When will Gladstone recover? Hotspotting's Terry Ryder

There are growing reasons for hope and optimism for property investors who bought in resources-related towns at the height of the mining investment boom.

The question I get asked most often is “when will Gladstone recover?” - or similar questions about other resources-impacted regional centres around Australia.

For the past couple of years, the honest answer did not give much cheer to those holding properties worth considerably less than they paid and earning a lot less in rent than before (if a tenant could be found at all).

But now, increasingly, the news is more positive. Many of these places are showing definite signs of recovery and investors can look forward to the prospect of better prices and rentals.

I’m not suggesting anyone should rush out and buy in these places, most of which sit at the high-risk end of the investment spectrum – just that, for those who own property there (it’s amazing how many people do), there is light at the end of a very long tunnel.

In our latest edition of the Price Predictor Index, the number of Regional Queensland locations classified as Danger markets has dropped from a record high of 31 late in 2016 to 19 now. 

Markets showing signs of recovery include Dalby, Emerald, Moranbah, Rockhampton, Mackay and the Whitsundays. 

Mackay is showing quite strong signs of returning to growth, with sales activity up, vacancies down and some evidence of prices rising again. With the Central Queensland mining industry revitalising, Mackay is likely to show some reasonable growth in the next couple of years.

Dalby’s economic and property fortunes rose and fell with the fortunes of the coal seam gas industry in the Surat Basin. Right now, its median house price ($255,000) is lower than it was five years ago but likely to recover in the near future.

Quarterly sales in Dalby over the past two years have been 32, 33, 41, 43, 50, 52, 65 and 75, a pattern that confirms the recovery in this market. Vacancies have dropped to around 2%, according to SQM Research.

Some of the worst-affected markets still have high vacancies and falling property values - and should be approached with caution. 

They include Mount Isa and Gladstone. Mount Isa still has eight suburbs classified as Danger markets and Gladstone still has six. Gladstone should improve, as the overall vacancy rate has dropped from a peak of 12% early in 2016 to around 3.5% now - still a little too high, but the trend is encouraging.

Regional areas of WA are nudging towards recovery, notably the resources-related centres in the north of the state.

Karratha and Port Hedland/South Hedland both have sales activity heading in the right direction again, a factor confirmed by our latest survey of sales volumes and also by new figures for the June Quarter from the Real Estate Institute of WA.

At the pinnacle of the resources investment boom, the median house price for Port Hedland was well above $1 million. 

The latest figures show a median price around $395,000. This is 14% above the level of a year ago, though still well below the peak during the resources boom. 

The median price bottomed out around $350,000 earlier in the year, so there appear to be early signs of growth.

But we continue to urge caution - this kind of volatility is common in resources-related markets and they are not for the faint-hearted.

Similarly, there is a general pattern of growth in the Karratha market - and a similar history with prices.

The Karratha market was achieving only 45-55 sales per quarter in 2015 but in the past six quarters have each topped 80 sales. 

Typical house prices in Karratha are now below $300,000, compared with $700,000 to $800,000 at the peak of the resources investment boom.

Median prices in the Karratha area include $260,000 for Bulgarra (up 13% in the past 12 months but down 40% over 3 years), $345,000 for Nickol (up 28% in 12 months but 20% below the levels of three years ago) and $250,000 for Pegs Creek (up 5% in 12 months but still 42% below the levels of three years ago).

There is even a glimmer of recovery in sales activity in the remote resources town of Newman, with a median price ($145,000) at a fraction of the boom-time levels. 

Sales levels in Newman have improved, although from a very low base - in 2015 there were only 11 sales in the town, but there were 57 in 2016 and 75 in 2017.

The Kalgoorlie-Boulder market remains well below par. In 2012/2013 this market was recording around 250 sales per quarter but in the past 12 months fewer than 125 per quarter. We continue to classify Kalgoorlie as a Danger market.

In South Australia, former growth star Whyalla has been classified in The Price Predictor Index as a Danger market over the past two years, but there is hope for better things. 

Our latest quarterly survey shows signs of an upturn in sales, but at levels still well below the resources-fuelled peak of 2013/2014.

Sales in the past four quarters have been 10, 30, 31  and 37, which shows a pattern of improvement, but compares to quarterly sales of 96, 99, 89 and 84 in 2012-13.

Better news about the future of ailing steel maker Arrium, one of the region’s major employers, gives rise to hope for recovery in the local economy and property market. 

I await the next few quarterly surveys to see whether recent signs of upturn in sales activity are real.

Terry Ryder is the founder of hotspotting.com.au

ryder@hotspotting.com.au

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