John Rolfe CQUniversity

1. Modelling the future economic, population and housing impacts of developments in Gladstone and Central Queensland John Rolfe CQUniversity

2. Focus of talk • Understand and model the key drivers for population growth in Gladstone • Model the potential impacts on housing markets • Extend the analysis to central Queensland

3. Population and housing models • Modelling has followed six key steps • Identify all the key projects • Estimate the construction and operational jobs based in Gladstone • Model the flow-on effects on employment in Gladstone • Estimate the additional population growth • Estimate the housing requirements • Model potential house price changes

4. Challenge to estimate flow-on effects • Use economic multipliers to predict flow-on effects of each new primary job

6. Construction employment - confirmed projects • Strong takeup of local employment in construction jobs to date • Estimate more than 1,000 locals employed at present

7. Construction employment: confirmed + likely • Accounting for additional new projects will extend construction employment over time

8. Operational employment: confirmed projects • Expect over 1200 new workers by 2016

9. Operational employment: confirmed + likely • Addition of more projects continues employment growth past 2016

10. Economic Multipliers • Two separate models used to predict possible flow-on effects in Gladstone • Model of past economy in Gladstone LGA indicates that for each new primary job, another 3.7 jobs are created • Model of future growth in region suggests multiplier will be lower from now on – for each new primary job, another 2.8 jobs are created

11. Results of modelling: Increases to 2018

12. Results of modelling: Increases to 2018

13. All projections are for rapid growth to 2018 • Assumes lower multiplier for future growth

14. Projections with higher multiplier • Assumes same multiplier for future growth

15. Predicting impacts on housing prices • Looked at housing price changes in three main ways • A. Extrapolated price trends over past decade into the future • B. Related past price changes to population growth and extrapolated to future • C. Related past price change to growth shock

16. A. Extrapolating previous trends • Extrapolation of previous models indicates that median house prices will increase by $35,000 per annum to about $660,000 in 2018

17. B. Extrapolate past relationship to future population growth • Regressed change in house prices against population growth over past decade • Extrapolation to new population growth suggests price growth by 2018 to >$800,000 for Scenario C

18. Predictions from approach B: 2000 - 2018

19. C. Price impacts ratio approach: Short term spikes • The Rio Tinto Yarwun Refinery located in Gladstone is identified as a similar project in terms of its nature and location • The refinery was commissioned in late 2004, with the first full year of operation in 2006. • The project employed 431 permanent operational staff with the majority housed in Gladstone during its first year of operation • The impact the Yarwun refinery had on property values in Gladstone will be used in this analysis to estimate the likely impact on property values of the major projects

20. Impacts on median house prices from Yarwun • Change in Gladstone population from Yarwun estimated at 1,164 people • 2.2% increase in population • Growth rate of median house price in 2006 was 33% • 14% above longer run mean of price increases

21. Source: KPGM (2009) Price impact ratio • Increase in population from major new projects for Scenario C is • 2011 population = 62,982 • Average annual increase over 5 years = up to 8% per annum • Price impact ratio analysis suggests annual price increases of 30% on top of existing market trends • Price increases could be as high as 55% more in short term under major growth scenarios and little change in supply • Price impact ratio estimated at 6.4% • Each 1% increase in population drives 6.4% increase in price

22. Are predicted price increases modest or high? • Models predict prices will double in 8 years – and there may be shorter term price spikes • Consistent with pattern in past decade • Predicted increases are large enough to cause pain and impacts • But are not at the scale that mining towns in the Bowen Basin are experiencing • And trends consistent with growth in past decade

23. Residential land prices in central Qld doubled in 8 years to 2010

24. Housing prices in central Queensland – up by 2.8 times in 8 years

25. Changes in housing prices partly explained by population growth

26. Rockhampton – housing price changes relate to population increase

27. Dwelling approvals driven by annual price increases

28. Mackay – housing price changes relate to population increase

29. Dwelling approvals driven by annual price increases

30. Growth forecasts for Central Queensland • Qld Govt population growth forecasts are very strong

31. Currently more than 100 significant projects underway or planned in CQ

32. More than $114 billion in capital expenditure

33. More than $114 billion in capital expenditure

34. Workforce requirements for new projects

35. Predicting population changes - optimistic • Assumptions about workforce moving to local areas: • Central Highlands: 50% • Barcaldine: 10% • Isaac: 30% • Gladstone: 80% • Assumptions about location of FIFO workers • Rockhampton: 25% • Mackay: 25% • Bundaberg: 10% • Outside CQ: 40%

36. Predicting population changes – conservative • Assumptions about workforce moving to local areas: • Central Highlands: 25% • Barcaldine: 5% • Isaac: 15% • Gladstone: 66% • Assumptions about location of FIFO workers • Rockhampton: 10% • Mackay: 15% • Bundaberg: 5% • Outside CQ: 70%

37. Summary of broad predictions • These predictions indicate that: • Gladstone’s rate of population increase will be about double the previous decade (1,622 per year) • Rockhampton’s population increase will be slightly higher than the previous decade (1,901 per year) • Mackay’s population increase will be about double the previous decade (3,128 per year)

38. Conclusions • Rapid growth in Central Qld is generating employment, with subsequent population and housing effects • Simple models used to make broad forecasts – but will be inaccurate • Gladstone population predicted to increase between 10,000 and 25,000 by 2018, depending on scale of industry development • Gladstone median house prices predicted to increase to between $604,000 and $928,000 • Higher price increases predicted in Mackay, and lower increases in Rockhampton