Central Highlands Workforce Development and Accommodation Strategy - Attachment 1

Central Highlands Workforce Development Program

Prepared For: Central Highlands Development Corporation

February 2024

With support by

Executive Summary

Executive Summary

This report has been compiled to investigate the demographic, economic and market parameters that are currently impacting the Central Highlands Local Government Area (LGA) with specific regard to the impact on housing demand in its many different forms. Whilst much of the focus of housing supply and affordability has been directed into south east Queensland and some of the regional coastal centres, rural Queensland has largely gone unnoticed.

As the world has largely emerged from the pandemic induced slow down and factories reopen, particularly through China, there is an expectation that demand for coal will increase significantly, particularly given the cost of the raw material at present. Combined with this has been the highly volatile world geo-political environment whereby energy has become a big source of tension. In addition, the impact of the declining inflation numbers through most advanced world economies suggests that investment in infrastructure throughout 2024-25 will grow significantly.

Total population growth forecasts for the Emerald Catchment suggests that it will experience an uplift in growth over the coming two decades, increasing the number of actual residents of property purchasing age in 2046 by circa 4%. This would suggest a need for circa 800 additional new homes. However, the author believes that this will prove conservative as the population projections were calculated in a near pandemic environment, without full knowledge of the high interstate and international migration numbers, and rising metropolitan house prices should create the opportunities for the Central Highlands to become a source of affordable accommodation with strong employment prospects.

The unemployment rate for the region reflects sound economic fundamentals and a labour force that is well below full employment reflecting the current economic cycle. Despite this, even during periods of low demand, unemployment rates in Emerald have rarely been above 4.0%. What is also evident is that the current unemployment rates are below those during the resource boom and could create a new record low in the coming months/years.

Whilst Emerald has a more diverse economy than several other regional, resource towns, the mining industry continues to be its largest industry of employment and directly accounts for 19% of the local labour force. Accordingly, the Emerald economy responds to macro economic drivers and the coal mining index is a good indicator of where world growth and demand is in a broad cycle. In periods such as the current boom, global supply has been constrained through recent natural events like flooding and earthquakes, as well as the closure of some mines in other countries in response to Covid which opened up new trading opportunities for Australian miners.

According to the most recent estimates published by the Queensland Government’s Statistician’s Office (February 2024) the total number of non-resident workers on shift in the Central Highlands LGA in 2023 was 5,135 people. Between 2022 and 2023, growth in non-resident workers on shift (7.4%) clearly outpaced growth in the resident population (0.7%), saw its share of the full-time equivalent population increase from 14% to 15%.

With regard to Central Highlands LGAs resource industries composition of workforce by employment status, it is largely on trend with the entire Bowen Basin – with 59% of its workforce being contractors and the balance being employees. There is a rather even split between local resident and non resident workers in the Central Highlands LGA, which is unique to the Bowen Basin as a whole where 65% of the resource industry workforce are FIFO and/or DIDO workers.

The NPR Co. holds the view that the projected Non-Resident population figures for the Central Highlands LGA that are presented on pages 14-15 are conservative at best, and are likely to ultimately prove to be an underestimation. This notion is underpinned by the acquired knowledge of the additional major projects featured, which weren’t taken into consideration when projecting the Central Highland LGA’s Non-Resident Population. Collectively, these additional projects are estimated to have the capacity to host more than 650 additional construction jobs and more than 1,955 operational jobs. However, it’s important to acknowledge that just 16% of these jobs that were overlooked in the projections are expected to be relevant to the forecast period through to 2026. Despite this, the demand for accommodation will more than exceed the already stressed short and long stay options potentially forcing prices to escalate beyond previous peaks.

Another aspect that was given consideration during the study was the impact that childcare can have on both growing the workforce and attracting longer term residents to the region. It was discovered that based on the optimistic assumptions applied to the sector and for the Central Highlands community to reach the Queensland average in regard to access to childcare; an additional 616 spots would need to be made available to residents in the short term. This would require a near doubling of the current offer, or an 84% increase in total licensed spots. However, the author believes that further research is likely to suggest that an even larger number of childcare positions would need to be added, acknowledging that a number of local centres are thought to be currently operating below their licensed capacity due to a lack of staff.

In order to attract individuals and families to the region, housing needs to be both diverse and affordable as well as available offering a sound level of choice. Mortgage affordability throughout the Central Highlands LGA improved between the 2011 and 2021 Census date, with median weekly mortgage costs declining from 23% to a 17% share of median household incomes. However, the median affordability equation has worsened throughout the Central Highlands LGA more recently, with the typical mortgage costs having increased to circa 28% share of typical household incomes in 2023. As pressure on housing stock continues, it is expected that 2024 may well exceed this threshold for many households as price growth is more likely to exceed the rate on interest cuts.

Land sales have been volatile in the region with extraordinary peaks and troughs fuelled by the mining and to a lesser extent, the agricultural cycles. Total annual land sales in Emerald fell from 312 lots in 2012 to just 9 sales in 2 years between 2015 and 2016, whilst the median land price dropped from $160,000 in 2014 to a low of just $85,500 in 2017 before improving to a new peak of $170,000 in 2020.

Executive Summary Continued

The challenge with prices this low are not affordability related, it is that there is very little value in the commissions for making sales and valuers are going to struggle to support higher prices. In addition, finding a builder in the current market to assist with the construction is incredibly difficult. Limited land sales also means limited additional stock.

In Emerald during the resource boom, annual house sales peaked in 2011 at 406 sales, whilst the median house price peaked a year later at $460,000. Again, as the peak mining construction phase came to pass and the industry transitioned towards the less labour intensive operational phase, demand for housing plummeted and so did values. The downturn was prolonged and it wasn’t until 2017 that the median house price had bottomed at $245,000 in Emerald.

Importantly, since bottoming in 2017, volumes and median house price growth in both catchment regions have grown at a much more sustainable rate A previous oversupply of housing has now been absorbed whilst values are now re-aligned with local household budgets and are no longer unsustainably inflated by external market pressures, though this is starting to change That being said, despite stable annual growth since 2017, the 2023 median house price in Emerald ($360,000) remains $100,000 lower than the previous market peak in 2012

It is this low median house price that is causing economic and financial challenges when the supply of new accommodation is required in the residential housing space With a construction price of circa $2,600per square metre, a modest 200 square metre home without the land input will exceed the median house price by $160,000 Gaining support from the valuation community is only likely to come in time when there are enough comparable sales to use as evidence for financiers For financiers to lend money, they require the comparable sales and so the economic chicken and egg cycle continues

This challenge also flows through to the rental market The key postcodes within the Central Highlands LGA, including 4720 ( Emerald), 4717 (Blackwater), 4723 (Capella) and 4702 (Rubyvale) demonstrate demand that exceeds supply In general terms, each of the four key postcodes have seen their vacancy rate trend within the tight range since February 2022 Notably, the 4720 postcode has recorded tight vacancy rates for 52 months in a row dating back to September 2019, whilst the 4702 postcode has experienced an even longer period (72 months) of tight vacancy rates which extends back to January 2018 As at the end of December 2023 all four postcodes recorded tight vacancy rates, ranging between 0 5% and 1 2%

Whilst housing is critical to workforce growth, it is also critical to the long term sustainability of the Central Highlands region Housing alone though will not solve the regions challenges There is a need for more services as identified with childcare, retail operating hours comparable to the coast, recreation and education opportunities that retain residents rather than act as detractors The Central Highlands is well positioned be a diversified centre with a long term sustainable outlook

Catchment Map

Primary & Secondary Catchments Map

The adjoining map defines the two key catchment regions that will be the primary focus of attention throughout the balance of this report in regards to property, demographic and economic market trends

Emerald SA2 (Primary Catchment) will generally be regarded as the Primary Catchment and is displayed in purple in the accompanying map Throughout the report comparisons will be drawn against the rest of the Central Highlands LGA (Secondary Catchment), which is displayed in orange in the catchment map The Secondary Catchment includes the amalgamation of three localities, including Coppabella, Dysart and Winchester

Where relevant, commentary will also be provided on apparent trends within certain localities throughout the rest of the Central Highlands LGA, with the reader advised to view this map for added geographic context

In addition, there will also be comparisons drawn between trends observed within the Central Highlands LGA and that of some of its closest neighbouring Local Government Areas, including Isaac LGA, Banana LGA and Maranoa LGA For formatting purposes, these LGAs have been omitted from the accompany catchment map but are able to be viewed in a broader context via this link

