How Covid-19 and monetary policy changes are impacting the Australian caravan park property market.
The Australian property market has experienced significant changes over the past few years and recent media and industry reports discuss that various sectors of the market, primarily residential and commercial, are entering a period of correction. Following the Covid-19 pandemic, the rapidly changing monetary policy environment has also contributed to market changes. In this article, we have reached out to national industry participants to provide insights into the going concern property space. We have discussed the general market trends in the hotel (pub), accommodation, and caravan park industries with active national agents in these specialist markets. We have also considered observations from valuation instructions within these sectors. The condition of the going concern property market in Australia varies depending on a range of factors, including economic conditions, consumer confidence and industry trends. It is also impacted by various state and federal regulations, for example licensing requirements, foreign worker availability etc.
Caravan Park Sector
The caravan park industry remains a significant component of the Australian tourism industry with over 2,500 parks in Australia. This industry has in general, experienced increased revenue over recent years with variations due to Covid and the overall economic environment.
During recent times, the industry has responded to market demand with the development of existing properties away from the traditional grassed camp sites to modern, well-appointed family cabin/villa accommodation and facilities designed to serve large motorhomes and caravans. This is coupled with infrastructure improvements including resort style swimming pools, kid’s clubs, playgrounds, water parks etc., continues to boost occupancy and mainstream tourism attention.
In addition to the further development of the industry in terms of tourism numbers, caravan parks continue to provide viable and attractive alternative housing options for long term residents and long-term casual holiday accommodation, where permitted.
This growth across the industry has resulted in the market for caravan/tourist parks increasing substantially over recent years with values increasing, yields declining and the emergence of strong institutional demand for larger, well located and operated parks
Kevin Connolly, Director, CRE Brokers adds, “The current institutional demand for caravan parks has created a two speed economy, were demand and transactions for large well located properties has seen record prices and record low yields. The balance of the market – ‘mums & dads market’ remains active and well-priced.”
Noting the recent strong transactional history in the institutional portion of the market, recent monetary policy changes do appear to be softening demand from the larger players in the market. Mr Connolly continues, “Institutional demand has appeared to have shifted a gear, with recent going concern yields in the sector for well located and operated facilities as low 7.5% being increased by approximately 1-2%, to reflect the cost of finance.”
Operational issues within the sector mirror that of hotels and other accommodation providers with labour and insurance being of most significance. Mr Connolly notes, “Recent climatic conditions throughout regional Australia have placed significant pressures on operators, which adds to their recovery from Covid trading conditions and now interest rate movements.”
It is further acknowledged throughout the industry, that delays and cost increases in the construction sector has hindered the caravan park market in terms of transportable cabins and residences being delayed, with price increases requiring increased feasibility scrutiny.
Noting a continued strong transactional environment for caravan parks, although a potential slowing at the upper end of the institutional sector, Mr Connolly acknowledges, “Good quality properties will always sell in this sector.”
Continue reading our Going Concern sector updates for Hotel and Accommodation industry sectors below ↓