Herron Todd White – Month In Review
As published by Herron Todd White Valuers
The Toowoomba residential market appears to remain location and property specific with some suburbs continuing to perform better than others. There was a continued trend of low levels of sales activity and value stabilisation throughout 2017, however there appears to be a small rise in sales activity for the start of 2018.
The middle ring market, comprising properties in the $350,000 to $600,000 price bracket which encompasses the median price of approximately $380,000, remains significantly more active than higher price points due to affordability. The prestige market for $1 million plus properties continues to show signs of strong interest and sales results in recent times, but is limited in supply. The middle ring price point encompasses a wide variety of household types, ranging from first home buyers through to retirees.
At the middle range price point there is a very broad range of properties available. Properties include colonials in East Toowoomba, South Toowoomba and Mount Lofty, 1970s brick in Centenary Heights, Kearneys Spring, Middle Ridge and Rangeville, and near new homes in surrounding areas such as Westbrook and Highfields. It is expected that values in this segment will remain relatively stable on the whole throughout 2018.
The majority of this market segment is owner occupied however there is a substantial amount of rental properties that also fall inside this price point. The rental market is in a balanced situation with vacancy rates of around 2.6% as at January 2018, keeping investors interested in the region, albeit at a lower level than in recent years. The current infrastructure projects are believed to have assisted in holding vacancy rates low with many employees living in the Toowoomba area during the construction phases.
Overall, despite the soft market conditions experienced throughout 2017 there is likely to be continued demand across the board for properties around the $350,000 to $600,000 price point and it is predicted that the owner occupier dominated suburbs such as East Toowoomba, Middle Ridge, Month in Review March 2018Residential 49 Kearneys Spring, South Toowoomba, Mount Lofty and Rangeville will continue to record a more stable growth pattern than investor driven suburbs across Toowoomba’s western suburbs.
Currently in the commercial market, leasing demand for industrial properties in Toowoomba is currently moderate and has resulted in an increase in vacancies. Although face rentals have been relatively static, lease incentives may need to be introduced to secure tenants.
Demand from owner occupiers for vacant industrial properties is also considered moderate with values likely to remain relatively static over the coming year.
Whilst interest rates are low, strong demand from investors is likely to continue. Yields between 8% and 9% are often achieved for fully leased properties in good locations. There have also been a few instances where properties with a strong tenant on long term lease have achieved a sub 8% net yield.
Demand and supply for smaller industrial strata units in Toowoomba is limited. This market is predominantly owner occupied with capital values also likely to remain static in the short to mid term. The lower price bracket often makes these industrial units attractive to entry level investors.
As construction of the Toowoomba Bypass Road continues (construction commenced in 2016) and the proposed Melbourne to Brisbane Inland Railroad project progresses ($8.4 billion in federal funding announced last year) it will be interesting to see whether demand increases for industrial land in the Charlton-Wellcamp Enterprise Area (located to the west of Toowoomba and positioned close to both projects).