Emerald SA2

Rest of Central Highlands LGA

Emerald SA2

Central Highlands LGA

Historical & Projected Population Growth Trends

Net Regional Internal Migration & Historical Population Growth

The adjoining graphs and tables are telling on how the Central Queensland SA4 region in its broadest sense is evolving with regard to population growth The ability to retain all age groups in the post resource boom period has arguably led to a brain drain on the region combined with a diluting of most aspects of society Whilst not significant in size in the broader scheme of things, it does demonstrate that there was a sense of lacking optimism and perceived better options elsewhere for the Rest of the Central Highlands However Emerald has remained more robust around population growth

It is the authors opinion that the data for 2021, 2022 and 2023 could highlight population growth on the positive side of the ledger as the mining and agricultural sectors continue to rebound Arguably the limiting factor for the region is the capacity to house everyone The post pandemic period has been particularly cruel to the regions in terms of attracting accommodation construction firms to build more homes at prices that are financially viable and acceptable to local bank lenders

As the world has largely emerged from the pandemic induced slow down and factories reopen, particularly through China, there is an expectation that demand for coal will increase significantly, particularly given the cost of the raw material at present Combined with this has been the highly volatile world geo-political environment whereby energy has become a big source of tension In addition, the impact of the declining inflation numbers through most advanced world economies suggests that investment n infrastructure throughout 2024-25 will grow significantly

The two tables at the bottom show where key net population gains or losses occur for the Central Queensland SA4 region As one expects for many regional centres there is a population drift that occurs from the more outback regions or from other regional centres Very rarely is there a significant population gain that occurs from a capital city to a region unless it is regarded as a tourism or retiree destination within reasonable proximity to a capital city

It should also be noted that the net internal migration data is somewhat skewed towards the conservative side given it does not account for fly in fly out workers who for all intents and purposes live there, but their principal place of residence is another location, that identify as home, rather than a work address

The population losses that have occurred throughout the years has had a heavy bias towards Brisbane and South East Queensland This is not unique to the subject region and will remain a trend until the broader economy is diversified, the education offer is the equal to the capital cities and job opportunities for seniority occur locally The author does acknowledge that the healthcare offer in many of the larger regional centres is far superior to what it was a decade ago which now means the older population is less likely to relocate and be cared for within their own community Education is still problematic Source:

Projected Population Growth by Buyer Profile/Age Group

The two graphs at the top of the page show the size of the Emerald SA2 Catchment and the growth rate it has achieved over the past decade whilst being compared to the Rest of Central Highlands LGA At an average annual growth rate of circa 1 9% per annum, the Primary Catchment has outperformed the State and significantly outperformed the balance LGA which has shrunk by -0 3% For Emerald, this is a significant achievement given the mining cycle, the inland location and the unaccounted for FIFO population that technically swells the local community but is not recorded as being local

Total population growth forecasts for the Emerald Catchment suggests that it will experience an uplift in growth over the coming two decades, increasing the number of actual residents of property purchasing age in 2046 by circa 4% This would suggest a need for circa 800 additional new homes However, the author believes that this will prove conservative as the population projections were calculated in a near pandemic environment, without full knowledge of the high interstate and international migration numbers, rising metropolitan house prices and a time when coal prices and demand were considered to be low At present, one of the largest constraints for the community is the lack of builders available to construct new homes despite the highly affordable nature of new land that was recently purchased As with much of Queensland, this is a trend that is not going to be resolved quickly or easily The ability to provide flexible housing arrangements should be welcomed where demand outstrips supply and is considered cyclical in nature

If one considers the population profile as it currently stands which is dominated by predominantly young families with school aged children, an additional two decades of time will echo highly similar population characteristics Having stated that, today's parents will be transitioning into being grandparents having gone through the upsizing process of housing and becoming more likely to be searching for the rightsize house or terrace property, and more likely having moved to a coastal destination It is thought that the Central Highlands will continue to be a working aged population with a requirement on school aged education and youth entertainment If it is to retain an older demographic, it will need to offer more than just affordable housing and high paying jobs

Although Upsizers will dominate the population growth narrative throughout the Primary Catchment, it’s important that First Home Buyers are not overlooked This is particularly important when one considers that First Home Buyers at present remain excluded from much of the residential sector; so any opportunities will be embraced Having stated that, the upsizer market poses less risk to the developer given they have usually built up equity, their access to finance is much smoother and the quality of the product being sought is typically of a higher standard

Having stated that, if mine and mine related businesses continue to take existing rental accommodation and the shortage of builders means adding new residential stock is highly unlikely, families will be excluded from Emerald and the Central Highlands This will have longer term negative consequences for the broader community and the services being offered

Pre- School (0 - 4 Years) School Years (5 - 19 Years) Leaving Home (20 - 29 Years) Young Families (30 - 44 Years) Mid Life (45 - 59 Years) Right Sizing (60 - 74 Years) Slowing Down (75 - 84 Years) Elderly (85 Years +)

Pre- School (0 - 4 Years) School Years (5 - 19 Years) Leaving Home (20 - 29 Years) Young Families (30 - 44 Years) Mid Life (45 - 59 Years) Right Sizing (60 - 74 Years) Slowing Down (75 - 84 Years) Elderly (85 Years +)

Source: ABS, QGSO & The NPR Co.

*2022 figures are based on current population estimates. All other totals and market share data projections.

Source: ABS, QGSO & The NPR Co Source: ABS, QGSO & The NPR

Source: ABS, QGSO & The NPR Co

Population Projections by Buyer Profile (Left) & Projected Change in Population by Age Group (Number - Left, Market ShareRight)

Workforce & Labour Market Trends

Key Industries, Occupations and Unemployment Rates Over Time

The Emerald and Central Highlands Catchments continue to benefit from the opportunities provided by an established mining sector with economic and downstream employment generation in the broader support industries This is likely to remain at the top of the industry of employment for the medium to longer term as the region is noted for its abundant mineral deposits

Retail trade which is usually a high employment generator in most centres ranking in the top five, often the top 3, remains important in Emerald, but not significant in the smaller regional centres Again, this comes back to the cost of living, small catchment, ability for retail to support high wages and the staff’s capacity to get accommodation Key workers are struggling to make ends meet, a problem not solely isolated to the Central Highlands Construction whilst being important in terms of employment generation, has been more attuned to growing mining capacity than residential capacity The author acknowledges that it is difficult to get builders out to the region when they are in high demand in Rockhampton, Yeppoon and Gladstone with good wages currently on offer there

Of interest is the general lack of Professionals in every Catchment which is underrepresented when compared to the major coastal centres of Queensland Unsurprisingly, technicians and trades continue to be dominant in the occupation space with machinery operators also highly sought after An outlier in the most recent census data demonstrates the elevation in the Management category of the rest of the Central Highlands This places it back in line with the results of 2011 having declined in 2016

The interesting aspect of this is that irrespective of whether it is housing or workers camps, they need to be designed to cater to the demographic composition of the community This should allow for a more seamless integration and relationship with both communities, an outcome that is preferable and important for the sustainability of the region

The unemployment rate for the region reflects sound economic fundamentals and a labour force that is well below full employment reflecting the current economic cycle Despite this, even during periods of low demand, unemployment rates in Emerald have rarely been above 4 0% What is also evident is that the current unemployment rates are below those during the resource boom and could create a new record low in the coming months/years

It is noted that the pressure on all aspects of Emerald and other smaller centre’s highly stressed at present with accommodation availability being one of the more highly visible This is in fact a problem throughout the Bowen Basin that then permeates almost every other aspect of society and service delivery

9% 6 Clerical & Admin 11% 6 Clerical & Admin 8%

7 Community & Personal Service 5% 7 Sales 7% 7 Community & Personal Service 7%

8 Sales 4% 8 Community & Personal Service 7% 8 Sales 5%

Historical (Left) & Current Unemployment Rates as at Jun-23 (Right) by Catchment

Local Resource Industry Characteristics

Noting the considerable influence of the resource industry on the Central Highlands economy, the following section of the report has been dedicated to defining the key attributes of the local resource industry workforce and some of its key subsequent impacts on local housing and economic needs under current market conditions

The first table on the right provides a breakdown of the Central Highlands LGA’s total full-time equivalent population, which is comprised of both the total resident population and the total non-resident workers on shift It’s important to note that the non-resident population is the number of fly-in/fly-out or drivein/drive-out (FIFO/DIDO) workers who are living in the area of their workplace temporarily, and who have their usual place of residence elsewhere. This group includes employees, contractors and associated sub-contractors employed in construction, production and maintenance at mining and gas industry operations and projects, renewable energy projects and resource-related infrastructure Due to shift arrangements, not all members of the non-resident workforce are present in the local area at one time For that reason, the non-resident population refers to the number of non-resident workers on-shift at a given point in time, rather than the total non-resident workforce

