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Why Invest? Warrnambool Fourth Quarter l 2010


Research

Brisbane | March | 2009

Why Invest? Warrnambool

Fourth Quarter 2010

Why Invest in Warrnambool? Scope As we now sit roughly two years in the wake of the 2008 Global Financial Crisis (GFC), a residual uncertainty continues to linger throughout the majority of the nations property markets. With this being said, one positive to come from this period of turbulence is that consumers are now smarter. Potential home buyers and investors are now wanting to understand the property market and those factors which impact on their market, market investigating thoroughly and understanding their product before diving in to purchase.

Area Characteristics Situated to the western corner of Victoria’s scenic Great Ocean Road, the Warrnambool LGA is approximately 265 kilometres south-west of the Melbourne CBD. Despite its regional location, Warrnambool is well serviced by the Hopkins and Princes Highways and the express ‘Vline’ rail running directly through the region. Today, Warrnambool’s picturesque landscape and patrolled beaches have resulted in a diverse economy, with an increasing focus on tourism generated business in the region. g However, a strong g alliance with the more traditional dairy industry remains well ingrained within the community.

Warrnambool House Price Points

Warrnambool Demographics Warrnambool Melbourne SD S Population 2009

29,961

3,892,419

Population 2008

29,437

3,817,806

Population growth rate 2008 to 2009

1.8%

2.0%

Portion of residents aged 65 years and older

15.9%

12.8%

Portion of residents aged 15 years and younger

20.5%

18.8%

37

36

Median weekly household income

$844

$1,079

Demographics Snapshot

Median weekly individual income

$415

$481

According to the Australian Bureau of Statistics (ABS), the most recent estimated resident population (ERP) figures suggests that the Warrnambool LGA is home to 29,961 residents as of June 2009. This reflects a population growth of 1.8% and places Warrnambool as Victoria’s fifth largest city. When considering the regions average household size of 2.5 residents, this continued growth rate would equate to a rough requirement for 1,300 new residential dwellings in the precinct by June 2015.

Average number of people per household

2.5

2.6

Warrnambool Projected Population 50,000

Assumed average growth of 1.8% per annum during the next 20 years 45,000

45,198 41,341

37,813

40,000

34,586 35,000

31,601

30 000 30,000 25,000 20,000

Projected Warrnambool  LGA Population

15,000 10,000 5,000

20 025

20 024

20 023

20 022

20 021

20 020

20 019

20 018

20 017

20 016

20 015

20 014

20 013

20 012

20 011

20 010

20 009

20 008

20 007

0

20 006

The buyer demographic largely consists of wealthy Melbourne investors, attracted to the area as an idyllic holiday destination and its strong rental yields. In total, 32% of Warrnambool’s tenure exists as either holiday or rental accommodation, while from the remaining share, 38% is fully owned and occupied and 30% is being purchased.

Prepared by PRDnationwide Research. Source: ABS

Estimated Resident P Population

The Warrnambool property market remains largely dominated by separate house type dwellings, which account for 78% of the regions total dwellings. With this being said, the regions continuous densification has resulted in a growing demand for well located medium density townhouse and unit type dwellings, which presently account for the remaining 22% of total dwellings.

Average age

Years Prepared by PRDnationwide Research. Source: ABS

Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Use with written permission only. Copyright © – 2009

20 026

In light of this growing trend for knowledge, this Why Invest? Report highlights the current market climate and driving forces behind one of Victoria’s most exciting markets. The Victorian property market, in particular key regional centres such as Warrnambool, have set the benchmark across Australia for the past twelve months. months Achieving exceptional growth in median sale price and robust sales volume, the confidence portrayed throughout the Warrnambool market at present demonstrates the growing appeal of this region for both home owners and investors alike.


Research

Brisbane | March | 2009

Why Invest? Warrnambool

Fourth Quarter 2010 Warrnambool House Sales Cycle $350,000

Number of sales Median

$315,000

300

$300,000

250

$250,000

200

$200,000

150

$150,000

100

$100,000

50

$50,000

The median price was attained from a total of 241 house transactions, 95% of which transacted within the central township of Warrnambool, while the remaining 5% were dispersed amongst the four neighbouring suburbs of Allansford Bushfield, Allansford, Bushfield Dennington and Woodford. Woodford This level of sales has seen activity in the regions market soften 11% below the five year average of 268 transactions per six month period.

