QLD Hervey Bay is it Finally Picking up?

Hi All,

New to the forum but would appreciate any feedback on how they see Hervey Bay tracking.

Reason for asking, is that we bought an IP 2B townhouse in 2007 for $290K (unfortunately near the peak of the market) and it has been trending down ever since. Currently rented out for $260/wk until early November. It is an older complex of 6 2B townhouses, on the Esplanade. So right across from the beach and facing a park. The problem with Hervey Bay as I see it, was an oversupply of units/townhouses, GFC, loss of mining jobs and dependence on tourism.

Bank valuation just came in at $240K, as we were looking at using it for security to purchase a PPOR in Perth. So this unfortunately means negative equity as we still owe $220K. It has always been negatively geared with probably costing us about $5K a year. Our aim with the purchase was more for CG and we bought it while we were working overseas and had a case of FOMO.

So tossing up whether to just cut our losses or wait a little longer as we would really like to buy a place for ourselves and wanting to take advantage of the downturn in prices in Perth. We are currently renting and feel we are wasting rent money while properties are only getting more expensive. The selling agent I have been talking to says that the market is picking up in Hervey Bay and it would be a good time to list it with spring and everything. Also, saw that the HTW clock has Hervey Bay as picking up. There has been recent extension of a major shopping centre and new hospital which sounds promising for the economy.

One negative with selling is that there is another one for sale in the complex at $240K and we were hoping to achieve $260K. So until that is sold, it will just keep the price down.

So, in summary, with the other unit on the market are we just wasting time and money trying to achieve a higher price? And if the market really is picking up, we could wait another year?

Thanks in advance.

 

If you've held on for this long I wouldn't sell just yet. While values of units plummeted the area now appears the only bright spot on the coast until Cairns

An agent saying "it’s a good time to sell" is a waste of typing

 

Of course the Agent said it's a good time to sell.... that is is their job! They get paid to "sell" properties....

Realising a loss hardly seems complimentary to buying a PPOR. Also owing 220k on a property valued at 240k is not negative equity. It has a LVR of ~92%, so you have some equity, which would largely disappear if you sold due to costs.

I think the real issue you're trying to convey is about serviceability for a PPOR?

Also, if the other property in the complex listed at 240k sells, it might not achieve 240k... so thinking that this will improve your chances of gaining a higher price does not make sense to me. Ie. if it sells for 230k & you list yours the next day, do you really expect someone to pay 260k for a comparable or identical property next door?

 

Hi spot, i live in maryborough, 30 mins to the bay.
Prices are holding, but barely. We are loosing employment every day. The wide bay has the second highest unemployment rate in australia for youth and overall its pretty bad economy here. I know where i work is a major employer and we just lost 23 people, and with more vr's to come it is not good... And this sentiment is not just where i work but other places too. I think a lot of people here are nervous about the economy. Tourism has picked up in the last twelve months, but with huge downturns else where no surprise tourism is one of the first things to drop. There are a lot of empy shops everywhere. In order for this area to take off we need some major players to set up industry here and i just dont see that happening unless we get state or federal help. I dare say any growth is going to be a long term thing. 06-07 was the peak and most stuff today is selling for 20% less or more from then. I dont see major growth for the next 5 years unless we get some big players in town for employment. Also u can buy a brand new house and land deal for less then 320k. That will be putting unit prices down too.

 

Market seems to be pretty flat to me. If you only owe $220k on it then your interest payments should be less than $11k/yr vs rent of $13k, with rates, insurance etc sounds like it should be neutral, not negatively geared. Stop paying P&I and switch to interest only.

The other way to look at Perth, is that rents are going down and competition between landlords is pretty high, so why not take advantage of that? ie get a nicer place, OR, get a lower rent and save save save for your deposit?

 

We (company I work for) opened a store in HB about 2 years ago. 12 months in and it's making about half it's budget. Given we sell a "lifestyle" product, I'd be saying that the local economy is still somewhat depressed. I'll let you know when retail sales pick up again.

