As published by Herron Todd White Valuers
2018 looms as an interesting year for the Toowoomba market. 2017 saw a continuation of 2016 trends with slowing levels of sales activity and some value stabilisation following the boom period from 2014 to mid 2015. Although sales activity has been steady across the board, the market has continued to be multi-speed and property specific. There has been little consistency with ariations in sale prices and buyer interest making it difficult to establish well performing suburbs and specific property types. This is expected to continue throughout 2018.
Toowoomba is currently a hub for major infrastructure projects including the Toowoomba Second Range Crossing road construction expected to be completed late this year and the recent completion of QIC’s Grand Central Shopping Centre extension. Also in the pipeline benefiting the Toowoomba area will be the imminent Inland Rail Project.
In terms of the residential housing market, it is expected that values may remain relatively stable on the whole throughout 2018 despite these projects. The rental market is in a balanced situation with vacancy rates of around 2.7% as at December 2017 keeping investors interested in the region, albeit to a lower level than that observed from 2013 to 2015. The infrastructure projects are believed to have assisted in holding vacancy rates low with many employees living in the Toowoomba area through the construction phases. Vacancy rates are expected to remain relatively low throughout 2018.
Key development areas continue to include the suburbs of Glenvale, Cotswold Hills, Torrington, Kleinton, Highfields, Cambooya and Westbrook with a mix of owner-occupier and investor orientated estates under development or planned.
Smaller lots than the traditional 600 to 1,000 square metre parcels are being developed within Toowoomba. The acceptance of this small lot product appears to be growing and is expected to increase in popularity in the future.
There are concentrations of small lots, units and duplex buildings in some of the above mentioned development areas which could result in an oversupply of product as infrastructure projects come to a close and workers vacate.
West of Toowoomba, towns within the Surat Basin following the decline of the construction phase of the mining and gas boom have experienced significant declines across the board. These towns are all either regressing currently or have reverted to levels which are more aligned with their predominantly rural based economies. This stabilisation is expected to continue in 2018 with a remaining over supply situation in the unit sector, improving interest for dwellings from owner-occupiers, the relatively inactive Roma market, and stabilising Chinchilla and Miles markets. Dalby is showing good signs of stabilisation with a strong occupancy rate currently being enjoyed leading to positive movement in rents.
In the commercial market leasing demand for commercial office accommodation in Toowoomba has been moderate for a couple of years with this trend likely to continue into 2018. As a result there is not expected to be a significant growth in rentals and it is possible that some lease incentives may be required to secure tenants.
Rentals can vary greatly depending on factors such as:
• Quality of office accommodation;
• Location (most popular areas are in the CBD fringes);
• Access (inner CBD properties for example can be difficult to access during peak traffic);
• Inclusion of car parking (considered a key driver); and
• PWD access (for upper level tenancies).
Rentals can vary from under $100 per square metre gross (often poor quality inner CBD first floor tenancies with no car parking or PWD access) to $400 per square metre gross for modern premium accommodation with good car parking. A small premium can sometimes be achieved for medical suites, especially in the precinct surrounding St. Vincent’s Hospital.
There are several vacant commercial sites in Toowoomba ready to be developed. The reduced leasing demand however has delayed most projects. It is unlikely that any project will proceed in 2018 unless significant lease pre-commitments can be secured. The projects will also likely need to achieve market leading rentals to make projects feasible.
The low interest rates have resulted in strong demand for commercial properties by investors, however with a low supply of quality, fully leased properties available, yields will likely remain strong.
Strong demand from owner-occupiers will likely continue in 2018, particularly for premises with floor areas of up to 300 square metres. There currently appears to be a reduced supply in this market segment, which may result in some sales reflecting a premium price. It appears that the inclusion of good car parking is a major factor for buyers.