Rocky on the rise as Gladstone stumbles: Terry Ryder
New data confirms two things we’ve been tipping: the decline of Gladstone and the rise of Rockhampton.
The downturn in Gladstone, after a couple of stellar years, is likely to be a short-term phenomenon. This city has a strong future as the nation’s No.1 industrial city, so investors who bought there in the past couple of years should avoid any feelings of panic.
But there’s some short-term pain to be felt before the long-term gain. Developers have done what developers always do: they dive into growth markets and create too much new product.
The extent of new housing supply is seen in the latest figures from the Real Estate Institute of Queensland, which records a vacancy rate close to 6% at the end of the March Quarter.
That has taken the heat out of the Gladstone market and the REIQ’s price data for the March Quarter provides further evidence. After strong double-digit growth last year, there was no movement in the city’s median house price in the first three months of the year.
There has been a similar transformation in another central Queensland regional city, Mackay. In the space of 12 months, Mackay’s vacancy rate has moved from 1.7% to 6.5%. The reasons are the same: developers became over-excited about the growth potential and built too much new product.
My feelings about Mackay are similar to those about Gladstone: long-term, Mackay will deliver for anyone who owns property there. It has done so in the past and will do so again. The growth factors are strong, including expansion of port facilities to the south of the city. But in the near-term there will be a shake-out.
It puts into focus the importance of always buying good real estate – property close to desirable things, like schools, shops and public transport – even when markets are pumping and it feels as if anything you buy will give you growth.
Meanwhile, the third major regional city in central Queensland, Rockhampton, is having a different experience. It has lagged its two sexier neighbours in the past two years but now it’s coming into its period in the limelight. The REIQ data for the March Quarter shows a 7.8% rise in Rockhampton’s median house price.
Rocky is often overlooked because so much attention is focused on Gladstone and, to a lesser extent, Mackay. But it has lots of offer.
It has diversity in its economy, more so than Gladstone, based on its status as the administrative capital for the region and its links to the grazing and farming communities. If you believe the marketing, it’s the beef capital of Australia.
It benefits from tourism, manufacturing, mining, construction and other economic sectors. It has a major power station, a couple of abattoirs and a large Queensland Rail workforce
It’s also a lot more affordable than Gladstone or Mackay – and it’s not too difficult to find houses with rental returns above 6%.
But investors need to cautious here, as much as anywhere else. There’s lots of new housing development in and around Rockhampton, notably out at nearby Gracemere, and investors need to research the amount of planned new supply before taking the big leap.
Terry Ryder is the founder of hotspotting.com.au