2010 JUN

2009 JUN

2009 DEC

2008 JUN

2008 DEC

2007 JUN

2007 DEC

2006 JUN

2006 DEC

2005 JUN

2005 DEC

2004 JUN

2004 DEC

2003 JUN

2003 DEC

2002 JUN

2002 DEC

2001 JUN

2001 DEC

2000 JUN

$0 1999 DEC

0

Med dian sale price

350

2000 DEC

While enjoying the obvious benefits of robust population growth, the Warrnambool stretch of the Shipwreck Coast also attracts an increasing number of holiday investors to the market. Primarily from the state capital, this substantial contingency of wealthy Melbourne investors has assisted in pushing the value of Warrnambool’s property market north. Closing the June 2010 half year period at $315,000, the median sale price for houses in the Warrnambool market recorded an annual growth of 10.1%. 10 1% Over the longer term a robust growth rate of 9.1% per annum has been maintained over the past 10 years.

Nu mber of sales

Warrnambool House Market

Half year period

Prepared by PRDnationwide Research. Source: PDS Live

Warrnambool House Price Points

To attain a better indication of capital appreciation in the region, PRD Research has conducted a resales analysis of the Warrnambool house market. The analysis has revealed an average annual capital growth of 5.7% per annum for those who exited the market within the June 2010 twelve months, with an average holding period of 4.8 years. Looking forward to 2011, the recent change in the dynamics of the Warrnambool house market will most likely remain. The market will be largely driven by a slightly wealthier demographic of investors, who can comfortably absorb the anticipated interest rate rises.

7.9%

90%

Percentage share of total mark ket

Warrnambool’s house price points graph to the right highlights a notable shift toward the higher price brackets in recent years. The portion of house sales transacting for less than $300,000 has diminished 11.8% since June 2008, while higher priced product d t transacting t ti f $400,000 for $400 000 plus l h has i increased d 10.2% 10 2% throughout this period. This trend can largely be attributed to the withdrawal of first home buyers from the market and a reemerging contingency of investor buyers returning to the market.

100% 8.2%

8.4%

10.4%

5.9%

8.0%

10.7%

7.7%

8.7%

17.8%

80% 70%

27.3%

30.4%

35.0%

32.5%

60%

32.0%

$500,000 +

50%

$400,000 to $499,999 $300,000 to $399,999

40%

$200,000 to $299,999 39.3%

Less than $200,000

48.3%

30%

42.7%

42.9%

33.6%

20% 10% 14.0% 7.7%

6.6%

7.9%

2009JUN

2009DEC

2010JUN

6.1%

0% 2008JUN

2008DEC

Half year period Prepared by PRDnationwide Research. Source: PDS Live

Warrnambool House and Unit Capital Growth 2010 JUN

Unit Resales House Resales

2009 JUN 2008 JUN

12 Month P Period

Observing sales activity by price points, the majority of Warrnambool’s sales transacted within the $200,000 to $299,999 and $300,000 to $399,999 price brackets, accounting for 33.6% and 32% of market share. The $400,000 t $499,999 to $499 999 price i b k t also bracket l accounted t d for f a reasonable bl share of activity, representing 17.8% of total sales, while 21 transactions achieved sale figures greater than $500,000.

2007 JUN 2006 JUN 2005 JUN 2004 JUN

There is a changing dynamic in Warrnambool’s property market at present. The local economy has a diverse and growing variety of driving forces from tourism, agriculture and an emerging natural energy sector. As such, an expanding g attracted to the region g number new residents are being through increasing employment opportunity and the idyllic coastal lifestyle. Infrastructure and amenity as well as Warrnambool’s property market are set for strong growth in the short to medium term.

2003 JUN 2002 JUN 2001 JUN 0%

5%

10%

15%

20%

25%

30%

% of Capital Growth Prepared by PRDnationwide Research. Source: PDS Live

Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Use with written permission only. Copyright © – 2009


Research

Brisbane | March | 2009

Why Invest? Warrnambool

Fourth Quarter 2010

The June 2010 six months saw the median sale price of Warrnambool’s unit market climb to $255,000, culminated from a total of 63 transactions. The median figure resulted in an outstanding twelve month growth of 13.3%, while a healthy 10 year growth rate of 9.1% per annum was maintained.

Warrnambool Unit Sales Cycle 100

$300,000

Number of sales Median

90

$255,000 $250,000 80 70 $200,000 60 50

$150,000

40 $100,000 30 20 $50,000 10 $0

The minimal numbers of transactions that occur within Warrnambool’s Warrnambool s tightly held unit market have resulted in noticeable fluctuation in the median sale price. However, the confidence portrayed in this market over the past 18 months demonstrates the potential for future growth in coming years. As Warrnambool's population continues to densify, centrally located and low maintenance style accommodation will continue to become increasingly in demand.

