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South-East Queensland Poised for Property Upturn

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South-East Queensland Poised for Property Upturn

The Queensland economy is now well into recovery stage after an inevitable slump following the mining boom.

In the third quarter of 2017, state final demand rose a significant 2.7 per cent year-on-year, which was the first time in three years this measure returned a positive result – the culmination of five consecutive quarters of positive growth.

Access Economics have also forecast the Queensland state final demand will average 3.8 per cent annual growth over the next four years, easily outstripping the average annual growth of 0.2 per cent in state final demand over the last five years.

Infrastructure boom set to takeover apartment construction

According to JLL, Queensland employment surged 4.1 per cent year-on-year to August 2017, easily surpassing Victoria and New South Wales (3.7% and 2.3% respectively) and the national figure of 2.8 per cent.

This is in spite of a clear slowdown in the construction of apartments in Brisbane that has been well underway for the better part of 18 months.

Building approvals for units in the greater Brisbane area were down 59.9 per cent for the year to August 2017 as it became harder for both developers and investors to obtain finance.

Interestingly, the pressure from APRA for banks to limit investor finance has actually benefited the Brisbane apartment market. It has inadvertently forced developers to create more appealing and better quality products – which is contributing to a change in buyer profile to more owner-occupiers and less investors and reducing the amount of “cookie cutter” apartments in the market.

Over the coming quarters, it is anticipated approval numbers will remain subdued. However, any negative employment effects felt from a reduction in construction will be offset by the burgeoning pipeline of infrastructure programs currently underway or soon to commence in Queensland.

Major Infrastructure Projects

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Cross River Rail

With the recent re-election of the Palaszczuk government, Brisbane’s $5.4 billion Cross River Rail will commence construction next year.

It will involve the construction of four new underground stations, significant upgrades to existing stations and Brisbane’s first southern CBD rail station at Albert Street.

Forecast to create 1,500 jobs annually, the Cross River Rail project is due for completion in 2024.

 

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Queens Wharf Redevelopment

The redevelopment of the $3 billion Queen’s Wharf precinct is one of the largest developments ever undertaken in Queensland. It covers 27.3 hectares, roughly one fifth of the CBD area.

At peak construction, Queens Wharf is projected to created 2,000 jobs with 8,000 jobs ongoing upon completion in 2024.

Queens Wharf will house over 50 restaurants, bars and cafes upon completion, with an additional 1,000 hotel beds and 2,000 apartments in the residential precinct.

Once fully operational, Queen’s Wharf is expected to bring an additional 1.39 million visitors and an increased tourism spend of $1.69 billion annually.

 

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Brisbane Showground regeneration

The redevelopment of the 22-hectare site is the largest brownfield development of its kind in Australia.

Due for completion in 2026, the $2.9 billion redevelopment of the Brisbane showgrounds will generate more than 2,000 jobs over the course of the development and add over $300 million annually to Queensland’s economy.

 

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Brisbane International Airport second runway

This is the largest aviation project currently underway in Australia, and one of the largest currently being undertaken globally.

Due for completion in 2020, the $1.35 billion second runway will create 2,700 construction jobs over seven years.

By 2035, Brisbane airport will handle 50 million passengers a year.

 

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Herston Quarter redevelopment

A world-class health and wellbeing precinct will become a new landmark in Brisbane’s northeast.

The $1.1 billion precinct is due for completion in 2027, creating 700 jobs in the construction phase.

Brisbane Metro

Due to commence in 2019, the $944 million Brisbane Metro project will feature two new high-capacity, high frequency metro lines connecting Brisbane’s southern suburbs and inner northern suburbs with the CBD.

Due for completion in 2022, Brisbane metro will create 7,000 construction jobs.

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Brisbane’s Property Outlook

Cyclical lows for inner city residential developments

As the cranes come down and the lights go on, we’ve officially hit the settlement stage of the inner-Brisbane apartment market.

The number of apartments being approved is now at cyclical lows and has been edging that way for quite some time.

Urbis reported the third quarter of 2017 saw only 672 apartments reach development approval status – a significantly lower number than those in the peak of the cycle which reached over 5,000 apartments per quarter in 2014 and 2015.

We’re also seeing cyclical lows for the number of pre-sales achieved each quarter, with the last four quarters averaging 348 in sales volumes.

These figures are a result of the stage of the cycle the market is in, reflecting the natural slowdown in completed stock that will likely carry through until 2020. And while small pockets of Brisbane have seen an oversupply in the last 18 months, prices have not been materially affected.

