No developer in sight
Wednesday 09 November 2016
The latest monthly report by Valuers Herron Todd White has confirmed that small developers and renovators have abandoned Central Queensland.
As has been well documented, the fortunes of the Central Queensland property market is ultimately defined by the health of the mining sector, with property prices moving in lockstep with the coal price since the industry started back in the 1960’s.
Since the peak of the mining construction and property boom in the years, 2012 to 2014, property prices have collapsed as a massive oversupply of houses built during the boom came onto the market at the very time the mining downturn kicked in and demand evaporated. In some communities, the price correction has been upwards of 80%.
On the Central Highlands, HTW says residential development projects are no longer viable.
“The cost to renovate is not recoverable in the current market unless you pick up a bargain well below market value, or purchased over ten years ago and have not continued to borrow against the equity when values rose,” they said.
“There have been a few land banking sales but no development taking place.”
Similar story in Gladstone where there is currently no development work of any size being undertaken.
“Until the current oversupply lessens, developing new units, housing or land is simply not feasible,” HTW said.
“There are however opportunities to buy properties with redevelopment potential (higher density zonings) in central suburbs providing the investment is for the long-term.”
In Mackay Herron Todd White says small time developers need to look carefully at the figures.
“It is quite a difficult task to undertake a small scale development and come out in the black in the current Mackay residential market," they said.
“There have been virtually no small developments (or large scale for that matter) in recent times, except for large developments that have been in the pipeline for some years and are just finalising.
“With land prices at over ten-year lows and council charges still at peak market levels, it is not considered viable to subdivide land on a small scale.
“ There have also been limited developments or renovations of dwellings with the express purpose of selling for profit because the key to these types of developments is to obtain the base unrenovated product for a below market or rock bottom price.
“The difficulty is that the depressed market has seen fully renovated properties sell for less than the cost to renovate.
“To make these projects viable, renovations usually have to be undertaken by the owner and not outsourced to third party contractors.
“What we see in Mackay though, is many investors and developers land banking in good locations, with what appears to be a strategy to hold until the market improves.”
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