 

Yep, tell you anything especially to get a listing. It is always a good time for buyer and vendor to act for them

I do not know the area, but if another is listed at 240, unless the market is warm, it is likely to go for less and in turn be same for yours unless sig. different

 

Thanks all for taking the time to reply.

Hi @Indifference , yes the intention was to sell to help with PPOR purchase. We had resigned ourselves to some loss, if it means that we can move on. In regards to the other property for sale, that is what is holding us back from selling. We were also thinking of heading overseas in a couple of years so wanted to have as much $$ with us as possible.

@Miss_D and wobbycarly that doesn't sound very encouraging for HB. We were only thinking of holding on for a bit longer if the market was looking to improve.

@Phase2 yes the other option was just to get something bigger to rent in Perth, especially if the Perth market is still falling. We are currently in a townhouse with hardly any outdoor space and a 2 year old.

The agent is a friend of the family, so hoping that it is not all bs talk

 

Renting is amazing value for money at the moment in Perth. If things are tight financially, this seems like an obvious choice imo.

 

There's some interesting information in this article:

Fraser Coast property market (Hervey Bay, Pialba & Maryborough) - Australian Property Investor magazine

Of particular interest, given the high regional unemployment rate, '...data from the Australian Bureau of Statistics points towards a credible economic recovery already under way, with a 10.3 per cent increase in total jobs in the region for the 18 months ending June 2016 (national average 4.5 per cent increase).'

If they can keep this rate up, that will be very positive for the region and things may start to pick up again.

 

I was talking to a salesman for Coral Homes last week and asking about coastal Wide Bay region. He said their company is currently looking around for a suitable place to set up another display village in Hervey Bay for 2017. Don't know if I'd believe him tho.

 

Here's a few links highlighting some economically positive things in the pipeline for this area:

Cr Loft: The Wide Bay Motor Complex will happen

Hervey Bay hospital to receive a $40 million upgrade

SKYSCRAPERS: Plans for the regions tallest buildings

Fraser Coast Mayor Chris Loft backs 20 storey development

$200 million PresCare hub set to create 450 jobs

$28M aged care boom on Fraser Coast

$30 million aged care facility to create 350 jobs

Maryborough, Hervey Bay make top 50 Aussie small towns list

Maryborough will soon officially be an RV Friendly Town

 

International visitor numbers going up on Fraser Coast

 

You might be able to change your situation just by getting the right loans and structure set up.

You should be able to make the place cashflow neutral. If this can be achieved you may as well keep it.

Talk to one of the brokers on here. It could seriously change your situation.

Also don't worry too much about buying in Perth. You've got plenty of time to save up and get a deposit together. Very unlikely that he market will rise there in the short term.

If you can ride this out correctly in five years time you'll end up with a nice place in Perth and your IP.

 

Thanks all for the feedback.

The agent up in Hervey Bay is reporting increased sales activity in the last months. So things have picked up but obviously not to the extent at the price we purchased.

Since posting, we have actually bought a PPOR 3bed townhouse and we have changed the Hervey Bay property to interest only (plus the bank reduced the interest rate). So should be close to cash flow neutral. Now just debating whether to still try and sell, should the general economy deteriorate as a lot of people are predicting. Would be nice to have one less thing to think about .

 

Will the Fraser Coast be Queensland's solar capital?

 

This is what I like to hear:

"This region is following along with what the Sunshine Coast has actually been doing.

"What happened in the Sunshine Coast 20 years ago is starting to happen here."​

REVEALED: New resort complex proposed for Esplanade

 

Thanks for the updates.
From what I hear, sales have definitely picked up. We have had an offer on our place and if we were to sell it would still be at a significant loss but one less headache. However, would hate to sell just as things are finally picking up. Is it looking likely to continue to improve?

 

Personally, I thing things are starting to look a bit more promising.

The Labor government, facing constant criticism for not doing anything, is facing an election this year. With Pauline Hanson looming, it seems as if some bigger regional projects may just get the tick to try to get things moving.

If it were me, I would sit tight for 12 months - unless you get an offer you are happy to accept. But don't expect miracles, more likely slow improvement.
Marg

 

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