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Significant growth for house prices

This chart from JLL’s third quarter Brisbane Apartment Market report shows Brisbane apartment prices were down only 0.2 per cent as at August 2017 year-on-year, while houses returned a robust 4.2 per cent positive growth story. Given this period spans the peak supply periods of the Brisbane apartment market (2016 and 2017) this is a reasonably solid result for apartments.

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On a citywide level for apartment price growth, even the so called “hotspots” have remained relatively buoyant, despite the “oversupply” story.

The table below shows the five strongest and weakest performing suburbs for median price growth for Brisbane houses and units for the 12 months to August 2017.

Supposed “problem suburbs” such as Newstead and Brisbane City have only seen a median price drop of 2 per cent each for the year and other challenging areas such as West End have achieved small positive returns in the 12 months to August 2017 (again, approximately 2%).

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Brisbane housing values remain steady against soaring Sydney

The Brisbane housing market has not seen the same run up in prices as our east coast sister cities, Sydney and Melbourne. As a result, Brisbane should be insulated from any major price correction some economists are forecasting for these cities.

In fact, Brisbane’s housing is now valued at only 43 per cent of Sydney’s – which is at both historical and cyclical lows for the last two decades. The chart below shows the relationship between dwelling values in Brisbane as a percentage of Sydney’s and net interstate migration.

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So what does this chart tell us?

  • Over the last two decades, Queensland’s net interstate migration peaked at just under 40,000 people (2002). This coincided with Brisbane’s housing being at its lowest value in relation to Sydney’s (43%).
  • In 2017, the ratio was at the same level as it was in 2002, as a result of Sydney’s recent bull market run up in prices.
  • Queensland’s net interstate migration has been steadily increasing since 2014 and history suggests that the dwelling price difference to Sydney (and Melbourne) should lead to a surge in interstate migration in the coming years and a subsequent surge in dwelling values in Brisbane.

Indeed, according to the Macquarie Bank equity strategy team we can expect “another great wave of interstate migration into Queensland.”

Based on past patterns, approximately 130,000 people could be expected to make the migration north into Queensland over the next three years.

The average number of migrants over a three-year period is greater than the peak year in the above chart.

Migration on this scale would more than likely soak up any additional supply in the Brisbane apartment market, and could also drive up real estate prices.

Over the medium-term, the Brisbane property market is looking steady due to:

  • Lower apartment supply and surging interstate migration.
  • Political stability and a burgeoning pipeline of major infrastructure project.

JLL’s outlook for the Brisbane property market for the 12 months out from December 2017 can be seen below. While there is still some supply to work through the system, the outlook for unit prices in the next 12 months is steady, and they expect price appreciation in the housing market.

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Gold Coast to see improving state employment and net migration

The Gold Coast property market boasts similar features to Brisbane – and is likely to see the same benefits as a result.

  • Wide price differential compared with Sydney and Melbourne
  • Improving state employment picture
  • Increasingly stable state government
  • Expected increase in net state migration.

Where the Gold Coast market differs is on the supply side of the equation – particularly since the global financial crisis.

Lenders exposed to the Gold Coast apartment market experienced losses at this time, and as a result lending on large developments all but dried up in the ensuing years.

Under normal circumstances, a chronic lack of supply would lead to a sharp upturn in prices – but in the case of the Gold Coast, there was an equal lack of confidence from buyers, particularly from interstate investors.

So, for the Gold Coast, prices are only really now getting back to pre-GFC levels for off-the-plan apartments in desirable beachside locations.

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Source: McGrath Projects

What can we see from this chart?

  • The median apartment price for Gold Coast has practically flat-lined since around 2008.
  • Historically, the median apartment price of Gold Coast and Sydney have converged after Sydney has had a run up in prices. This should give confidence to buyers of Gold Coast apartments in the short to medium term, given the gap is at the widest it has been in the last 20 years.

Looking ahead

South-east Queensland’s property market seems to have weathered the worst of the economic storm and the oversupply of apartments in and around the Brisbane CBD.

The economic and demographic signs are now positive for both Brisbane and the Gold Coast:

  • Strong employment growth
  • Extremely strong outlook for the state economy (projections for State Final Demand)
  • Huge pipeline of infrastructure yet to be complete
  • Net interstate migration story.

If the latter plays out as expected, this should provide an enormous transfer of wealth from the southern states – and would have far reaching positive outcomes for the economy and property prices as a whole.

If the market can navigate 2018 safely, the ensuing years could potentially experience some of the strongest years of price growth for south-east Queensland property since the early 2000s.

