Residential property clock reveals surprise recovery locations
Spring is a significant time on the real estate calendar and with news that national dwelling values are rebounding, the clock is ticking to see which micro markets will move first.
Independent property valuation and advisory company Herron Todd White has released its monthly “residential property clock”, showing a mixed bag of surprise locations in recovery mode.
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Homebuyers and investors alike are always keen to buy at the beginning of a rising property wave and this study breaks down which cities and regions are on the decline, which have hit rock bottom as well as those that are climbing back from the brink.
The Herron Todd White report comes in the same week that CoreLogic’s August Hedonic Index showed national dwelling values had risen by 0.8 per cent (the first monthly increase in almost two years and the largest movement since April 2017).
Brendon Ptolomey, managing director at Herron Todd White Western Australia, said things were looking up for the Pilbara region which had experienced a significant property price correction at the end of the last mining construction boom around the end of 2015.
“On average, prices dropped by 60 per cent as the construction projects concluded and the workforce migrated away from the region, back to Perth, the east coast cities and New Zealand,” he said.
“The region has been experiencing a steady build in projects and therefore workforce since the beginning of 2018.”
Herron Todd White Central Queensland director of residential valuations, Adrian Haks, said he saw his local markets also stabilising.
“We were on the downward trend for many years since 2009 in contrast to those markets in Sydney, Melbourne and Brisbane which were all shooting upwards. Off the back of the mining downturn many people left the local market,” he said.
“At a time when those major cities are coming down, we’re now heading back upwards again and we believe it’s because of the confidence in the mining industry which is employing more people.”
But, it’s not just about mining, said Mr Haks.
“This time there are quite a number of projects happening which, if they’re done in a timely manner over an extended period, you would hope there’d be another project to continue on and keep people in the area and continue that confidence.”
THE START OF A RECOVERY
Northern Queensland towns which suffered through a property price rollercoaster in recent years; such as Cairns, Gladstone, Mackay, Townsville and the Whitsunday region, as well as mining centre Port Hedland, all feature in the “start of recovery” spot for houses in the Herron Todd White data.
“The Gladstone market is slowly starting to recover after the last boom and bust period,” the report pointed out, adding that there was an influx of interstate purchasers over the past 12 months.
The reasoning behind Mackay’s turnaround, according to the report, is an increase in the population after a post-resources boom exodus.
After the downturn in the sector, Mackay suffered a savage 20 per cent to 30 per cent drop in residential values but large infrastructure projects in the pipeline mean things are looking up.
Townsville is also on the receiving end of some major projects which translates to an economic recovery, more jobs and a population increase which will in turn push up property prices.
Mining metropolis Port Hedland, which took a mammoth hit in house prices after the Australian resources sector took a dive, has had a promising year in property according to the monthly report.
“Port Hedland continued to have a positive 2019 seeing a 3.4 per cent increase in the median house price over the June 2019 quarter to $225,000,” it reported.
A positive improvement, but a world away from the off the chart prices during the 2013 peak where the median house price was recorded as high as $1.125 million.
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THE RISING MARKETS
The report placed Adelaide, the Barossa Valley, Hervey Bay, Karratha, Launceston, Mildura, Emerald and Shepparton among the locations in a “rising market” mode.
In Karratha, Mr Ptolomey said the “perfect storm” for house price growth is building.
“The town is dominated by Iron Ore and Woodside natural gas as well as minor projects in salt and other metals. Demand is building for owner occupier and rental accommodation on the back of the new mining construction projects,” he said.
“This time around it is not as big as the once in a lifetime boom, but there has been a significant uplift in activity,” he explained.
Mr Ptolomey added that such an uplift in local projects is attracting people to Karratha.
“However, there is only a finite supply of housing and it is difficult to create new supply as the cost of construction is still very high, higher than buying existing, hence the pressure has begun to mount on the existing supply. Demand continues to grow and house prices rise (as do rents) so the cycle gets traction and moves again,” he said.
Across in Adelaide, long considered one of the country’s most affordable capitals, the report highlighted that the tide is turning. The South Australian capital has long suffered from negative population growth due to “brain drain” but more recently there has been an increase in overseas migration, which accounted for 60 per cent of the population growth from 2017 to 2018.
“A change in population size can cause price level fluctuations while a change in population demographic visibly alters a suburb’s taste, smell and appearance,” the report explained.
“With an aim to halt the brain drain and increase international migration, South Australia has high hopes of becoming a creative multicultural hub.”
Head further south and the number crunchers at Herron Todd White have labelled Launceston as another one to watch, citing climate as a driver.
“The state is seeing population migration due to real or imagined climate change effects. People are simply relocating from Queensland and Western Australia because it’s too hot.”
The figures show that net inflow migration for the December 2018 quarter was 568 people.
However, buyers hoping to maximise capital growth in Hobart may have missed the boat on this tide with the report clearly placing the Tasmanian capital at the “approaching peak of market” spot on the property clock.