Don’t be tempted to invest in Central Queensland

As the Sydney and Melbourne markets go flat, some property professionals are touting Central Queensland as the ‘next big thing’ in the investment property market, following strong price reduction in recent years.

The research house has received a number of inquiries about Central Queensland as an investment alternative to the major East Coast hubs of Sydney and Melbourne. 

Central Queensland is attracting a new wave of attention because many investors believe this property market has hit rock bottom and that the only way is up.

However, he said the economy of Central Queensland had been in decline “at an alarming rate” since the end of the mining boom.

This is followed by negative capital growth of, on average, (-17.5%) for houses and (-18.7%) for units in the past five years.

Some areas, such as Gladstone – Biloela experienced even more severe price reductions, with (-28.7%) negative growth for houses and (-39.9%) for units in the past five years, including -7.3% and -10.4% in the past 12 months, for houses and units, respectively.

So, it’s no surprise many believe strong capital growth will follow.

While its economy had shown some slight improvement recently, Central Queensland was projected to deliver low economic growth, a soft job market and low population growth. 

This means both houses and units in the region still carry high risk and research in our RiskWise Quarterly Risk & Opportunities Report,  published last month (February), backs that up.

Moreover, the unemployment rate in the region was “very volatile”, with frequent significant changes in recent years.

This is a reflective of a depleted labour market and a major factor in the uncertainty and the high level of risk associated with residential properties.

Consequently, Central Queensland is also experiencing low population growth rate.

Also, the vacancy rate in the past 12 months has been very high at 7.4%, on average, for houses and 7.9% for units, as per CoreLogic data. 

This has resulted in negative price growth for both houses and units across the area in recent years.

The risk is even higher for off-the-plan properties that are currently in the pipeline.

The 559 house building approvals and 639 unit approvals are of the greatest concern as these new properties will be added to the already current oversupply.

Units in some suburbs were also subject to voluntary lending restrictions by the major lenders, such as lower loan-to-value ratio (i.e. higher deposit).

He said that with only slow improvement in the economy, low population growth, high vacancy rates, dwelling oversupply, along with lending restrictions, and therefore less demand, the overall risk for both houses and units in Central Queensland remained high for the foreseeable future.

About Doron Peleg is the CEO/Founder of RiseWise Property Review. He has more than 20 years’ experience in risk management including, Co-Founder of Peleg, Kessel & Co, an assurance and advisory accounting firm & Executive Manager at Westpac Banking Corporation in Sydney. www.riskwiseproperty.com.au/