Originally Published: brisbaneinvestor.com.au

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Opinion

Queensland’s 100,000-property public housing shortfall revealed

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Queensland's 100,000-property public housing shortfall revealed

Queensland has a severe shortage of social and affordable housing, an issue that is projected to get worse by 2036 according to new research.

More than 102,000 additional social houses are currently needed across the state, and 54,700 affordable houses are also needed with nearly 13 per cent of Queenslanders spending more than 30 per cent of their income on rent.

By 2036, Queensland is projected to need 254,300 more social and affordable houses – the second-highest unmet need behind NSW, the report found.

The new figures come from a UNSW City Futures Research Centre report on social housing shortfall across Australia.

Regional social housing shortfalls are higher than in Brisbane, the data shows, but Brisbane residents are slightly more likely to be spending more of their income on rent.

Housing Minister Mick de Brenni said housing affordability was a “big issue” for Queensland.

“Through the Palaszczuk government’s $1.8 billion Queensland Housing Strategy, Labor is driving key reforms and targeted investment across the housing continuum,” he said.

“The Strategy commits us to build more than 1000 affordable homes for Queenslanders, as well as a further 4522 new social homes to help ensure everyone has a safe, secure and stable place to live.”

Lead researcher Laurence Troy said 22.5 per cent of Australia’s entire housing growth must go to social housing to meet demand into the future.

“Our analysis shows that the sheer number of households in rental stress across the country means that if we’re going to meet the need, at least 12 per cent of all our housing by 2036 will need to be social and affordable housing – which is a very reasonable ambition in global terms,” Mr Troy said.

“To cover the backlog of unmet need and future need in Australia two in 10 new homes will need to be for social housing over the next 20 years, and a further one in ten for below-market affordable rental housing.”

Mr Troy said the research’s financial modelling found the “best and cheapest way” for governments to meet the need for social housing was to fund it through upfront grants and low-interest government financing.

“Delivering below market rental housing through the not-for-profit sector, as opposed to the private equity model, will save $3 billion a year by removing developer mark-ups and shareholder returns,” he said.

The financial modelling was commissioned by the NSW community housing sector.

Mr de Brenni said the state government was “listening” through its recent public consultation on rental reform and was committed to investing in affordable housing in partnership with community housing, to provide more subsidied homes for low income earners.

“We heard Queenslanders are struggling to afford rental properties in the suburbs close to where they work,” he said.

“Through our Build-to-Rent pilot project, we are seeking to work with the private sector to increase the number of long-term, affordable rental properties for low to moderate income earners, including key workers in health, early childhood and hospitality.

“Internationally, the Build-to-Rent model is delivering fantastic outcomes and facilities for tenants and we’re looking to see what the market is open to delivering here.

“The pilot, if it proceeds, will see $70 million invested towards delivery of hundreds of affordable rental properties for key workers in inner-city areas where affordability has been identified.”

Mr de Brenni said the registrations of interest for that pilot had seen strong market interest, and the department was considering the responses before calling for expressions of interest.

Source: brisbaneinvestor.com.au

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Opinion

Treasury: Negative Gearing Reforms Will Have ‘Little to No Effect’ on House Prices

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Treasury Negative Gearing Reforms Will Have ‘Little to No Effect’ House Prices

Federal Treasury has delivered a serious rebuke to the Coalition for exaggerating the impact of Labor’s negative gearing and capital gains changes.

In emails released under freedom of information, acting treasurer Kelly O’Dwyer requested the department fact check the Coalition’s claims that Labor’s policies would cause house prices to fall.

In response, Treasury issued a correction: “The [s]tatement is not consistent with our advice.”

“We did not say that the proposed policies ‘will’ reduce house prices,” the email reads.

“We said that they ‘could’ put downward pressure on house prices in the short-term depending on what else was going on in the market at the time.

“But in the long-term they were unlikely to have much impact.”

Labor has jumped on the release, with shadow treasurer Chris Bowen saying that the government had been “caught red-handed” misrepresenting Treasury’s advice.

For his part, treasurer Josh Frydenberg denied that the government was misrepresenting Treasury, pointing to the Financial Review’s take on the release that changes “could” put downward pressure on house prices in the short term.

Frydenberg quoted building industry group the Masters Builders Association figures.

“If Labor’s policy is in place you’ll see 32,000 fewer jobs and 42,000 fewer homes being built.”

Treasury Negative Gearing Reforms Will Have ‘Little to No Effect’ on House Prices

House prices hit spending

It has been a difficult week in economic policy, with GDP figures released on Wednesday revealing that the economy has slowed significantly, entering a “per capita recession” for the first time in 13 years.