According to the most recent estimates published by the Queensland Government’s Statistician’s Office (February 2024) the total number of non-resident workers on shift in the Central Highlands LGA in 2023 was 5,135 people Between 2022 and 2023, growth in non-resident workers on shift (7 4%) clearly outpaced growth in the resident population (0 7%), see its share of the full-time equivalent population increase from 14% to 15% Conversations had with local mining companies suggests that these growth patterns are likely to continue through 2024 Accordingly, there is unlikely to be any notable change in the Central Highlands economic diversity in the short term, with non-resident resource sector employment growth continuing to outpace resident population growth

That being said, the second table on the right importantly shows that the Central Highlands LGA hosts a more diverse resource industry, with coal mining accounting for 70% of local resource industry jobs, which is the lowest share of any LGA within the Bowen Basin – where coal mining accounts for 94% of resource jobs The ‘Other Resource Industry’ classification includes gas operations, metalliferous mining, renewable energy projects and related infrastructure operations Greater diversity within the resource sector is a feature of the Central Highlands LGA labour force is a feature of the local economy that should provide opportunities to foster and develop a broader range of skills and professions than other regional economies that are more heavily linked to the coal mining industry

With regard to Central Highlands LGAs resource industries composition of workforce by employment status, it is largely on trend with the entire Bowen Basin – with 59% of its workforce being contractors and the balance being employees There is a rather even split between local resident and non resident workers in the Central Highlands LGA, which is unique to the Bowen Basin as a whole where 65% of the resource industry workforce are FIFO and/or DIDO workers

Central Highlands LGA Major Resource Industry Projects

The two tables on the right provide a breakdown of all key, known major resource projects that are operating, under construction, approved, planned or proposed for development within the Central Highlands LGA as at the time of writing. Included in these tables is an update on project status, as well as estimated total number of construction jobs and/or current and future operational jobs.

Each of the 19 projects featured in the first table on the right were sourced from those Central Highlands LGA projects featured in one or both of the Queensland Government Statisticians’ Office’s reports named ‘Bowen Basin Population Report 2023’ (February 2024) and ‘Bowen And Galilee Basins Non–resident Population Projections, 2022 to 2026’ (June 2022). It’s worth noting that these reports included other projects which have been cancelled or withdrawn and have thus been omitted from the accompanying table.

It’s important to acknowledge that each of the 19 projects featured in the first table on the right form the basis of the Central Highland LGA’s Non-Resident Population Projections 2022 – 2026 provided overleaf.

The second table on the right provides details of 6 additional key projects relevant to the Central Highlands LGA that The NPR Co. was able to identify and source through a number of key reputable sources – most particularly from the Resources and Energy Major Projects database published by the Australian Government Department of Industry, Science and Resources.

Accordingly, The NPR Co. holds the view that the projected Non-Resident population figures for the Central Highlands LGA that are presented overleaf are conservative at best, and are likely to ultimately prove to be an underestimation. This notion is underpinned by the acquired knowledge of the additional major projects featured in the second table on the right, which weren’t taken into consideration when projecting the Central Highland LGA’s Non-Resident Population.

Collectively, these additional projects are estimated to have the capacity to host more than 650 additional construction jobs and more than 1,955 operational jobs. However, it’s important to acknowledge that just 16% of these jobs that were overlooked in the projections provided overleaf are expected to be relevant to the projection period through to 2026.

As discussed previously, data released by the Queensland Government Statisticians’ Office’s ‘Bowen Basin Industry Workforce 2023’ report (August 2023) suggest that for those resource industry workers employed in the Central Highlands LGA whose place of residence was known, 49% lived within the LGA, mostly in towns like Emerald, Blackwater & Capella. Assuming these statistics remain consistent, the total workforce of the 6 overlooked projects featured in the second table on the right would collectively host an ‘overlooked’ nonresident workforce of more than circa 997 people throughout the entirety of their respective project lifespans – or more than 156 ‘overlooked’ non-resident workers within the projection timeframe presented overleaf (2022 – 2026).

Central Highland LGA’s NonResident Worker Population Trends

The chart on the right notes the total non-resident population of the Central Highlands LGA between 2006 and 2023 and also provides three different future non-resident population projection scenarios for the LGA between 2022 and 2026 – according to the Queensland Government Statistician’s Office (QGSO).

It’s important to read and understand the assumptions applied to each of the three non-resident projection scenarios as defined below the chart, acknowledging that they all relate to workforce estimates linked to major projects detailed in the first table on the previous page of this report. Furthermore, it must also be acknowledged that whilst these projections are the most up to date, they are now beginning to lack validity having first been published 24th June 2022.

Though the author is confident in the historical portion of the accompanying chart, The NPR Co lacks confidence in the projection scenarios due to a combination of factors, including:

1. The previously mentioned, dated nature of these projections

2. More recent updates for 2022 and 2023 Non Resident Population figures for the Central Highlands LGA from the same source exceeding the totals previously projected in all three scenarios

3. There are additional major projects in the Central Highlands LGA that were not considered in these projections (see overlooked projects in the second table on the previous page)

4. Current qualitative research findings is contradictory and instead suggests that demand for accommodation from non-resident workers is so strong that finding accommodation within both the local housing market and dedicated workers accommodation villages is becoming increasingly challenging

For further context – particularly to points 1 and 2 above – the table on the right has been included, which provides a more recent update on Central Highlands LGA’s non-resident population through to 2023. Notably, Central Highlands LGA’s estimated 2022 and 2023 non-resident population were last published and reviewed by QGSO 9th February 2024 and exceed their previous 2022 projections by 575 workers (14%) and their previous 2023 projections by 910 workers (22%).

The Central Highlands LGA’s total non-resident population increased by 18% between 2021 and 2022 and by a further 8% between 2022 and 2023, with both of these most recent annual growth rates exceeding the LGAs long term historical average annual growth rate of 6%. Based on sentiment shared by local mining organisations as part of qualitative research completed by The NPR Co. and Infinitum Partners in early 2024, the author expects similar patterns of growth to continue in the immediate future.

Looking ahead the author expects that the non-resident population projections last published by QGSO in June 2022 will continue to fall short of the actual non-resident population figures Future shortfalls of these projections will only be compounded by preceding non-resident population underestimations and also through the 6 additional major projects that were overlooked as part of these projections, which will continue to contribute additional workers that have been unaccounted for thus far The author believes these projection scenarios will be revised upwards in due course by the QGSO, but until then, would advised against making any planning decisions based on the most current projections – without undertaking further primary research

Note: Non-resident population is the number of fly-in/fly-out or drive-in/drive-out (FIFO/DIDO) workers who are living in the area of their workplace temporarily, and who have their usual place of residence elsewhere This group includes employees, contractors and associated sub-contractors employed in construction, production and maintenance at mining and gas industry operations and projects, renewable energy projects and resource-related infrastructure.

Due to shift arrangements, not all members of the non-resident workforce are present in the local area at one time For that reason, the non-resident population refers to the number of non-resident workers on-shift at a given point in time, rather than the total non-resident workforce

Series A projection is based on the number of non-resident workers on-shift who were engaged in existing resource operations at June 2021, which includes all projects featured as ‘Category A’ projects in the first table on the previous page The projection takes into account future changes to those operational workforces as advised by company sources, as well as the estimated construction and operational workforces of Category A projects (i e those that are approved and have reached financial close)

Series C projection includes the Series A projections, plus projected growth in the non-resident population arising from Category C projects - as labelled in the first table featured on the previous page (those that have published an EIS, but are not yet approved)

Series D projection includes the Series A and C projections, plus projected growth in the non-resident population from Category D projects – as labelled in the first table on the previous page (those that have yet to publish an EIS, including projects that have lodged an initial advice statement (IAS) as well as projects that have yet to begin the approvals process) Please note that whilst there were two ‘Series D’ projects located within the Central Highlands LGA at the time of these projections first being published, both projects are known to have since been cancelled – hence being omitted from the relevant table on the page above Accordingly, the series D projections now lack validity and should command minimal attention

Source Queensland Government Statistician's Office, Queensland Treasury, Non–resident population projections, 2022 to 2026

Central Highlands LGA Non-Resident

Childcare Industry Trends & Capacity

Central Highlands LGA Childcare Provider Summary Statistics

This section of the report provides a snapshot of the name, number and key attributes of daycare centres known to be operating within the Central Highlands LGA, as well as drawing comparisons against other neighbouring LGAs regarding resident population fueled demand for daycare enrolments.

