higher than the rest of the year as tenants move or students leave for Christmas break. The March quarter is typically a more consistent indicator of where the market is performing and this market is now in tight territory.
Middle ring (5-20km) 2.7% (up 0.7 percentage points from 2.0%)
The middle ring has eased to 2.7 per cent, which is within the healthy range of 2.5-3.5 per cent. Pockets of the middle ring have continued to be very popular, largely due to the relative affordability compared with the inner ring. It’s likely , a factor that will ensure it remains competitive despite supply levels. Suburbs such as Albion, which has welcomed apartment developments such as The Hudson, Jade and Crosby Park in the last few years, is just 5kms from the CBD but continues to absorb supply as demand remains steady.
Outer Brisbane 2.0% (no change)
The combined Outer Brisbane regions of Ipswich, Logan, Moreton Bay, and Redland is tight, at 2.0%
Ipswich 2.3% (up 0.5 percentage points from 1.7%)
The Ipswich rental market remains affordable and healthy, with both landlords and tenants having good options available. This is a population growth area and while there is some new stock coming online in areas such as Walloon and Brassall, suburbs near the RAAF base, our expectation is that this market will tighten further as population grows with the expansion of the base.
Logan 2.4% (no change)
The Logan rental market is remaining steady. This is part of southeast Queensland’s strong population growth corridor and there is steady new housing supply coming online in suburbs such as Yarrabilba and Holmview. Some of this stock is making its way to the rental market and ensuring demand remains in check.
Moreton Bay 1.7% (down 0.3 percentage points from 2.0%)
This market is one of the fastest growing regions in Queensland, according to ABS data, with rapid population growth filling out areas such as North Lakes and Kallangur. While there is a steady stream of supply coming onto the market in the form of house-and-land packages, it is not necessarily making it onto the rental market, making conditions tight.
Redland 1.7% (up 0.1 percentage points from 1.6%)
The Redland market is hanging onto its tight status and vacancies have not moved much in six months. This is a very busy market and local agents tell us that tenants are keen to sign longer leases and stay put.
Gold Coast: 1.8% (up 0.2 percentage points from 1.6%)*
While the March quarter data reflects a tight rental market, feedback from local agents indicates this market has moved significantly and in April and May is much softer. While this market is subject to seasonality, and traditionally eases as we head into the cooler months, we feel that a strong level of new rental supply has come online and this has had an immediate impact on the market. The Smith Collective has released a second stage of dwellings, now offering 300 rentals, and Vue at Robina is offering a significant level of rental properties also. These new properties have eased the market and we recognise that the data does not yet reflect that however, our expectation is that we will see this come through in the next two quarters.
*The December quarter vacancy rate has been revised down to accommodate new information. We now understand the vacancy rate was 1.6 per cent, continuing the consistently tight rental conditions through 2018.
Sunshine Coast SD 2.6% (up 0.8 percentage points from 1.8%)
The Sunshine Coast SD market, which includes Sunshine Coast LGA (3 per cent, up from 1.7 per cent) and Noosa Shire (2.0 per cent, up from 1.5 per cent), has eased a little, moving from the tight to the healthy range. The Sunshine Coast does have an element of seasonality to it, with hospitality and fruit picking workers coming in during the spring and summer periods and then leaving during the winter period. This influences the vacancy rate and we traditionally see an uptick as we head into the cooler quarters. However, local agents are also telling us this market is easing as supply dilutes demand.
Toowoomba 1.6% (down 0.2 percentage points from 1.8%)
This is one of the most consistent rental markets in Queensland and varies very little. The local economy is being fuelled by strong projects and jobs, supporting a healthy housing market. Landlords are enjoying the whip hand as tenants are faced with little choice of available accommodation.
Fraser Coast 1.1% (down 0.1 percentage points from 1.2%)
This coastal market has remained tight at 1.1 per cent. Few rentals are advertised on popular listing portals such as realestate.com.au and tenants are struggling for choice. Landlords definitely have the upper hand and local agents are telling us that they have multiple applicants per property.
Bundaberg 3.1% (up 1.1 percentage points from 2.0%)
The Bundaberg market has eased somewhat but is maintaining a healthy status. With a long list of government work on the go in the region we anticipate this market will remain healthy for the rest of the year.
Gladstone 3.1% (down 1.1 percentage points from 4.2%)
Gladstone is the headline-grabbing market this quarter, as mentioned earlier, as it’s moved into the healthy range for the first time in years. This is encouraging news. In January this year the State Government announced Gladstone would become the renewable energy powerhouse of Australia with hydrogen emerging as the region’s “next LNG”. Even though it’s still in the planning stage, we are optimistic that government, at both a state and federal level, are focused on the region and its potential.
Rockhampton 2.0% (no change)
This market is marking its fourth quarter in healthy or tight conditions. Jobs are bringing new residents to town and the rental supply is being absorbed steadily. At this stage we are unlikely to see much impact on rents.
Mackay 2.9% (up 0.1 percentage points from 2.8%)
This market is still feeling the pinch with multiple viewings on most properties and property managers receiving several applicants per vacant property. The tight conditions are pushing rents up to the tune of around five per cent to as much as 20 per cent in some areas. The steady influx into Mackay is mostly families moving to take up professional positions with local organisations or to work on major government projects.
Townsville 1.5% (down 2.8 percentage points from 4.3%)
The rental market is facing the twin factors of dramatically reduced supply levels and increased demand as temporary workers come to town to help the recovery efforts from the floods.
Cairns 1.3% (down 0.4 percentage points from 1.7%)
This market remains tight and would benefit from new supply to the rental market, however, developers are struggling to get funding for larger projects. The consistent high demand is starting to see rent rises to the tune of around $10 to $15 a week. Three bed houses have lifted $45 a week from December 2017 to December 2018. Investors continue to enjoy some of the best gross rental yields in the state.