04 Nov 2016
Words Catie Langdon
Regional Round-Up Reveals Robust Market
The latest reports on visitor numbers certainly show a very positive trend. But is that improvement being felt in regional areas, and how does it impact the accommodation business and property market? We did the rounds of Resort Brokers Australia’s teams in New South Wales and Victoria to find out.
The number of short-term visitors to Australia rose by 8.6% to 7.68 million between April 2015 and April 2016, according to a report by research firm CoreLogic. The surge has largely been driven by the Australian dollar falling from US94.2¢ to 76.6¢, said research analyst Cameron Kusher.
Tourism is already one of Australia’s biggest industries. Tourism exports in the year to March were worth $43.6 billion, just shy of the $47.6 billion generated by the nation’s top export, iron ore.
Domestic visitor numbers are also showing healthy increases. In Victoria, total domestic overnight visitors rose to 21.6 million in the year ended December 2015, up 6.5%. Regional Victoria recorded a 5% increase in visitors to 13.8 million for the year.
Available figures (YE June 2015) show regional Victoria experienced a 4.3% increase in accommodation takings, with growth recorded in most regions for room nights occupied. Occupancy rates statewide were up 1.2% to 68.7%. Average yield per room night occupied in regional Victoria was up 3.2% to $142 per night.
NSW saw a 4.4% increase in domestic overnight visitor numbers to 28.1 million (YE Dec 2015), which translated into a 4.1% rise in visitor nights (to 91.1 million) and a 5.1% lift in expenditure to $16.1 billion.
STR Global’s latest survey showed the occupancy rate in NSW grew slightly from 75.7% in the March Qtr 2015 to 75.9% for the same period this year, primarily driven by occupancy rate increases in regional NSW (64.4%, up from 64%). Takings from accommodation in regional NSW increased 5.3%.
Without exception, Resort Brokers’ agents covering regional areas across both states, reported evidence on the ground of the increased tourist activity. And they agreed with analysts that the lower Aussie dollar is behind the lift in overseas visitors and frequency of Australians holidaying at home.
In the accommodation business and property market, buoyant trading figures have caused a supply shortage as operators hold their assets while enjoying increased profitability.
Across both states, “tightly held” was the phrase most used by brokers to describe the motel market. Demand for freehold investment properties and freehold going concerns is strong, while availability is short, creating a very favourable selling environment.
Motel leases too are turning over quickly in many areas when the business shows solid figures and has reasonable tenure.
“The market at the moment has an insatiable appetite for both leasehold and freehold motels,” said veteran broker and Victoria state manager Jim Chapman about his southern patch. “Demand is being fuelled by low interest rates and the fact properties are achieving consistently strong returns.”
Jim also pinpointed why freehold investment properties everywhere are in hot demand – returns that few other investments can match. “Freehold investments are selling at about 8% return, so are very sought-after, particularly by those with self managed super funds,” he said. “Not a lot of investments will give you 8%.”
An interesting development in many regions across both states has been a marked increase in the number of Chinese and Indian buyers. “They are especially keen for freehold going concerns close to major population centres,” Jim observed.
Resort Brokers managing director Ian Crooks says Asian buyers more broadly are starting to look at investments in regional Australia.
“I recently brought some Singapore investors out to look at properties in coastal New South Wales,” he said. “I travel to Asia every three to four months, and we are starting to see more enquiry for smaller properties, which is a real opportunity for regional owners.
“In fact, because of the rising interest and demand, we are going to run a motel information seminar over there later this year and we’ll be looking for a good selection of properties to present.”
Of course, the market in every region is different, affected by its own set of unique economic and tourism circumstances. And it has to be said some regional areas, particularly the Hunter and inland NSW are still facing challenges. But, on the whole, the picture is very encouraging.