A desktop canvas of the local childcare market found a total of 19 childcare centers operating within the Central Highlands LGA across various iterations, which include long day care, family day care, pre-school and before, after, occasional and vocational school care. Only 14 of these 19 operators currently hold a National Quality Standard (NQS) rating, whilst the balance are yet to be rated (‘provisional’). Impressively, circa 43% of NQS rated centres in the Central Highlands LGA currently hold an ‘exceeding’ rating, which is well above the national average of circa 24% Equally importantly, 100% of Central Highlands NQS rated childcare centres hold a rating of ‘meeting’ or higher, which is again beyond national trend, of 66% across Australia’s rated centres At a high level, childcare operations within the Central Highlands LGA are operating at a high standard, regarding National Quality Standards

At this stage of the research process, the author is still awaiting responses from local childcare operators which will provide greater insight into daily fees and vacancy rates. In the interim, its worth noting that according to the latest data from the Australian Government Department of Education (September 2023), the mean hourly fee for childcare services in the Central Highlands LGA is $11.10. Whilst this figure is yet to be confirmed by local survey responses, its worth noting that this interim average hourly fee is circa 10% cheaper than the Queensland average, which reached $12.35 as at the end of September 2023, according to the Australian Government Department of Education.

Focusing solely on long day care, family day care and pre-school centres (excluding before/after & vocational care), the second table on the right shows that more than half (64%) of the relevant childcare centres within the Central Highlands LGA currently have vacancies available This is lower than the broader regional trend, with 69% of relevant centres hosting vacancies throughout Central Highlands LGA, Banana LGA, Isaac LGA and Maranoa LGA combined On face value, this suggests that whilst childcare enrolments are more difficult to acquire in Central Highlands than they may be in surrounding LGAs, vacancies overall do not present as an alarming issue

However, the author will withhold further comment on vacancies until all survey responses have been received and further context is provided around vacancy status, reasoning and whether certain age groups are more heavily impacted than others. There are multiple potential influences on vacancies in childcare centres, which must abide by certain staff to child ratios that differ across different age groups. It is increasingly common for daycare centres to be limited in their ability to operate at capacity due to restrictions in attracting and retaining staff (particularly in regional areas), with the demand side of the equation rarely the issue. A national survey of 1,000 Australian childcare centres in late 2023 found that 90% had a current staff vacancy and half of those had three or more staff vacancies. Accordingly, it wont be until all survey forms have been completed and returned to Infinitum Partners that the author will be able to draw meaningful conclusions as to both the true number and most common reasons for vacancies in local childcare centres.

Central Highlands LGA Childcare Population Ratios

The first table on the right compares the total, known licensed capacity of daycare centres as a share of the total 0- to 5-year-old population in Central Highlands LGA against its closest neighbouring LGA’s and the Queensland state norm. This table has been provided with intentions of providing further context to how the local regions compares against broader State trends with regards to its capacity to offer childcare services to the relevant age group, and how this may need to change over time in order to meet future population growth demands.

The first table on the right suggests that Central Highlands LGA is performing largely on trend with its neighbouring LGAs in regard to the provision of access to childcare spots for children aged 0 to 5. Collectively, the 19 centres presented on the previous page hold licenses to provide some form of day care for an estimated total of 734 children aged 0 to 5, which accounts circa 29% of Central Highlands LGA’s 0 to 5 population It should be noted that these figures are subject to change with the confirmation of details still pending from a number of local childcare operators through surveys sent by Infinitum Partners

It’s important to note that the accuracy of the accompanying results are limited by the fact that the assumed total number of licensed daycare spots is based on current desktop research undertaken in 2024, whilst the total 0 to 5 population figures quoted in this analysis have been taken from 2022 estimates, which are subject to change If the 0 to 5 years population has increased since 2022, then the share of the population that could be accommodated in local daycare centres will have declined, whilst the opposite would be true if the total population aged 0 to 5 has declined

Based on initial discussions with local childcare operators, the author believes that the true portion of the 0 to 5 population that could be accommodated in local daycare centres is notably less than the quoted 29%.

Several local childcare centres are known to currently be operating below their full licensed capacity due to a lack of staff., Some operators have indicated that they have even had to temporarily close certain rooms within their centre due to an inability to adhere to minimum staff to child ratios.

When comparing Central Highlands and its surrounding LGA’s to the broader Queensland trend, it is apparent that these regional communities are not provided with the same level of opportunities to utilize childcare services As shown in the second chart on the right, circa 53% of Queensland’s 0 to 5 population is believed to be accessing some form of centre-based and Family day-care service, which is considerably higher than the maximum portion of Central Highlands LGA’s relevant aged population that would be able to access care if all licensed spots were able to be filled

Looking ahead, based on the optimistic assumptions applied to the accompanying analysis, for the Central Highlands community to reach the Queensland norm in regard to access to childcare, an additional 616 spots would need to be made available to residents in the short term. This would require a near doubling of the current offer, or an 84% increase in total licensed spots. However, the author believes that further research is likely to suggest that an even larger number of spots would need to be added, acknowledging that a number of local centres are thought to currently be operating below their licensed capacity due to a lack of staff.

number of licensed spots in a single childcare centre is evenly distributed across all age groups that they advertise to cater for.

*In instances where total number of licenses per age group are unknown, The NPR Co. has applied the assumption that the total

Property Market Composition, Affordability & Building Approvals

Changes in Dwelling Structure & Tenure Over Time

Detached housing has continued to dominate the residential landscape throughout the entire Central Highlands LGA Between the 2011 and 2021 Census period the total market share of detached houses remained largely unchanged, increasing from 86% to 87% throughout the Central Highlands LGA Whilst statistically Emerald hosts greater diversity than the rest of the LGA, the difference is quite insignificant, with the share of detached housing trending sidewards at 81% between the 2011 and 2021 Census dates

Growth in housing supply throughout the recording period has been quite minimal, with the total number of occupied private dwellings increasing by less than 3% between 2011 and 2021 throughout the Central Highlands LGA (20% growth in Emerald and 21% decline throughout the balance of the LGA) This is little surprise, noting the previously discussed decline in total population that has occurred throughout Central Highlands LGA throughout the relevant recording period In the specific case of Emerald, it’s worth highlighting that it recorded an increase of 795 occupied private dwellings between 2011 and 2021, which theoretically should have been more than suffice to host the net growth in population that it recorded across the same timeframe (720 people)

On face value, it defies general market theory to note that vacancy rates (examined in detail in a later section of this report) trended downwards toward new record lows at the time of the 2021 Census, despite the Census data suggesting that the relevant rate of growth in occupied private dwellings had outstripped population growth demand The author believes that these anomalies can be attributed to the unique influence of FIFO and DIDO non-resident workforce populations, which are not considered in population figures - though continue to occupy local dwellings Further discussions and primary research on influential, local resource industry operators is required to acquire a better understanding of the local housing supply and demand scenario

Housing tenure has also remained quite consistent throughout the past three Census periods, with owner occupiers trending sidewards, occupying 53% of local dwellings within the Central Highlands LGA in both 2011 and 2021 Whilst this sentiment is generally also true for Emerald alone, it has experienced a slight rise in renters, who have increased from a 42% share in 2011 to a 44% share in 2021 More recent property buyer origin data suggests that rental occupants have continued to rise in Emerald, with investors making up a growing share of property sales of late This has come on the back of a combination of record low vacancy rates, still below-peak sale prices and growing non-resident workforce numbers

In terms of housing composition by number of persons usually resident and total number of bedrooms, there has been no meaningful change between 2011 and 2021 Three and four bedroom households account for a largely unchanged 75% share of occupied private dwellings throughout the Central Highlands LGA, despite the fact that one and two person households continue to account for a dominant 59% share of private dwellings At a high level, this could suggest that there is potential for acceptance of smaller, higher density accommodation, though these changes usually require significant pressure on housing affordability and constrained land supply – which is not currently the case for Emerald and its surrounds

Source: ABS & The NPR Co

Changes

Workers Accommodation Village Capacity

Whilst the information presented on the previous page is primarily concerned with the traditional housing market, with a non-resident population that accounts for circa 15% of the Central Highlands full-time equivalent population, its also important to acknowledge the workers accommodation village market

The first chart on the right provides a breakdown of the Central Highlands LGAs historical annual nonresident population and the total capacity of all Workers Accommodation Villages located within the LGA, according to the Queensland Government Office’s Statistician’s Office This chart highlights a clear historical correlation between the two, suggesting that the capacity of dedicated, local Workers Accommodation Villages has been quite responsive to changes in the non-resident workforce, and importantly, the total number of non-resident workers has never exceeded the market capacity

