I recently had the pleasure of filling a keynote speaking request for a property event in Mackay.
With the event not being until the evening, I spent the entire day driving around, inspecting the city and the suburbs, and meeting with several key people in the Mackay community, including a chat with Mayor Greg Williamson, who is a real go-getter I might add.
Mackay is one of many Australian locations which is misunderstood by outsiders.
While there is no denying that mining is important to the city, mining is critically important to the entire Queensland economy, including Brisbane.
Let’s be clear, Mackay is not a one-industry boom or bust mining town. The city has a population of nearly 120,000, it services a broader regional population of circa 200,000, there is economic diversity, it has all of the essential infrastructure, and one of our nation’s most beautiful attractions is right on its very doorstep.
Like all major locations, Mackay has experienced periods of real estate price growth and price contraction during its history. But when one drills down into its average annual performance over the long-term you can understand the real picture – if anyone apart from me actually bothered to look.
Mackay is Australia’s 18th largest city yet its median house price is the 78th most expensive. In other words, Mackay’s property prices provide a lot of bang for the buck. What’s not to love about that?
Here are nine reasons why I love Mackay.
Right now, Mackay is one of the strongest property markets in Australia. Over the 12 months ending October 2019, Mackay’s median house price increased by 4 per cent, which was superior to every capital city in Australia. From where I sit, it’s at the early stages of a new growth cycle. Oh, and did I mention that its median house price is just $360,000?
Mackay’s local economy is now very buoyant, there’s a staggering 450 major infrastructure project pipeline worth $30 billion, and the list of major job-creating projects is more diverse than what most people appreciate. Housing supply (new-builds and rental stock) is also very tight. With a few recent RBA rate cuts, an investor can acquire debt at around 3.5 per cent, purchase a quality asset at a price of $360,000 to $400,000, and the rent will cover the entire cost of the holding the asset. One won’t get that in the big smoke!
Related article: How to win Australia’s affordability challenge
Mackay is a real city of substance. It’s a coastal location with nice beaches, fantastic weather year-round, as well as has a youthful and hardworking demographic that love sport! The Mackay airport has dozens of direct flights to all corners of the country every day. The city has an attractive waterfront, quality retail facilities, good schools, a university campus and a good hospital – it’s what I call a ‘mini capital city’. These attributes are far from the ‘vision’ that many city dwellers have of Mackay.
As I mentioned, Mackay sits at the front door to one of the world’s most idyllic tourist attraction – the Whitsundays. It’s also Australia’s sugar cane capital, and Qantas recently hand-picked Mackay as one of only two locations in Australia for a new pilot academy. The city of Mackay plays an important role in providing goods and services for a large number of coking coal (a steel-making commodity) and thermal coal (the world’s largest source of electricity) which are located two or more hours from Mackay. So rather than a one tricky-pony location, Mackay has a diverse economy that employs tens of thousands of locals in different industries. That gives its employment sector, and its economy, a depth far greater than just a resources-dependent regional area.
Like everywhere else in Queensland, Mackay’s property market has been disappointing for the past decade. But how Mackay’s property market has actually performed over history is different to most people’s perception. From the $75,000 median house price at the end of 1990 to today’s $360,000, the average annual growth rate across the past 29 years is 5.6 per cent and only marginally behind Greater-Brisbane’s 5.8 percent – that’s pretty damn good if you ask me!
Related article: Queensland’s double-digit growth potential
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The plethora of property generalists in the world probably consider Mackay to be a boom-bust high-risk property market. That’s certainly true for one-industry towns like Moranbah, but Mackay is a city of substance with a very different property trendline. Mackay’s median house price increased by a whopping 161 per cent over the nine years ending 2012 – yes, that’s a big boom. But a decline from $430,000 (at its late-2012 peak) to $335,000 (when it bottomed in late-2017) is not dissimilar to the values wiped off Sydney and Melbourne house prices during their recent downturn. Booms and downturns occur in literally every location from time to time.
With the size of a typical mortgage in Mackay being significantly lower than Australia’s more expensive cities, the cost of housing places less stress on the budget. Not only that, the prospects for more growth are real because of its rebound in population as well as a looming undersupply of property. Like all markets that experience a flat period, building supply has dried up over recent years, which is starting to create property price pressure. Of course, none of this is new, because this is generally what happens in all markets on the rise. It’s just that every time a market is flat lining far too many people throw their hands in the air in defeat as if that location will never see any property sun ever again.
If a strengthening house market wasn’t enough, investors of Mackay real estate are already enjoying superior yields. In fact, their yields would make Sydney investors cry cash flow tears into their skinny lattes! While Sydney investors try to make up mortgage repayment shortfalls of hundreds of dollars every week, Mackay investors are often in positive cash flow territory from day one – plus they are investing in an asset with real price growth prospects. Mackay’s vacancy rate is now just 1.5 per cent, which is into undersupply territory. Of course, with more demand than supply, rents are soaring!
Right here, right now, I consider Mackay to be a safe property market. Housing being so affordable provides an important solid floor and arguably the biggest risk mitigant of all. Other solid fundamentals include a below-average volume of new housing supply in the pipeline, very low (and falling) residential vacancy rates, and solid job creation. Mayor Greg Williamson also confirmed that school enrolment volumes for the 2020 calendar year are through the roof, suggesting to me that that the large pipeline of major projects is already attracting internal migration.
If you ask me, Mackay’s property market fundamentals are currently superior to many Australian locations and the city deserves more credit than it have previously been afforded.
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