2010 JUN

2009 JUN

2009 DEC

2008 JUN

2008 DEC

2007 JUN

2007 DEC

2006 JUN

2006 DEC

2005 JUN

2005 DEC

2004 JUN

2004 DEC

2003 JUN

2003 DEC

2002 JUN

2002 DEC

2001 JUN

2001 DEC

Half year period

Prepared by PRDnationwide Research. Source: PDS Live

Warrnambool House Price Points 100%

5.7%

9.1%

1.9%

90%

2.8%

4.4%

4.8%

11.3%

8.8%

11.1%

9.1%

Perc centage share of total market

To attain a better indication of capital p appreciation pp in the region, PRD Research has conducted a resales analysis of the Warrnambool unit market. The analysis has revealed an average annual capital growth of 4.5% per annum for those who exited the market within the June 2010 twelve months, with an average holding period of five years.

2000 JUN

Warrnambool’s unit sales were heavily weighted within the $200,000 to $299,999 price bracket, which attracted 68% of th markets the k t total t t l sales l activity. ti it The Th remaining i i share h off sales l were well dispersed from an affordable $90,000 to a premium of $640,000 for a four bedroom apartment on Merri Street.

2000 DEC

1999 DEC

0

The price points graph to the right highlights a dominance of the $200,000 to $299,999 price bracket within Warrnambool’s unit market in recent years. However, a notable change to consider is the decline in the portion of unit sales transacting for less than $200,000. The June 2010 six month period resulted in the lowest percentage of sub $200,000 transaction on record for the Warrnambool unit market. This trend highlights the growing demand of unit product in Warrnambool and the expiring opportunity to enter the Warrnambool market at the sub $200,000 level.

Me edian sale price

For the past five years, years units in Warrnambool have roughly represented 15.5% of the regions residential property market. While there is a list of housing developments in the pipeline in the outer perimeter of the region, the increasing density of residents and holiday makers to Warrnambool’s town centre is sure to result in a surge in demand for unit type product over the coming years.

Nu umber of sales

Warrnambool Unit Market

80% 41.5%

70% 60% 50%

56.3%

52.9%

$400,000 +

61.8%

68.3%

$300,000 to $399,999 $200,000 to $299,999

40%

$100,000 to $199,999 Less than $100,000

30% 49 1% 49.1% 20% 10%

25.4%

30.9%

4.2%

2.9%

3.2%

2009JUN

2009DEC

2010JUN

20.0%

12.7% 1.9%

0% 2008JUN

2008DEC

Half year period Prepared by PRDnationwide Research. Source: PDS Live

Warrnambool Total Property Returns Warrnambool Property Returns

Houses

Units

Median price change pa

10.1%

13.3%

Rental return pa

4.3%

4.3%

TOTAL PROPERTY RETURN

14.4%

17.6%

Prepared by PRDnationwide Research. Source: PDS Live and Vic DHS

Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Use with written permission only. Copyright © – 2009


Research

Brisbane | March | 2009

Why Invest? Warrnambool

Fourth Quarter 2010 Warrnambool House and Unit Rental Figures

Warrnambool Rental Market Over the last year rental vacancy rates within Warrnambool have remained between 1.5% and 0.6%, well below the 3% vacancy rate, which locally, has represented a balanced market in the past. This retracting of available rental tenancy has increased the demand for rental accommodation in Warrnambool and has assisted in excellent returns for investors over the June 2010 twelve months.

J Jun-09 09

J Jun-10 10

New New Rent Rent Bonds Bonds

Highlighted in the Rental Figures table to the right, right inflation in the average weekly rent of one and two bedroom units in Warrnambool have soared 29.2% and 10.5% respectively over the past twelve months. This increase has resulted in a total weekly return of $155 for one bedroom and $210 for two bedroom apartments.

12 Month Share of Growth New Rate Bonds

1 Bed Unit

81

$120

80

$155

29.2%

-1%

2 Bed Unit

383

$190

299

$210

10.5%

-22%

2 Bed House

98

$230

86

$250

8.7%

-12%

3 Bed House

424

$260

382

$290

11.5%

-10%

Prepared by PRDnationwide Research. Source: Vic DHS

Similarly, the average weekly rent for two and three bedroom houses in Warrnambool have recorded 8.7% 8 7% and 11.5% 11 5% annual increases respectively. This level of growth has seen the average weekly return reach $250 for a two bedroom and $290 for a three bedroom house.