However, it’s important to acknowledge that the relationship between the two variables tracked in the first accompanying chart is more complex than it presents on face value Through previous industry research experience and recent discussions with mining companies and workers accommodation village operators, a point that continues to be raised is that there is a contingent of the non-resident DIDO and/or FIFO workforce who are allocated a permanent room/bed within certain workers accommodation villages, as to avoid ‘hot bedding’ for the sake of staff wellbeing This means that even when these workers are not staying within the village, their room/bed is unoccupied awaiting their return on the following swing

This is important to keep in mind when considering the first accompanying chart, as it highlights the need to retain a sizeable buffer between the combined Workers Accommodation Village capacity and the nonresident workforce population, acknowledging that the non-resident population figure only accounts for workers on shift at any one point in time, rather than the total non-resident workforce Accordingly, this figure ignores additional workers not on shift, but who will also require a room/bed upon their return to work

Historically, the average annual ratio of Workers Accommodation Village Capacity to total non-resident population has been 1 38 The flow-on effect for the traditional housing market is one where rental vacancy rates have generally tightened during periods where this ratio has trended downwards and have softened during periods of higher ratios Notably, this ratio has remained below this long term average since 2022, with a clear ongoing trend of a narrowing gap between the two variables shown in the first accompanying chart As at 2023 the Workers Accommodation Village Capacity Ratio reached just 1 27, which is its lowest point since 2012 (1 05), at the height of Australia's resource boom

Further research is required to be able to acquire a better understanding of the supply and demand scenario for dedicated workers accommodation village beds and the optimal WAVs to non-resident workforce ratio However, it is known that the narrowing gap between the two variables in the accompanying chart is adding pressure to the local housing market and has certainly played a role in the ongoing, sustained periods of record low residential vacancy rates recorded throughout the Central Highlands LGA – which are discussed further in a later section of this report

Changes in Affordability for Owner Occupiers & Renters Over Time

The first chart on the right utilises median household incomes and median mortgage repayments by Census period to define the typical share of household incomes being spent on mortgage repayments over time for key suburbs within the Central Highlands LGA As well as defining housing costs of income by Census year, the author has also provided two scenarios for 2023 which considers mortgage costs as a share of more current estimates of median household incomes, if the median mortgage size either remained unchanged since 2021 (scenario 1) or increased by 5% since 2021 (scenario 2)

Mortgage affordability throughout the Central Highlands LGA improved between the 2011 and 2021 Census date, with median weekly mortgage costs declining from 23% to a 17% share of median household incomes However, the median affordability equation has worsened throughout the Central Highlands LGA more recently, with the midpoint between the two scenarios suggesting that typical mortgage costs are likely to have reached somewhere in the vicinity of a 28% share of typical household incomes in 2023 Importantly, whilst the housing share of income figures remain below 30%, the local housing market remains ‘affordable’ However, if this figure continues to edge closer to and/or exceeds the affordability threshold, property sale price growth is likely to slow and increased negative downstream economic impacts will emerge due to declining discretionary household budgets

The second chart on the right compares the local housing affordability scenario over time through a longitudinal study of the median annual household income to median dwelling price ratio for detached houses and medium density based property Over the long term, the median household income to median dwelling price scenario has improved considerably across both property types in Central Highlands LGA, falling from 3 7 to 2 7 for houses and from 2 9 to just 1 9 for medium density accommodation between 2011 and 2023 This long-term pattern has been driven by both sides of the equation, with median property prices declining by 18% (houses) to 27% (medium density) and median incomes improving by 12% on a point-to-point basis between 2011 and 2023

Despite the long-term pattern of improvement, it’s worth noting a recent uptick in the ratio between 2021 and 2023 – with the ratio currently sitting at its highest point in the recording period since 2011 Whilst growth in this figure is not ideal from an affordability perspective, when viewed in conjunction with the chart above, housing affordability should currently be viewed as remaining under control at the time of writing, though is something worth monitoring moving forward

Overall, whilst affordability remains within the bounds of acceptable ratios, the author would advise against complacency and reiterates that the affordability measure does not reflect the actual supply of product on the ground that is available to new residents, no matter what industry or occupation they represent Furthermore, the accompanying data alone is unable to provide any insight into the affordability scenario for the construction of new housing, which is known to be heavily negatively impacted by inflated construction costs and subsequent valuation pressure, which will continue to inhibit new housing supply moving forward

Source:

Residential Building Approvals

The chart on the right provides a breakdown of annual vacant lot endorsements and new residential building approvals for new houses and new medium density property within the Central Highlands LGA by catchment over the last 5 years (since 9th February 2019). The data displayed in the accompanying chart has been derived from a series of datasets provided to Infinitum Partners directly from Central Highlands Regional Council upon request. Due to discrepancies noted between ABS, QGSO an Council databases, the decision was made to rely on the primary data provided by Council, instead of using any other secondary sources.

Emerald continues to be the focus of attention in regard to Central Highlands residential development activity Since 9th February 2019 85% of the 407 total vacant lot endorsements (257), new house (89) and new medium density (61) approvals in the Central Highlands LGA have been located within Emerald Combining the information presented in the accompanying chart with the historic population growth figures presented in earlier sections of this report suggests that residential development activity is lagging behind population growth demand

It’s note to emphasise that the totals mentioned above are for approvals and not commencements, with high construction and labour costs currently resulting in declining conversion rates. Between 2019 and 2022 Emerald saw its population increase by 405 people, which would have created demand for circa 150 new dwellings. Optimistically, if 60% of the new house and medium density approvals were converted to commencements and completions, new housing construction would have fallen circa 53 dwellings short of accommodating the population growth observed between 2019 and 2022. Even if 100% of new house and medium density approvals were constructed, there still would have been a circa 18 dwelling shortfall. This provides important context for the decline in residential vacancy rates observed across this timeframe (examined in a alter section of this report).

The Covid-19 pandemic resulted in highly publicised disruptions to global supply chains and subsequently a significant increase in construction material costs, with the house construction industry’s producer price index increasing by 33% between March 2020 and December 2023. Couple this with record high labour price growth fuelled by a tight labour market that continues to operate at cyclical and/or record low unemployment rates and you reach the current position where the cost of building a new home has is increasingly prohibitive. This is particularly true for regional markets like Emerald, where labour shortages are compounded exponentially by distance from key commercial hubs and where low land values continue to drive valuation risk, restricting development. At a 2023 median land price of $152,500, the capacity for a developer to deliver a new residential project in Emerald from conception to completion is near impossible without incurring losses, due to a combination of high construction input costs, high labour costs and reasonably low property values.

Beyond the challenges associated with the likely emergence of new development projects are the added valuation pressures that local households face if they were to require a mortgage to build a new home on a pre-existing vacant lot. In speaking with local builders the author has been informed that the cost to build a moderate quality, new, four bedroom home with a 200sqm floorplan would likely be circa $520,000. Adding this to the 2023 median land price would see a total housing cost of $672,500, which is an 87% or $312,500 premium over the 2023 median house price Understandably, most banks are unlikely to lend on any such endeavour, which provides some explanation for the continued lack of new residential approvals and commencements throughout the Central Highlands LGA.

Central Highlands LGA Annual Vacant Lot Endorsements & Residential Building Approvals by Catchment

Source: Central Highlands Regional Council

Historical Vacant Land Sales

Comparing Land Sales by Neighbouring Regional LGA’s

The adjoining graphs are important for demonstrating the lack of land sales which inadvertently reflects supply additions to the broad region in order to highlight that the problem is not isolated, nor is it that spare capacity can be utilised from somewhere else At present the problem would be considered systemic

It is highly important to note that investment in the regions in terms of development activity has largely stopped as the feasibilities of declining prices, falling demand and labour availability has made private sector development unviable The previous resource boom that concluded in 2012 saw any remaining land that was developed sold in the proceeding years following this date, often at a loss

Financiers have also had a part to play in the limited additions to the land market as the valuers have struggled to find comparable sales that were in line with what had sold previously In some regions this problem was made more challenging as government agencies discounted land to remove them from their books and or sold large parcels to mining firms that have also experienced the challenges of developing suitable accommodation for their staff given the shortage of construction resources

Current sales rates are now more aligned to that of the early 2000’s for both resales and developer sales The bottom graph clearly demonstrating that the supply of new land is nothing more than a handful of lots whilst the workforce in the regions continues to expand significantly

The author does acknowledge that there is also a reluctance to supply long term housing in order to meet what is often a high and growing proportion of non local employees that either fly in fly out or drive in drive out to meet the cyclical demands Protecting local residents and or residential investors in regional towns has become a priority given the lessons learned from the last resource boom

