Is the Gladstone market positioned to crash?

At the height of the mining boom back in 2011, Gladstone was touted by many as a hotspot; recording a vacancy rate of just 0.6% in the June quarter and settling in as Queensland’s top performer in August.

But after an injection of supply into the market from completed projects and QGC moving their staff to accommodation on Curtis Island, the vacancy rate has continued to climb.

Louis Christopher of SQM Research recently spoke to David Koch on Channel 7’s Sunrise and claimed that Gladstone is experiencing rental falls of 30% and a high vacancy rate around 7%; concluding that the Gladstone market is positioned to crash.

According to RP Data, rents have continued to trend downwards since February 2013 and the median weekly rental rate has fallen -7.3% for houses as of October 2013.

John Fieldus director of property management and leasing Ray White Gladstone says the vacancy rate got very close to 9% the week before Christmas but is currently back around 3.5%. 

“I’ve been a property manager for 25 years and it’s very sensational what is being said.

“Vacancy rates got very close to 9% the week before Christmas but that occurs every year in Gladstone.

“It’s like an ebb and flow effect, a lot of tenants do transfer, it’s a very transient sort of town,” says Fieldus.

Fieldus says that rental property in Gladstone accounts for around 40% of all dwellings.

“The vacancy rate has been less than 1% over the last seven years until a month ago. Some 4,000 houses have been built in the last year, and a large percentage of those are investor driven.

“There’s around 850 vacancies around the city at the moment, which is four times higher than what we’re used to. But I’m confident in the market absorbing a lot of the vacancy we have, it just takes sheer hard work,” says Fieldus.

Fieldus says rents in the area have come back 10-15% in recent times, which means existing tenants can get a better deal.

“Majority of the tenants are existing tenants in town looking for a better deal. They’re picking up on that 10-15% drop and can find something better,” says Fieldus.

Fieldus describes the Gladstone market as a funnel; too much is going into the top and it can’t be funneled through.

“It’s certainly not going to be a buoyant year but I don’t think the market has crashed it, I dispute that strongly.

“Our challenge is to absorb all those vacancies. I think over 500 would be self-contained units built and developed for the Curtis island project.

“The company then built their own accommodation on their construction site and now there are several thousand living in the companies own accommodation on the island, which has been detrimental to Gladstone.

“I think housing is nearly in balance and I think we can get it back to balance this year. Majority of the development has ceased here, so we’re trying to filter everything through the funnel but too much is going through the top."

In terms of the future market for Gladstone, Fieldus says it just needs a bit of elbow grease.

“It’s taken more than 12 months to absorb the vacancies and the town itself is in a little bit of semi shock.

“If you stand back and be objective, we’ll be in oversupply for a little while. It will just take some time, it needs some growth and there is still a lot of employment around,” says Fieldus.

Major projects currently under construction include the $2.5 billion port expansion of the Fisherman’s Landing Reclamation Area, the $2.5 billion Wiggins Island new coal export terminal and the $23 billion LNG production facility, among many others.

The median house value as of November 2013 was $495,000, a 10% drop from $551,000 in November 2012, according to Residex. They put the capitalised annual yield at 6%, with the median reflecting a 5% rental yield.

RP Data records the median rental yield of West Gladstone at 6%.

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Nicola Trotman

Nicola Trotman

With a penchant for the written word, Nicola has built a career doing just this – now Creative Director at thriving Melbourne-based PR agency, Greenpoint Media.

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