Mackay's property investor woes continue as vacancy rate hits 10%

Mackay's property investor woes continue as vacancy rate hits 10%
Jessie RichardsonFebruary 2, 2015

The rental market in Queensland's Mackay continues to decline, with 10.3% of rental stock vacant, according to the Real Estate Institute of Queensland (REIQ).

The town has been fuelled in the past by its mining economy, thanks to its location near the Bowen Basin coal mining reserves. However, as coal mining work declines, in part due to falling commodity prices, so too has Mackay's popularity with workers.

There was a 3.1% vacancy rate two years ago.

The struggling rental market has seen some landlords offer rent-free periods to attract tenants.

One investor is advertising a two week free offer on a three bedroom townhouse style South Mackay property that falls under the National Rental Affordability Scheme (NRAS).

It was available last February at $368 per week, and is now available at $300 a week, from 24 February.

The investor paid $370,000 in 2011. The median sale price of a Mackay unit or townhouse in the September 2014 quarter was $301,000, according to the REIQ. The median house price was $391,000.

It is not just NRAS investors who are seeking tenants. Another landlord is also offering a two week free rental period after lowering their asking rent from $300 per week in May 2013 to $250 per week. The two bedroom townhouse, pictured below, is available now.

5/10 Romeo Street, Mackay

Domain Group senior economist Andrew Wilson says that three to four years ago, Mackay – which saw vacancy rates as low as 0.9%, by some measures  – was a "classic overheated market".

"It became investor central, with a lot of speculation, and prices moved well beyond their fundamentals, and affordability killed demand" Wilson told Property Observer.

He notes that the mining economy peak saw a lot of housing supply brought to market, with the transient workforce unable to keep up.

"A lot of the mining workers are fly-in, fly-out, and a lot of them are actually drive-in and drive-out as well, so there was no real incentive to be a local resident. And it really was the decline of the mining sector that triggered the drop [in rental demand]."

Wilson says Mackay's market declines aren't over yet.

"There's a real oversupply in Mackay, and no bottom is falling in the market. As long as vacancy rates are that high, you're going to see investors competing for a relatively small pool of tenants.

"That puts more downward pressure on rents, and those with a short term investment view have moved on."

The competition to attract a dwindling supply of tenants has seen the investors who own 5/9 Stevenson Street in South Mackay advertise the property at $210 per week. In early 2012, they was asking for $490 per week. They paid $206,000 in April 2008.

5/9 Stevenson Street, Mackay

The current state of Mackay's property market is perhaps not a surprise, given warnings from experts in the past year about oversupply.

Wilson says it will be a while before the town's market strengthens again.

"It's going to be a long journey back for a stable Mackay housing market," says Wilson.

"It was the curse of the hotspot." 

Property Observer notes the vacancy rate in Mackay was just 0.7% in December 2011.

Picture of Mackay marina courtesy of  Kris C. May/CC BY-SA 3.0.

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