Historical Annual Developer Land Sales Summary by

Central Highlands Annual Land Sales by Catchment & Price Range

This section of the report will provide an insight into the historical vacant land sales market since 2000, focusing on Emerald and the rest of the Central Highlands LGA given the low volumes of sales found in smaller centres It’s also important to note that sales data for 2023 remains somewhat incomplete and is inhibited by an an approximate three month lag in the database, which applies to a reasonable sample of the dataset

Emerald has historically accommodated the bulk of Isaac LGA’s land development activity Since the year 2000, 65 5% of the vacant urban lots sold in the Central Highlands LGA have been located in Emerald Whilst occurring at different scales, land market cycles in Emerald and the rest of the Central Highlands LGA have broadly followed similar trajectories

In Emerald during the resource boom, annual sales peaked in 2012 at 312 sales, whilst the median land price peaked two years later at $160,000 as land supplies dwindled As mentioned previously, this growth occurred on the back of peak levels of investment and construction in the mining industry, which required a dramatic increase in temporary workforces Unfortunately, the sky rocketing number of people working in the local mining industry captured the attention of opportunistic developers and project marketers, who – in partnership – were developing and selling investment housing to short-sighted and/or misinformed investors As the peak mining construction phase came to pass and the industry transitioned towards the less labour intensive production/operational phase, it quickly became apparent that the housing market had been oversupplied quite considerably

As the fallout commenced, volumes and prices softened, though not to the levels being experienced in Moranbah and some other regional townships Total annual land sales in Emerald fell from 312 lots in 2012 to just 9 sales in 2 years between 2015 and 2016, whilst the median land price dropped from $160,000 in 2014 to a low of just $85,500 in 2017 before improving to a new peak of $170,000 in 2020

The challenge with prices this low is that there is very little value in the commissions for making sales, valuers are now going to struggle to support higher prices and finding a builder in the current market to assist with the construction is incredibly difficult Limited land sales also means limited additional stock

Such has proven to be the fragility of this regional market that even now more than 10 years since the 2012 peak, the fallout continues The median land price in the Central Highlands LGA reached plateaued at $37,000 in 2023, which is less than a quarter of the 2014 peak median price of $161,250 It is results like these which provide a strong argument for designated mining accommodation, which are able to provide temporary housing for dynamic workforces, with limited disruption to the local housing market acknowledging that additional permanent housing is also part of the solution

*Sales remain restricted to those recorded within the first 10 months of the year due to an approximate 3 month lag in the database. Source: PriceFinder & The NPR Co.

*Sales remain incomplete at the time of writing due to an approximate 3 month lag in the database. Source: PriceFinder & The NPR Co.

Annual Land Sales by Lot Size Range & Buyer Origin Profile

The first chart on the right provides a breakdown of annual market share of land sales by lot size range and catchment. Whilst little should be inferred from this chart in terms of meaningful long term size changes, it is worth highlighting the unique lot size profile that occurred during the height of the investment and resource boom. Between 2012 and 2014, the median size of vacant lots sold in Emerald were predominantly sub 800m2 . Surprisingly this very useful lot size has gone from representing circa four out of every five sales to now les than one in ten.

Whilst housing diversity is important and there are definitely social advantages in small lots that are 300m2-400m2 , particularly where an ageing population is concerned, Emerald has not been able to make any inroads in this product type. Not only do small lots allow for people to age in place, they also represent an affordable entry point for first home buyers and young persons to purchase a house and land package…in normal market conditions.

Furthermore, the second chart on the left further highlights the role that investors have played in the supply of new land and subsequently housing within the Central Highlands LGA. The trend would place it on par with many of SEQ’s more affluent suburbs when consideration is given to Emerald. However for the LGA, this has changed dramatically in 2023 whereby interstate investors have accounted for more than half of all sales, noting that the sample size is small.

*Sales remain incomplete at the time of writing due to an approximate 3 month lag in the database.

Source: PriceFinder & The NPR Co.

Historical House Sales

Central Highlands LGA House Sales by Catchment & Price Range

This section of the report focuses on house sales trends and will cover the same attributes featured in the land sales analysis Again, the Rest of LGA is named as the only secondary catchment location for this analysis due to the absence of meaningful house sales data in other townships It’s also important to remember that the sales figures for 2023 remain incomplete due to an approximate three month lag in the database, which applies to a portion of the dataset

The first chart on the right reinforces Emerald’s prominence in the Central Highlands LGA market Since 2000 Emerald has accounted for 37% of all established house sales recorded within the Central Highlands LGA as a whole Also Emerald has historically accommodated the bulk of the Central Highlands LGA’s land development activity Furthermore, whilst both catchment regions have experienced similar cyclical timing, having hosted the bulk of the LGA’s development activity, Emerald was far more exposed to the cyclical peaks and valleys caused by the previously discussed, resource boom Having stated that, it has also rebounded stronger than the balance LGA too

In Emerald during the resource boom, annual house sales peaked in 2011 at 406 sales, whilst the median house price peaked a year later at $460,000, circa $300,000 cheaper than Moranbah. Whilst hindsight is 20/20, it is quite staggering to note that during 2012 it was far more expensive to buy a house in Emerald than it was to buy the median house in the Brisbane LGA (median price of circa $383,000). Again this was caused by a combination of the need to accommodate a temporary swollen workforce in a small housing market and opportunistic, investment housing spruikers.

Again, as the peak mining construction phase came to pass and the industry transitioned towards the less labour intensive operational phase, demand for housing plummeted and so did values. The downturn was prolonged and it wasn’t until 2017 that the median house price had bottomed at $245,000 in Emerald.

Importantly, since bottoming in 2017, volumes and median house price growth in both catchment regions have grown at a much more sustainable rate. A previous oversupply of housing has now been absorbed whilst values are now re-aligned with local household budgets and are no longer unsustainably inflated by external market pressures, though this is starting to change. That being said, despite stable annual growth since 2017, the 2023 median house price in Emerald ($360,000) remains $100,000 lower than the previous market peak in 2012. Many will have taken learnings from the previous, tumultuous market cycle with the benefits of mining camps/temporary staff accommodation heightened through the capacity to provide a buffer against these types of extreme market cycles in the future.

Annual House Sales by Lot Size Range & Buyer Origin Profile

The first chart on the right depicts annual market share of house sales by lot size range and catchment since 2000 On face value, this chart demonstrates consistency in annual lot size trends across all catchment regions, with the median lot size of all houses sold in the Central Highlands LGA remaining largely stable, though possibly going against the broader National trend of lots declining in size

Consistency in lot sizes whilst typically denoting a stable market, also demonstrates a market that has lacked diversity and arguably not been responsive to the permanent and non-permanent residents alike Demographic modelling would suggest that some older persons are likely to leave the region as housing offer between traditional housing and higher density accommodation does not exist In time, this will become a challenge the region has to address

Much like it did in the land sales analysis, the second chart on the right highlights the role that investors have played in the housing market throughout the Central Highlands LGA, but particularly in the regions outside of Emerald Buyers from outside of the local LGA – who are generally assumed to be investors –have accounted for 35% of house sales in Emerald and 63% of house sales in the Central Highlands LGA since 2023 This is significantly outside of the longer term trends and is starting to demonstrate that the regions are again seen as very good value given the resource cycle and economic outlook of more diversified towns

As has been noted in discussions, if Emerald had a greater supply of housing, the opportunity to attract people from the East Coast would be quite high with substantially and comparably lower house prices, strong employment opportunities and generally above average wages The pull factor could be made to quite compelling Having stated that, the region needs to provide opportunities for entertainment, enhanced retail offerings, education and childcare placements that make retaining new residents more likely in the medium to longer term Good quality housing is just one part of the livability equation Share

Medium Density Sales

Comparing Medium Density Sales by Neighbouring Regional LGA’s

The adjoining graphs are important for demonstrating the lack of medium density sales which inadvertently reflects supply additions to the broad region in order to highlight that the problem is not isolated, nor is it that spare capacity can be utilised from somewhere else Having noted that, the cycle is trending along the right direction

One of the observations that should be most apparent despite the cycles is the heavy lifting of providing higher density accommodation I largely being left to the Isaac and Central Highlands Council LGA’s It should also be noted that the supply peaks in 2011 and 2012 are more than three times the loner term average This was driven by a mix of both investor driven development as well as mining firms needing to create housing an in efficient manner in order to maximise the capacity of the land they had under control

These property types are also considered highly affordable which is beneficial for existing residents or investors alike, however on a valuation basis, the low prices make very difficult for a developer to create new medium density product as the construction costs alone excluding any land component would be unlikely to achieve a financial approval

Central Highlands LGA Medium Density Sales by Product Type

This section of the report has been included to provide an insight in to the true composition of the medium density property market throughout the Central Highlands LGA. It has also been included to highlight the shortcomings associated with relying on standard Building Unit and Group Title sales data, which are too frequently regarded as being an accurate reflection of Unit sales (Building Unit) and Townhouse sales (Group Title) alone.

