Toowoomba, Townsville or Brisbane (North)?

[Dakkas]

Hi all,

Long time reader - first time poster.

Myself and the wife are new to the property investment scene and are doing as much as we can to take on as much information as possible - this forum is fantastic for a start.

Over the past 9 months I've inundated myself with research into different area's for investment properties. The initial research has seen us buy a 4br house in Dubbo which is returning a yield of 6.02%.

While it's no trail blazer I'm hoping it will do ok - I'm a little concerned we've bought too high in the market cycle due to stalling on actually making a move. But it's an area I know really well, being in the comfort zone it made the whole learning process a bit easier and well it's not costing us anything to hold so I'm reasonably happy.

In any event, we're now close to being in a position to make a move and strike again - I've narrowed down area's such as Toowoomba, Townsville (close to CBD) and the Northern Suburbs of Brisbane however I can't for the life of me find anything that sets one of these apart from the pack.

To give an insight as to what we want to achieve - my wife and I live in the NT away from family (due to good wages) however over the next 10 years we are hoping to achieve enough in the way of investments that can offset the high wages the NT offers and move back home - and ideally be in a financial position so the Mrs doesn't have to work full time. We're also thinking long term for retirement as well (and hopefully being able to retire early) - say 50-55yo.

Any thoughts, advice or input into the above area's would be appreciated.

Regards,
Dakkas.

 

[Coota9]

Dakkas,

How far north are you talking in Brisbane ?

 

[Dakkas]

Around Mango Hill / Rothwell area's and anywhere in between.

Maybe even out a bit West - Ipswich?

 

[norwoodman]

Toowoomba has well and truly left the starting line now (with variation across different suburbs of course), everyone is raving on about it now and there are unit developments everywhere now - along with a few large infrastructure projects. Hard to find anything much above 6% yields given the rents haven't really moved in line with prices.

The other two are further back in the cycle - Townsville is currently experiencing some issues with its rental market and high vacancies, even though the property prices there are slowly rising (with the exception of some fringe suburbs like Deeragun which are around developer central). The Mango Hill/Rothwell area is currently getting a new rail line - the Moreton Bay rail link.

 

[Coota9]

Westfield extension with 8 screen cinema complex under construction.

Ikea completion now pushed back to be complete 2016.
Rail to be completed 2016 also..

 

[sandyfeet]

Hey Dakkus, congrats on the Dubbo purchase, at least you have got started.

I am in a similar spot to you and have looked into your mentioned areas. I'm not sure what your strategy is but our purchases are long term holds. We are focussing on Brisbane for our next IPs and I'm spending a week up there early July to have a look around. We are still deciding what type of prop and location is best for us and our price range but still believe long term, if purchased well, Brisbane will perform better than Toowoomba and Townsville. But hey, I'm a beginner and could be wrong.

Thanks, sandyfeet

 

[Dakkas]

Hi thanks for the reply.

I generally agree, however, what keeps me thinking of Townsville is that it appears to be flat at the moment (ie relatively cheap) and the flow on affects of the Casino / Resort in Cairns would be a major injection for the region - and that's in addition to the Federal Government's push to develop Northern Australia. I was thinking somewhere in the CBD could be good for capital growth and good yield.

On the flip side you've made a good argument for Brisbane... comes back to why I can't decide.

 

[RPI]

Ipswich has introduced laws letting your rent out granny flats, Logan's new planning scheme will do so as well. Townsville is already possible. That may help your yield improve.

 

[Nth Brisbanite]

I invest and live in North Brisbane with most of my properties in this area although I don't go as far out as Mango Hill and Rothwell apart from one property in Kallangur. There are good properties in Aspley, Zillmere, Taigum and Boondall which have got better long term prospects than areas further out. Prices are still reasonable and there are pockets of new development going on if you want brand new properties.

I don't know Townsville and Toowoomba very well but from reading posts on this forum I wouldn't invest in these areas.

 

[JenJen]

Hi Dakkas

It looks like you have done some good research to date, and of course where you invest does depend on your strategy and tolerance levels, on which your finance expert will be able to advise you.

I agree with Norwoodman re Toowoomba having moved already, and the others as further behind.

Northern suburbs of Brisbane are moving at different rates. Depending on your budget, and whether you want a townhouse or house, some areas no longer have the yields many investors are chasing. However, vacancy rates are tight, and rents are heading up in many areas, so you would do well to factor this in to your investigations.

Townsville is also picking up but does currently have high rental vacancy rates mentioned by Norwoodman. Townsville has and is experiencing a building boom and an injection of NRAS into the mix, which I believe has contributed to an oversupply in some areas. Inner city is currently being revitalised, but be careful of short term unit oversupply.

