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Towoomba strongest property market in Australia

Terry Ryder, August 6 2014, The Property Observer

Strongest property market right now isn't where you think

I think there’s a strong argument that the strongest property market in Australia right now is not Sydney, nor Melbourne, but the Queensland regional city of Toowoomba.

This is the market which has not only delivered outstanding growth in the past year but has the credentials to keep on doing it. It has one of the nation’s most vibrant local economies, it has the lowest unemployment in the land, it’s affordable, it has above-average rental yields and there is a massive infrastructure spend under way.

That’s an investment cake with lots of tasty ingredients. And the icing on the cake is the resources activity in the nearby Surat Basin.

A question I always ask when a location is being boosted by exceptional circumstances is this: if all that activity suddenly stopped, would the location still be a good investment?

In the case of Toowoomba, this means: would the cake still be tasty without the icing? If all the coal seam gas and related activity stopped tomorrow, would Toowoomba still be a good buy?

The answer, unequivocally, is yes.

Toowoomba has long been an important regional centre. It’s Queensland’s largest inland city and it has that most important of ingredients, economic diversity – including agriculture, tourism, manufacturing, health & community services, construction and government administration.

I’ve been shouting about Toowoomba for several years now and recently the city has been widely recognised for its many qualities.

A 2012 report by the Queensland Chamber of Commerce and Industry rated the Toowoomba region as the backbone of the state economy. The chamber’s Queensland Pulse Report ranked the south-west region, centred on Toowoomba, as the leader in all key criteria except one. The region led the state on business confidence, general business conditions, sales and revenue, employment levels and capital spending.

A 2013 report by Suncorp Bank rated Toowoomba as the employment capital of Australia. It had the lowest unemployment rate at 1.9%, ahead of Darwin 2.1% and Canberra 2.9%. This was reinforced in a September 2013 report which found Toowoomba’s unemployment rate was 1.5 percentage points below the national average. Toowoomba was also rated the third most “family friendly” of Australia’s 30 largest cities.

Affordability and strong rental returns are a big part of the Toowoomba appeal for invesetors. The standard house purchase is something in the high $200,000s or low $300,000s, with apartments in the mid to high $200,000s. It’s fairly easy to find 6% gross yields on houses and 6.5% on units. Vacancies are consistently low.

According to Australian Property Monitors, there has been exceptional capital growth in the past 12 months. Most suburbs have had double-digit growth in their median prices, with several recording 15% to 18%.

Prospects for ongoing performance are strong. The infrastructure spend is considerable and there is the bonus of resources activity via the coal seam gas which is feeding the new processing plants at Gladstone.

The Wellcamp Airport is well advanced in construction, there is massive investment in roads (including the $1.6 billion second range crossing, which has state and federal funding), there are plans for two major new rail links to serve the resources sector, a $300 million convention centre is in the offing and there are upgrades to medical facilities including Toowoomba Hospital.

Property developers are active, with projects that include a $350 million re-development of inner-city retail facilities, major industrial estates and an array of housing and apartment projects.

In terms of what many investors would see as the ideal investment venue – affordable prices, strong rental returns and great future prospects, underpinned by a vibrant local economy – it doesn’t get much better than Toowoomba.

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