The first chart on the right provides an annual summary of all Building Unit and Group Title sales combined by property type since 2000 throughout the Central Highlands LGA. In order to be able to accurately provide this data for all individual property types, The NPR Co. has had to cross check close to 100 individual project addresses and re-group their respective sales data by the correct property type. Whilst it is always a large undertaking to complete, it is crucial in understanding the true depth of each market and the correct value of each individual property type, with the accompanying chart highlighting how each individual product type carries its own unique market trends.

The importance of correctly unpacking medium density sales data is further highlighted in the second chart on the right, which compares annual sales trends of all Budling Units and Group Title Properties against the actual results for Units and Townhouses throughout the Central Highlands LGA. The differences between the results presented in this chart, particularly in regards to volume, highlights how misleading it can be to assume that Building Unit sales are an accurate reflection of the Unit market or that Group Title Sales accurately define the townhouse market.

After going through the coding process and identifying all key property types within the dataset, the decision was made that moving forward, all townhouse, unit, villa and duplex sales will be combined and analysed together and referred to as ‘medium density’ sales. The decision to combine all of these sales was made due to the low volume of each individual dwelling structure and the lack of relevance to the key objectives of this research report.

However, before delving into historical sales trends for the medium density market as a whole, the following table has been provided to offer some context as to the general market composition and provides a breakdown of all medium density sales since 2000 by product type and catchment.

*Sales remain restricted to those recorded within the first 10 months of the year due to an approximate 3 month lag in the database.

**Other includes Commercial, Duplexes (Multiples), House & Land, Industrial, Motel/Rooming or Short Stay and Retail. Source: PriceFinder & The NPR Co.

Annual Medium Density Sales Summary & Sales by Price Range

According to the most recent census data, medium density accommodation makes up only 6% of occupied private dwellings within the Central Highlands LGA. Accordingly, the lack of sales volumes displayed in the accompanying chart will come as little surprise, with only 765 medium density sales recorded throughout the Central Highlands LGA as a whole since 2000 – which is dwarfed by the 12,750 house sales recorded across the same timeframe.

Like the house and land market, Emerald can be regarded as the dominant medium density market in the Central Highlands LGA, though more strongly, having accounted for 100% of all medium density sales recorded in the region at certain times in the cycle since 2000. No other centre would be considered as contributing any meaningful quantity of medium density product.

As revealed on the previous page, the medium density market in the Central Highlands LGA is underpinned mostly by townhouse properties with very few residential units. When comparing the two property types, typical unit accommodation in the Central Highlands LGA is most similar to mining camps and generally comprises of an arrangement of single storey, two to three bedroom dwellings which share a communal internal road and in some instances, communal amenity like a pool and rumpus room. Meanwhile, local townhouse accommodation is dominated by two storey designs and smaller body corporate schemes.

The enduring, small size of the medium density sales market has meant that there is little that can be inferred from the accompanying charts in regards to long term price growth trends, which are highly vulnerable to skewness. That being said, at a high level, patterns in medium density sales volumes and price cycles are not dissimilar in timing to those observed throughout the land and house market. That being said, a closer examination of recent (since January 2021) medium density sales in the Central Highlands LGA suggests that privately owned accommodation that is most similar to mining camp arrangements have been achieving a median sale price of $220,000 of late. At present, this would create yields in excess of 10% with weekly rents escalating at a rate that is not yet being picked up in the data. It is these yields that may prove to be attractive for institutional superannuation funds, high net worth individuals acting as small unlisted real estate investment trusts. The underlying problem with this scenario is that the new build prices will likely reduce the yields quite considerably when compared with older established product.

Annual Medium Density Sales by Size Range & Annual Buyer Origin Profile

The first of two charts on the right provides a breakdown of the annual market share of medium density sales by lot size (combined townhouse, villa and duplex) or total floorplan size (units). At a high level, this chart highlights some clear size differences between the two catchments, with Emerald hosting both the smallest typical lot or floorplan size and also the largest of both. The Rest of the Central Highlands LGA has such a small sample size that product diversity is largely meaningless when trying to gain meaningful observations about product offerings.

In regard to buyer profile, medium density accommodation is shown to have attracted the greatest portion of external buyers of any residential property type covered in this report. Across all medium density properties sold in the Central Highlands LGA since 2000 43% can be attributed to buyers from outside of the LGA. Medium density accommodation is often more common for investors, as it usually requires a lower price barrier of entry and less recurring property maintenance concerns. Whilst the bulk of these sales to external buyers are assumed to be attributed to investors looking to rent these dwellings to FIFO and DIDO workers, there is also believed to be a market for long term DIDO and FIFO workers to purchase their own property to live in whilst working, as a home away from home.

Having stated that, the author does acknowledge that there is a desire by council for greater working relationships with the mining communities in securing more families to the regions. The challenge being that many families are well established in their own communities before working in the mines. If their children are at school, relocating them is also challenging. As is if their partner is gainfully employed in a role they enjoy. Education remains one of the largest inputs into buying a property for household formations where school aged children are involved.

From the author’s perspective, it is understood that the mining camps and mining companies have had more involvement in the community and community businesses post 2012 where a lot of lessons have been learnt and implemented. Having stated that, the high demand for accommodation that is reflected in the report where a vacancy rate of just 0.6% for all accommodation providers suggests that unless more accommodation is added, history may again repeat itself with exorbitant rents and key workers squeezed out of the town.

*Sales remain restricted to those recorded within the first 10 months of the year due to an approximate 3 month lag in the database.

Source: PriceFinder & The NPR Co.

Rental Market Summary

Central Queensland Rental Market Summary by Product Type & LGA

This section of the report will provide an insight into the historical rental market, starting with a high level comparison of the Central Highlands LGA against other key regional Local Government areas within Central Queensland before focusing more specifically on Emerald and the broader Central Highlands LGA independently.

The first chart on the right defines the historical monthly rental vacancy rates in Central Queensland across all residential property types. It should be noted that this data is not available at an LGA level and as such, data for the entire Central Queensland region has been included, which comprises Banana LGA, Central Highlands LGA, Gladstone LGA, Livingstone LGA, Rockhampton LGA and Woorabinda LGA. Monthly vacancy rates within Central Queensland are shown to have generally experienced a long term patten of decline throughout the recording period, albeit with several notable cyclical changes throughout.

Between early 2015 and early 2017 vacancy rates in Central Queensland were weak and were tracking high. As detailed in proceeding sections of this report, this period of weak vacancy rates coincided with dramatic declines in regional housing values. At the time, housing values were plummeting as the residential market endured a state of considerable oversupply. As the mining industry transitioned out of peak construction and into the production phase, the required workforce declined considerably, leaving behind excess supply of rental housing, which had been marketed and sold to investors in pursuit of ultimately unsustainable, strategic rental yields.

Since early 2017 vacancy rates in Central Queensland have largely trended downwards. After enduring a period of stable, healthy vacancy rates between late 2018 and late 2019, the onset of Covid-19 followed and saw vacancy rates decline quite rapidly, from 3.1% in December 2019 to 1.0% by August 2020. Vacancy rates than continued to decline, albeit at a slower rate, bottoming at 0.4% in August 2022 and largely trending sidewards ever since to reach 0.6% as at December 2023.

As to be expected, sustained periods of tight vacancy rates have resulted in a considerable upswing in rental rates across Central Highlands and its neighbouring Local Government areas Concentrating on houses as the predominant dwelling structure, the second chart on the right shows that median weekly house rental rates have increased by an average of 43% across each of the four LGA’s covered in the accompanying analysis Notably, the Central Highlands LGA continues to record some of the highest median weekly rental rates of all, at $454 per week for houses and $345 per week for medium density property

Another point worth noting from the second chart on the right is the continued pattern of decline in new bonds being lodged, particularly since the onset of Covid-119. Whilst Central Highlands LGA continues to lead in terms of market depth, across all four LGAs the total number of new bonds lodged per annum fell by an average of 27% between 2019 and 2023. This trend has been influenced by a combination of contributing factors, including an owner occupier sales cycle and declining construction starts reducing new rental supply; and rising rents and dwindling vacancy rates leading to less people moving between rental properties at the end of a lease due to a heightened sense of ‘Fear of Missing Out’

Central Highlands LGA Vacancy Rates by Key Postcode

Central Highlands Rental Market Summary & Vacancy Rates

Shifting attention from broader Central Queensland to the Central Highlands LGA alone, this section will examine monthly historical residential vacancy rates and quarterly median weekly rental rates and new bonds lodged for units, townhouses and houses within Emerald’s host postcode (4720) and the rest of the LGA.