Your comments about Townsville are also spot on. It is coming off a recent flat period but now into recovery and has plenty of potential. The Northern Australia policy and associated rumblings are already having an impact on planning and policy. Historically, one of the main obstacles to progress in the North has been high insurance premiums, and governments are determined to address the issue. The housing insurance market is making good progress. It has far more market competition, and insurers have made significant adjustments to their policies, such as using flood maps rather than post codes, and providing a range of options available to keep costs attainable. The housing insurance market is streets ahead of strata insurance market which is very limited. If you look at graphs comparing the historical growth of houses vs units across the region you will see how pronounced the impact has been. This insurance issue has made some investors wary of buying in the region in general, but it is not an obstacle for owner occupiers. Also, it is all relative, so when the difference between house and unit prices reaches a certain point, or the price difference between investing in North Queensland vs other areas that are ahead in terms of the market cycle reaches a tipping point, something has to give. This can already be seen in the Cairns unit market, but is yet to be realised in Townsville.

Speculatively speaking, if the Cairns Aquis development goes ahead, surrounding areas are very likely to experience the flow on effect. If you read the Aquis Environmental Impact Statement, you will see the enormity of what is proposed, as well as the capacity issues.

Regardless of whether or not the Aquis development goes ahead, Cairns is rebounding already, and the rental market is already stretched to the limit. I have just advertised an IP for rent and have around 10 interested parties before the first open for inspection. Even after having raised the rent by 16% to keep up with the market, people are willing to pay more. I would think this is only just the start of it for renters.

Townsville is very well placed to absorb people who may be displaced from Cairns. It is rapidly developing into a lifestlye and tourist destination in its own right, has a very diverse economy, an international airport (albeit small and not used as such at the time of writing) and is only 1 hr flight to Cairns.

At the end of the day, as you say, it really is a long term strategy. Whatever decision you make will impact on your ability to progress, and needs to be considered in that light. Your finance expert will be able to do some modelling and discuss the financial implications with you.

Cheers

Jen

 

[JenJen]

Hey Dakkus, congrats on the Dubbo purchase, at least you have got started.

I am in a similar spot to you and have looked into your mentioned areas. I'm not sure what your strategy is but our purchases are long term holds. We are focussing on Brisbane for our next IPs and I'm spending a week up there early July to have a look around. We are still deciding what type of prop and location is best for us and our price range but still believe long term, if purchased well, Brisbane will perform better than Toowoomba and Townsville. But hey, I'm a beginner and could be wrong.

Thanks, sandyfeet

Hi Sandyfeet

It's difficult to compare the potential of these areas as a whole, but if you look at the graph attached (courtesy of RPData sourced via CBA) you can get an idea of how specific areas have performed in comparison with Brisbane, historically at least.

Annandale is a blue chip suburb in Townsville:

I'd be interested to hear your thoughts.

Cheers

Jen

 

[Nattl3s]

Hi Jen Jen
Was in townsville a few weeks ago. Used to live up that way years ago, i now live in Brisbane. My friend bought a house in Idalia 2 years ago. Its a 4 bedder. It does overlook a man made lake and has a lovely aspect but I nearly fell off my chair in surprise when she told me what she paid for it. $980K!!!
Perhaps Idalia will be the new blue chip area and overtake Annandale.
There are quite a few new housing estates being built. The economy is reasonably good up there.
Cheers nat.

 

[JenJen]

Hi Jen Jen
Was in townsville a few weeks ago. Used to live up that way years ago, i now live in Brisbane. My friend bought a house in Idalia 2 years ago. Its a 4 bedder. It does overlook a man made lake and has a lovely aspect but I nearly fell off my chair in surprise when she told me what she paid for it. $980K!!!
Perhaps Idalia will be the new blue chip area and overtake Annandale.
There are quite a few new housing estates being built. The economy is reasonably good up there.
Cheers nat.

Hi Nan

Funny that! I was in Brisbane a week or so ago. Used to live down that way, and now live in Townsville!

Yes, Idalia is one of the newest housing development areas in close proximity to the city. That price is way above the median though, so it sounds like your friend bought a very nice place, with perfect location and outlook, and good block of land. If you have a look at flood maps etc, you can see that there is now a shortage of available land in close proximity to the hospital, university, city and strand, and out of the flood zone. Idalia was pretty much the last of it. Comparatively speaking, Annandale is an older suburb, although it does have more owner occupiers than Idalia. Idalia is very popular with the Army families, especially high ranking army personnel!

As you say, the economy is reasonably good, depending on how you define it though. If you are Bunnings, for example, it's pretty much the busiest in Australia. I've discussed this in other threads dedicated to North Queensland.

Cheers

Jen

 

[sandyfeet]

Hey Jenjen, great post, some useful information for us all.

Re: the graph (is this free info from CBA?) Is this for Brisbane LGA? assuming this is the case:

Looks like Annandale is more volatile than Bris - I guess this is purely due to sample size. After 10 years, growth has been similar for Bris and Annandale, considering Brisbane comprises of many suburbs (hence the growth line is an average) some suburbs in Brisbane may have performed better (possibly much better) and some worse (possibly much worse) than Annandale.

Regards, Sandyfeet