Retail trade figures for the March quarter were also sluggish, with falling house prices impacting wealth and spending.

RBA governor Philip Lowe highlighted the link between the two at the AFR annual business summit on Wednesday.

“The evidence is that a tightening in credit supply has contributed to the slowdown in credit growth,” Lowe said.

“The main story, though, is one of reduced demand for credit, rather than reduced supply.

“When housing prices are falling, investors are less likely to enter the market and to borrow. So too are owner-occupiers for a while.”

Source: brisbaneinvestor.com.au

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Opinion

Queensland to rank among best state markets in 2019

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Queensland to rank among best state markets in 2019

Queensland’s housing markets are expected to rank among the best performing across Australia during 2019 as they have the key factors that drive growth – liveability, affordability, booming infrastructure and enhanced economic prospects.

The Sunshine State leads the nation when it comes to confidence in residential property, as the gears shift from recovery to rising prices.

The NAB Residential Property Index recently tipped Queensland house prices will grow the fastest of the nation over the next two years.

The survey of more than 300 property professionals confirmed rising sentiment around the Queensland markets. And these property professionals also saw Queensland leading the way when it comes to rental growth.

South East Queensland is tipped to be the prime beneficiary of Sydney and Melbourne’s property slowdown, with the state possibly set to return to its place as Australia’s No 1 destination for interstate migration, as more families and downsizers from the southern cities cash-in for a lifestyle in the sun.

2018 saw strong price growth across Queensland, from suburbs of Brisbane to the coastal localities.

Economic growth and jobs now assisting the property market’s performance as Queensland emerges from the shadow of the mining downturn.

It is the value gap between the East coast capitals that makes the move compelling for many.

The value gap is the largest it has ever been between Brisbane and Melbourne and the largest in 15 years with Sydney, according to CoreLogic.

A typical house in Brisbane is around $393,000 cheaper than Sydney and $227,000 cheaper than Melbourne, with Brisbane’s median sitting at $542,000.

Observers suggest this affordability, coupled with positive economic signs, means Queensland is primed for future growth.

The increasing opportunity to work remotely, having set up a home business, or taking up a new job in Queensland is a do-able option.

Brisbane’s median house price sits at new highs, after posting a 2.3 percent increase in the September quarter, with the Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella saying the strength of growth proved that Queensland real estate was a good investment and could be relied upon to deliver capital growth.

“While other markets around the country are struggling in the face of tightened lending criteria and cooling investor appetite, the southeast corner of Queensland continues to deliver steady, sustainable growth,” Mercorella said.

“Queensland’s economy is proving itself to be a good performer, against a backdrop of national gloom, with new jobs bringing population growth and demand for housing.”

The REIQ found coastal Queensland locations ranking as the state’s strongest performers during 2018.

These included Mackay’s housing market which has come back from the mining downturn to post 5.6 percent annual growth in its median house price, according to the REIQ’s late 2018 figures.

“We are confident this growth can continue for the moment,” the REIQ advised.

The region has the lowest unemployment rate in the state at 3.3 percent, while the population is growing as jobs attract workers back to the region and the rental market is one of the tightest in the state with just 0.9 per cent vacancy.

With a $340,000 median house price, Mackay is still one of the most affordable coastal districts, with prices still at levels below the peak of the mining boom five years ago.

The tightening of bank lending standards has been seen across Queensland, as noted by the latest SEQ report by Ray White on house and land sales.

Despite this there has been an increase in house and land package prices, up 7.8 percent in Brisbane, up 5.05 percent on the Gold Coast sales and 4.99 percent on the Sunshine Coast where house and land package are a popular way to create a new start.

Estate agent John McGrath noted recently that Queensland’s top two regional performers were the Sunshine Coast and the Gold Coast due to rising demand from interstate home owners and investors.

One of McGrath’s pinpointed suburb’s to look out for in 2019 was Pimpama, in the northern part of the Gold Coast.

Pimpama recorded Queensland’s fastest population growth at 31 percent in FY17, with many enthusiastically buying or building brand new homes.

“Pimpama is affordable with a median house price of $475,000 and is located within the rapidly developing northern Gold Coast region along the M1 corridor,” McGrath said.

The $100 million Pimpama City Shopping Centre opened in 2018 and the $56 million Northern Gold Coast Sports and Community Precinct is set to open in 2020.

There’s also plans for a new train station to better connect Pimpama to Surfers Paradise.

The economic forecaster BIS Oxford Economics concluded Brisbane will lead the mainland capitals with price growth.

Source: brisbaneinvestor.com.au

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