The first chart on the right defines the historical monthly rental vacancy rate across all residential property types by key postcode within the Central Highlands LGA, including 4720 ( Emerald), 4717 (Blackwater), 4723 (Capella) and 4702 (Rubyvale) For the most part, each of the four postcodes featured in the accompanying vacancy rate analysis have followed a similar trajectory as the broader Central Queensland trend discussed on the previous page At certain points in the various cycles there has been a much higher level of fluctuation in vacancy rates for some postcodes, particularly 4717 and 4723. However, its important to note that these two catchments host the smallest rental market of those featured in the accompanying analysis at a total of 993 and 154 bonds currently held (compared to 1,734 in 4720 and 1,846 in 4702), which makes them most vulnerable to sudden fluctuations in vacancy rate.

Low residential vacancy rates is clearly a common theme throughout the entire Central Highlands LGA. In general terms, each of the four key postcodes in the accompanying chart have seen their vacancy rates trend within the tight range since February 2022. Notably, the 4720 postcode has recorded tight vacancy rates for 52 months in a row dating back to September 2019, whilst the 4702 postcode has experienced an even longer period (72 months) of tight vacancy rates which extends back to January 2018.

As at the end of December 2023 all four postcodes recorded tight vacancy rates, ranging between 0 5% and 1 2% Conventional market theory suggests that the logical flow on effect of such vacancy rates will be continued rental price growth For the Central Highlands LGA, this is likely to place rising pressure on housing affordability – an issue that will be furthered compounded by the current lack of future housing supply due to construction industry constraints and increased demand from growing non-resident workforce numbers

The second chart on the right provides a historical breakdown of the total number of new bonds lodged and median weekly rental rates per quarter across all unit rentals within the 4720 postcode and the rest of the Central Highlands LGA. Emerald’s host postcode accommodates the bulk of what is a small unit rental market in the Central Highlands LGA, typically accounting for 84% of the average 119 new rental bonds lodged per quarter throughout the recording period. Notably, the turnover rate of rental units has declined of late, falling by 22% from 454 in 2019 (pre Covid-19) to a new cyclical low of 354 in 2023.. However this is not unique to the unit rental market, with a decline in turnover of all rental property types observed since the onset of Covid-19, due to the previously mentioned combination of constrained supply, rising rents and heightened FOMO.

With low vacancy rates has come strong rental price growth. Between December 2019 and December 2023, the median weekly rental rate for units within the 4720 postcode has increased by 46%, from $248 to $361. Despite such considerable growth, from a housing share of income perspective, the median weekly rental rate for a unit in the 4720 postcode remains well and truly affordable, at a circa 15% of the typical local weekly household income.

Source: SQM Research

Source: RTA & The NPR Co.

Mount Pleasant –

Glenella SA2

West Mackay SA2

Historical Unit Rental Summary by Layout & Catchment

Central Highlands Rental Market Summary by Product Type

The townhouse rental market is far smaller in scale than the unit rental market, with an average of just 16 new townhouse rental bonds lodged per quarter throughout the entire Central Highlands LGA since 2012. Emerald (4720) is clearly the medium density capital of the Central Highlands LGA and has accommodated a generally unwavering 74% of all new townhouse rental bonds lodged since 2012. Like the unit rental market, supply and availability of townhouse rental properties has been in decline, through a combination of the absence of any new supply and with tenants opting for longer lease terms or electing not to move between properties at the end of their term due to FOMO. Overall, the total number of new townhouse rental bonds lodged per annum has declined by 30% from 80 in 2019 (pre Covid-19) to 56 in 2023.

The small scale of the townhouse rental market has resulted in broken patterns of price growth, with median weekly rents unable to be inferred from quarters with 5 or less new bonds lodged per catchment Whilst broken in parts, the first chart on the right shows a steady upswing in weekly townhouse rental rates, particularly since early 2018 The most current weekly rental rate data depicts an average annual growth rate of circa 17% between June 2018 ($235) and June 2023 ($440), or a total increase of 87%

The second chart on the right provides the same level of information for the detached housing rental market, which remains the predominant housing structure throughout the entire Central Highlands LGA and is most reflective of the rental market as a whole. That being said, much of the same sentiment shared previously is also relevant for the house market, which has also enjoyed a stable, sustained pattern of price growth now that dates back to late 2016.

The Central Highlands’ rental market has recorded an average of 140 new house bonds lodged per quarter since 2012, with no meaningful difference between three and four bedroom supply and each accounting for an equal 46% of new bonds lodged per quarter Emerald (4720) typically hosts just over half of the house rental market, recording an average quarterly market share of 54% of new bonds lodged since 2012

Like the unit and townhouse market, rental supply has declined for houses as well with the total number of new house rental bonds lodged declining by 31% from 1,062 in 2019 (pre Covid019) to 728 in 2023. This trend is likely to continue , particularly given the lack of new building approvals and the absence of any notable future residential supply pipeline. This is already, and will continue to have a negative impact on the local economy as it is becoming increasingly difficult for key industry employees to be able to secure permanent residential accommodation to fulfill essential roles that service the broader community and economy.

Overall, since mid-2017 median weekly house rental rates in the Central Highlands have been in an upswing, increasing at an average annual growth rate of 12%, from June 2017 ($269) to June 2023 ($468). House rental rates in Emerald continues to maintain a stable price premium, which has averaged circa 9% per quarter since 2012. As at December 2023 median weekly rental rates reached $450 for a three bedroom house or $530 for a four bedroom house in Emerald ($390 or $520 in Central Highlands LGA), which importantly remains well within the typical household affordability threshold at a housing share of income of 17% to 19% (or 14% to 18% in Central Highlands LGA).

Mount

Glenella SA2

West Mackay SA2

Summary Observations & Recommendations

The following are key observations from the preceding report that have generated the following recommendations for consideration.

• Based on the forecast population growth from 2022 to 2026 using the estimated resident population data for Emerald combined with the QGSO population forecasts which would appear to be conservative, and the average household size from the 2021 Census; theoretically Emerald will need to create 59 dwellings per annum for the next four years if this growth in resident population is to be realised and/or achievable. The balance of the Central Highlands LGA has been excluded from the calculations given the forecasts by QGSO of a declining population

• Utilising the vacancy rate data found within the report for residential property and assuming a desire to reach a healthy rental market with a 2 5% vacancy rate, at the time of writing the report, Emerald would require 48 additional rental properties, Blackwater would need to increase by 14 homes and Capella would need a smaller increase of circa 5 properties.

• The median established house price in Emerald is circa $360,000 The median residential land price is circa $152,500 The authors of the report are of the understanding that the construction price for a new, mid specification level detached house is $2,600/sqm Assuming a moderately sized home of 200sqm, the build cost will be $520,000 for the house plus the land input creating a house and land package of circa $675,000. This represents a premium of over $300,000 (83%) greater than the median established house in Emerald.

• The Central Highlands non-resident workforce in 2023 is currently higher than the QGSO forecasts highest growth rate expectation concluding in 2026 2023 is 260 workers above this forecast and currently sits at 710 workers above what the State Government had anticipated to be the on the ground numbers today It has been understood that a minimum of 300 working camps is required now, the destination to be determined

• The team proposes to investigate and the test the opportunity of creating an “app” that could manage the availability of property and rooms that the mining community has paid for and not using This would create greater efficiencies in accommodation for these firms, save money through reduced nightly rates that occurs with last minute bookings, and act as a co-operative of sorts

North Mackay SA2

Mackay SA2

The National Property Research Co.

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Brisbane, QLD, 4000

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This Research Report of National Property Research Pty Ltd is issued on the basis that it is only for the information of Central Highlands Development Corporation and that it is not a valuation. This report may not be reproduced, distributed or published without the written permission of National Property Research Pty Ltd Any recommendations contained herein are subject to the property market at the time of writing the report and as such are conditional. They must not be relied upon without specific advice from an Analyst of National Property Research Pty Ltd as to the appropriateness of the intended action Past performance of property is no guarantee of future performance. Given that some of the material conveyed in this report is from speaking with Agents, Operators and other persons in positions of trust, National Property Research has endeavoured to ensure that all information is true and accurate. National Property Research reserves the right to amend the report should new information become available.