Crash or Correction – 4th Quarter 2013 Market Update

By Andrew Allen

It’s not uncommon at the moment to open a major Australian newspaper and read an article about the impending crash of Gladstone. The opinion on the ground is that this so-called “crash” has already happened.

The reality is that the market has fallen 20% since the peak of the market 2 years ago (or about 10% per annum). On the surface this appears to be a huge drop, however remember prices rose 20% in 12 months during 2011.

In share market terms this would be called a correction. An enormous unsustainable volume of investment, which at some point needed to adjust.

Prices are now back to a level in line with 2007 and on par with pricing prior to the LNG gas projects coming to town. Rental vacancy currently sits at around 7%.

The future

For as long as Gladstone locals can remember, the regional city of just over 30,000 people with close to 60,000 in the region, has always moved counter cyclic to the rest of the country.

When the markets improve in capital cities, investment money tends to flow to there first.

There is still a relatively small amount of newly developed housing product set to come into the market, so we predict the current volumes of vacancy to decrease slowly as these are absorbed.

For the moment, pricing for established housing and older rental properties seems to have stabilized.

There are some big projects on the horizon.

The likes of the Arrow Energy LNG plant, Boulder Steel plant, QER Shale Oil project could all employ thousands of construction and full time workers.

If one of these major projects gets up, it will underpin the ongoing growth of Gladstone.

Despite a perceived lack of entertainment and dining options, Gladstone remains a great place to live, particularly for young families. The city features some of the best recreational, sporting and cultural facilities in regional Queensland.

With the commissioning phases of these enormous Gas plants due to start soon, Gladstone will see the arrival of potentially hundreds of full-time operational staff and their families.

Add to this the ongoing operations of some of Australia’s biggest industrial heavyweights and Gladstone will continue to prosper as Queensland’s most vibrant modern city.

Andrew Allen, Ray White Gladstone

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