Warrnambool House and Unit Rental Growth Cycle 1,400

$350 New Lettings

House Rent

Unit Rent

1,200

$290

12 Month Period Prepared by PRDnationwide Research. Source: Vic DHS

From the perspective of investors and home owners, this market lends to a very favorable situation. At present, investors can enjoy the high rental yields being achieved in Warrnambool which will eventually result in increased capital growth as tenants begin to see better value in purchasing.

Development At present, there is over $4.2 billion dollars worth of development either approved or under construction in the Warrnambool and Moyne LGA LGA’s s. From this figure, figure over $3.5 $3 5 billion can be attributed to different forms of privately funded alternative energy projects, projects while almost $300 million is designated to the improvement of infrastructure and amenity within the Warrnambool area. This level of development will create expanding employment opportunities and attract new residents to the region. Project

Developer

Specifics

Estimated Value

Stage

Construction Commencement

Forecasted Completion 2012

Entertainment Centre – Redevelopment

Government (local funding)

Alterations and Additions

$9.3 million

Development Approved

2011

Warrnambool Hospital – Redevelopment

Joint Venture (state funding)

Alterations and Additions

$130 million

Development Approved

2011

2012

Gateway Plaza - Shopping Centre Extension

AMP Capital Investors Ltd

Alterations and Additions

$50 million

Development Approved

2011

2011

Anchor Point Retirement Village

Endevour Living

213 independent living units

$50 million

Construction Commenced

2010

2014

Shaw River Power Station

Santos Ltd. – Adelaide

100 kilometre underground gas transmission

$800 million

Development Approval

2011

2012

Henry Gas Field

Santos Ltd. – Adelaide

24 kilometres of subsea pipeline

$200 million

Concept

NA

NA

Mortlake Power Station Project

Origin Energy Ltd. – Melbourne

550MW gas-fired power station

$640 million

Construction Commenced

2009

2029

Portland Wind Farm

Pacific Hydro Pty. Ltd

98 Wind Turbines

$330 million

Under Construction

2007

2010

Macarthur Wind Farm

AGL Energy and Meridian Energy

140 Wind Turbines

$1 billion

Planning Approved

2010

2013

Ryan Corner Wind Farm

Union Fenosa Wind Australia

68 Wind Turbines

$300 million

Construction Commenced

2009

2010

Hawkesdale Wind Farm

Union Fenosa Wind Australia

31 Wind Turbines

$130 million

Development Approval

2006

NA

Woolsthorpe Wind Farm

Wind Farm Developments Pty. Ltd.

25 Wind Turbines

$60 million

Development Approval

2010

NA

The Sisters Wind Farm

Wind Farm Developments Pty. Ltd.

12 Wind Turbines

NA

Proposed

2008

NA

Cordington Wind Farm

Pacific Hydro Pty. Ltd

14 Wind Turbines

$30 million

Planning Approved

2010

2013

Mortlake Wind Farm Salt Creek Wind Farm Mortons Lane Wind Farm

Acciona Energy Oceania Pty. Ltd. NewEn Australia Pty. Ltd. NewEn Australia Pty. Ltd.

96 Wind Turbines 15 Wind Turbines 15 Wind Turbines

est. $330 million est. $30 million est. $30 million

Proposed Approved Approved

2007 2007 2007

NA NA NA

Prepared by PRDnationwide Research. Source: BCI Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Use with written permission only. Copyright © – 2009

Median Rent M

$0

2010 JUN

-

2009 JUN

$50

2008 JUN

200

2007 JUN

$100

2006 JUN

400

2005 JUN

$150

2004 JUN

600

2003 JUN

$200

2002 JUN

800

2001 JUN

Furthermore, a growing contingency of Warrnambool’s, holiday home owners are now choosing to take up extended leases to meet demand of the areas population growth fueled by alternative energy projects throughout the region. With the emerging energy companies willing to pay more for properties, this has proven to be an attractive option for investors even through peak holiday times. times

$250

$210

2000 JUN

New Lettings N

1,000

Looking forward, there is no reprieve for renters in the short to medium term. Warrnambool’s increasing population growth, coupled with a shortage of available land for new buildings, suggests the local rental market will remain tight. tight

$300


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Prepared by PRDnationwide Research. Source: RP Data, PDS Live and ABS. For further details contact Dan O’Halloran Research Analyst P: +61 7 3026 3383 or E: danohalloran@prd.com.au PRDnationwide does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. PRDnationwide will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Use with written permission only. Copyright © – 2010

Why Invest Warrnambool Q4 2010  

This Report highlights the current market climate and driving forces behind one of Victoria’s most exciting markets.

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