Fourth Quarter │2012

Gladstone Area RENTAL MARKET ANALYSIS

According to the most recent quarterly median rent release by Residential Tenancy Authority, the Gladstone

Area residential rental market (represented by the 4680 post code) appears to have reached a plateau after

experiencing exceptional growth over the past two years. The chart below highlights the median rent movements

for select house and unit dwelling types over quarterly periods from September 2010. Only dwelling types that

accounted for 100 or more new bonds per quarter where considered for this study.

The highest median rent for a single quarter period was achieved in the four bedroom house market, recording

$650 p/w back in June 2012. The highest median price achieved in the three bedroom house and two bedroom

unit markets were $520 p/w and $420 p/w respectively, also in the June 2012 quarter. Since these peaks in

median rental price, records for the September 2012 quarter show that prices have fallen 3.1 per cent ($630 p/w)

for four bedroom houses, 3.8 per cent ($500) for three bedroom houses and remained flat ($420 p/w) for two

bedroom units.

GLADSTONE AREA MEDIAN RENTAL PRICE PERFORMANCE

Prepared by PRDnationwide Research. Source: RTA

$630

$500

$420

$0

$100

$200

$300

$400

$500

$600

$700

2010 SEP 2010 DEC 2011 MAR 2011 JUN 2011 SEP 2011 DEC 2012 MAR 2012 JUN 2012 SEP

Med

ian

ren

t

Quarterly period

House - 4 Bed

House - 3 Bed

Unit - 2 Bed

Your home of property knowledge www.prdresearch.com.au

Observing the long term trends of the rental market, investors who purchased over two years ago have relished

in super charged rental yields, particularly from the June 2011 quarter onwards. Both three and four bedroom

houses experienced their largest quarterly growth during the September 2011 quarter, with a quarterly increase

of 18.4 per cent and 21.3 per cent respectively. Two bedroom units enjoyed their largest growth during the

March 2011 quarter, having increased its price by 16.7 per cent from December 2010. Over the past two years

the Gladstone residential rental market has demonstrated consecutive growth in prices up until the most recent

September 2012 quarter period. The two year average quarterly growth rate for four bedroom houses was 6.5

per cent, followed closely by three bedroom houses at 6.2 per cent. The two bedroom unit market achieved the

best growth recording an average quarterly growth rate of 7.8 per cent. The increased demand and therefore

competition for both short and long term accommodation in the more affordable unit market has underpinned the

level of growth it has achieved proportionate to other dwelling types in the market.

The volume of rental accommodation available to the market during the September 2012 quarter appears to

have satisfied a considerable amount of underlying demand as evidenced by an increase in the number of new

bonds across the board. On the market insight suggests that demand for rental accommodation remains strong,

with well-appointed, well-presented and above all well-priced rentals leased within days of listing. With that being

said, the budgets of many prospective tenants appears to be stretched to their maximum capacity, with pricing

over $550 p/w for a non-executive dwelling deterring any interest from the market. The fact that vacancy remains

tight in the current market implies that lessors are becoming more receptive to the markets price expectations in

order to let up their property with minimal vacancy throughout the year. This is reiterated by the volume of new

bonds for the September quarter and in the concurrent softening in rental prices.

GLADSTONE AREA NUMBER OF NEW BONDS

Prepared by PRDnationwide Research. Source: RTA

201174

206244 234

304266

236

326

252

185

190

198172

210232

204

236

181

135

178

152

153

130129

173

192

0

100

200

300

400

500

600

700

800

2010 SEP 2010 DEC 2011 MAR 2011 JUN 2011 SEP 2011 DEC 2012 MAR 2012 JUN 2012 SEP

Nu

mb

er

of

ne

w b

on

ds

Quarterly period

Unit - 2 Bed

House - 3 Bed

House - 4 Bed

Your home of property knowledge www.prdresearch.com.au

Prepared by PRDnationwide Research. Source: PDS, Residential Tenancy Authority. PRDnationwide does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. PRDnationwide will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Prepared by PRDnationwide Research © All medians and volumes are calculated by PRDnationwide Research. Use with written permission only. All other responsibilities disclaimed. © 2012

Research Analyst │Robert Matta P (07) 3026 3357 F (07) 3166 0457 E robertmatta@prd.com.au

With the extent of new construction in Gladstone correcting the housing shortfall, it is difficult to envisage further

rental price growth from hereon as the supply of new housing adds to the existing stock on the market. In the six

months to 30 June 2012 only 576 houses sold in the established market, down 30.2 per cent from the previous

December 2011 half year period. Over what has been an enduring and grossly underperforming five years in the

property market for most of the nation, Gladstone has bucked the trend to record remarkable growth in both

sales volumes and subsequent median price. The volume of sales recorded for the December 2011 period was

just 39 sales short of that recorded in the pre-GFC December 2007 period. The five year average annual growth

rate in the median price was an exceptional 7.1 per cent, recording a median price peak of $475,000 in the June

2012 period. However, the start to 2012 has not provided a positive outlook for the region’s property market.

Currently, there is an oversupply of overpriced property on the market that is not moving, which is exacerbated

by new supply additions that are being drip fed into the market to navigate competition and sustain price growth.

The acute fall in sales volumes during 2012 is the direct result of the market’s appetite for affordable property

and the reluctance of vendors to revise their price expectations, opting for longer listing periods and speculating

on selling at their original asking prices. There is an interesting trend in which vendors are withdrawing their

properties from the market after little to no interest and placing them in the renting pool with the intention of

bringing it back to the market when selling conditions improve. The trend is expected to put further downward

pressure on rents, much to the relief of renters, as the supply of rental properties increases towards the end of

the year into 2013. In addition to influencing rental prices, there is potential for house prices to correct as well.

The outlook of diminishing rental yields will be detrimental to the level of investor demand which accounts for a

large proportion of the active buyer segment, particularly if vendors are not willing to budge on pricing to

accommodate the change in the rental market. The current market presents a plethora of opportunities for

vendors/ lessors to sell/ lease their properties within days of listing so long as they are prepared to meet a

reasonable market, and have the type of property to attract competition from active buyers.

GLADSTONE LGA 10 YEAR HOUSE SALES CYCLE

Prepared by PRDnationwide Research. Source: PDS

$475,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

0

100

200

300

400

500

600

700

800

900

1,000

200

2 J

UN

200

2 D

EC

200

3 J

UN

200

3 D

EC

200

4 J

UN

200

4 D

EC

200

5 J

UN

200

5 D

EC

200

6 J

UN

200

6 D

EC

200

7 J

UN

200

7 D

EC

200

8 J

UN

200

8 D

EC

200

9 J

UN

200

9 D

EC

201

0 J

UN

201

0 D

EC

201

1 J

UN

201

1 D

EC

201

2 J

UN

Med

ian

sale

pri

ce

Nu

mb

er

of

sale

s

Half year period

Number of sales

Median