Brisbane v Gladstone: Where would you invest?

Brisbane, in recent years, has achieved prime status with investors due to its lower entry level price and comparatively strong yields.

However, powerhouse regional town Gladstone in central Queensland has long been an investment hotspot, making its way on to top suburb lists across the country.

So, which one would you choose to park your money in?

BRISBANE

Bonus reading: 10 hidden gem suburbs in Brisbane

Lachlan Walker, director of Place Advisory is bullish on Brisbane, calling it the key business district for South East Queensland, and a hub of commerce, professional services and industry.

“Over recent years Brisbane’s property price growth has slowed considerably against its southern counterparts, creating the ideal buyers’ market today, but Brisbane’s population is still expected to grow by over 9,000 people each year; meaning there is an underlying demand for new homes and rental accommodation,” said Walker.

“According to the SEQ Regional Plan, there is a forecast need for at least 138,000 new infill apartments to meet Brisbane’s predicted population growth, illustrating that residential property is in hot demand.”

However, BIS Shrapnel is expecting apartment prices in Brisbane to soften over the next few years after strength this year in the off the plan building sector.

In previous market upturns, they noted that interstate investors have accounted for up to a massive 40% of the off the plan sales in inner Brisbane, with New South Wales buyers being pronounced – finding the apartment prices far more accessible than those of Sydney.

With Sydney’s prices still increasing, this seems likely to continue.

Currently, BIS Shrapnel estimates that as of November 2013, over 4,000 apartments in inner Brisbane were under construction in projects scheduled for 2015/2016 completion, with 3,000 expected to see pre-sales hurdles before proceeding to completion around this time.

New apartment completions are therefore looking to increase from 1,300 dwellings in 2012/2013 to more than 2,000 in 2013/2014 and 2014/2015. This could see the numbers exceeding 3,000 in 2015/2016.

Across Brisbane, the median house price is $470,000, while in Brisbane City it sits substantially higher. Meanwhile, the median unit price sits at $383,000 across the entirety of Brisbane.

“Yes, the top end suffered losses from those who over extended themselves, but Brisbane’s middle market continued to transact as people took the opportunity to trade and upgrade,” said Walker.

BRISBANE CITY
Median house price:
$662,000
Median weekly asking rent (house):
$560
Indicative rental yield: 4.4%
Median unit price:
$461,500
Median weekly asking rent (unit):
$630
Indicative rental yield:
7.1%
(Source: RP Data)
Vacancy rate: 6.3% (Source: SQM Research) 

GLADSTONE

Recently, Property Observer asked whether Gladstone was positioned to crash after there was talk of skyrocketing vacancy rates. The fact that this question is asked says something of the general view of the risk prevalent in markets similar to Gladstone.

Despite this, there is an element of the ‘sky falling’ with these sorts of sensational comments, explained director of property management and leasing Ray White Gladstone, John Fieldus. While the vacancy rate got close to 9% the week before Christmas, this is actually said to be normal for the market. In January it returned to close to 3.5%. Despite this, SQM Research still records the vacancy rate near to 9%.

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

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

This strongly contrasts with the predictions being made mid-2013 that prices for houses would drive upwards of $900,000 by 2018. The study, from Central Queensland University was commissioned by Lyons Capital – they were developing in the area at the time of the study.

LJ Hooker Gladstone director Mark Spearing told The Gladstone Observer at the time that this was pure speculation.

The area has grown substantially over the past few years, and often it is pointed to as a town that offers diversity as well as the bullishness of a mining town investment area.

With the fifth largest multi-commodity port in Australia and the world’s fourth largest coal exporting terminal, it has become a focused hub. Despite some of the diversity, it has seen adverse impacts from the mining sector downturn over the past two years, Walker warned.

“This uncertainty resulted from a significant decline in employment opportunities and is reflected in the ongoing decline in the level of sales transactions,” he said. “Unlike Brisbane, Gladstone is a rare example in the Australian property market that defied the immediate wider Queensland market contraction post GFC, only to suffer the effects of a mining recession years later, and arguably to a greater extent,” he said.

Apartment sales across Gladstone through 2008 to 2011 saw figures peak just short of 10 year highs, with a median driven to $465,000.

“However, the market performance in Gladstone has been tightly linked to the demand resultant from the mining industry in the local area,” said Walker. Prices soon came back to $365,000 as of the December 2013 quarter, with an 18% softening over the past 12 months.

“Therefore, unfortunately as quickly as the Gladstone apartment market went up, so too did it go down”.

GLADSTONE
No statistically reliable information available for medians and rents
Vacancy rate: 8.8% (Source: SQM Research) 

{module Where would you buy an investment property: Brisbane or Gladstone?}

jduke@propertyobserver.com.au

                            

Jennifer Duke

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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