Queensland Property Market

John McGrath | Switzer

Where will be the next growth market for property?

How much would you have given in 2012 to know that Sydney prices were about to skyrocket by almost 50% over the next three years? Would you have bought? Well, I think you’ll be looking back in 2018 and saying the same thing about South-East Queensland in 2015.

Tuesday, September 29, 2015

Has the Sydney market peaked? This is the question on everyone’s lips following a few weeks of low auction clearance rates.

According to CoreLogic RP Data, Sydney’s clearance rate fell to 71% in the third week of Spring. Although that is still a strong result in anyone’s language, it is the lowest clearance rate recorded all year and is well down on the 80%-plus clearances we consistently saw throughout winter.

So have we reached or passed the peak? 

I’ve been in real estate for more than 30 years and one thing’s for sure – you can never pick the exact peak or trough of a market. It only becomes clear a few months after it’s happened. My best guess is that we are about 80% through the cycle. But that’s no reason for panic.

It’s important to remember that a ‘growth cycle’ and a ‘boom’ are two different things. Booms occur within a broader growth cycle. Sydney is coming to the end of its boom but the growth cycle will continue for a little while yet. Sure, prices might come back a bit in response to the frenzy going out of the market, but growth will then resume at a slower and more stable pace.

According to CoreLogic RP Data, Sydney’s current growth cycle began around May 2012. So we’re talking almost three and a half years of growth and within that, at least a couple of years of major boom conditions. The simple truth is it can’t go on forever – if it did, then we’d have problems. The market is cyclical and it’s a pattern you can rely on.

I’d actually be concerned if Sydney has another year of double digit growth. What we need now is to put a floor under the fantastic growth we have seen since 2012 and consolidate this new level of pricing across the city with a period of calmer trading and price plateauing.

What’s going to end the boom? 

Well, it’s not interest rates – they certainly won’t be moving north for a while. The restrictions on investor lending are certainly having an effect, given the high volume of investor activity that has powered this cycle, but so far it hasn’t been a crushing effect.

What’s going to end this boom is simple natural attrition. We’ve had a long run of growth and soon enough it’s going to peter out, simply because it’s due to do so.

Looking ahead, South-East Queensland is next. It will be Australia’s hottest market for the next three years. We’re already seeing lots of positive signs up north. Investors who feel they’ve missed the boat with Sydney and Melbourne should look to Brisbane and the Gold Coast for opportunities now.

How much would you have given in 2012 to know that Sydney prices were about to skyrocket by almost 50% over the next three years? Would you have bought? Well, I think you’ll be looking back in 2018 and saying the same thing about South-East Queensland in 2015.

Sunshine State property market snapshot

Tuesday, October 20, 2015

In last week’s column I took a look at the local factors influencing the market in Sydney. This week, let’s look north to the Sunshine State for a snapshot on what’s happening on the ground in Brisbane, the Gold Coast, the Sunshine Coast and surrounding regions.

Overall, South-East Queensland has shown stability this year with consistent sales activity, however price growth did slow to just 4% along the Brisbane to Gold Coast corridor for the financial year. The reasons behind this include the lowest net interstate migration in more than two decades; a weak state economy; comparatively high unemployment; and the change of government. At a macro level, there’s obviously been challenges.

Drilling down though, some areas are experiencing exciting activity. Low interest rates are encouraging upgraders in the $1 million-plus bracket in premium areas such as Ascot, Hawthorne, New Farm, Bulimba and Paddington. Many are choosing to keep their existing homes in the $500,000 to $1 million bracket for investment.

First home buyers are also back, buying in affordable suburbs like Mansfield, Salisbury and Belmont where homes are selling faster than anywhere else in Brisbane, according to CoreLogic RP Data.

Solid demand and a shortage of homes for sale in some areas pushed Brisbane’s auction clearance rate to its highest level on record (since 2009) at 50% for the year to August. By comparison, over the same period of the year, Brisbane recorded 46% in 2014, 40% in 2013, 33% in 2012 and 24% in 2011.

Apartments are a different story, with a rising oversupply in inner city areas like West End, Fortitude Valley, Newstead and Hamilton. Buyers are very discerning and only competing for properties with unique features. Downsizers are snapping up three bedroom properties but the smaller non-descript options are sitting on the shelf.

Typically, an increasing house price gap between Brisbane and Sydney is pivotal in creating new market energy. By August 2015, the gap was $431,500 – the largest gap in dollar terms on record with Sydney house prices 88% higher than Brisbane, according to CoreLogicRP Data.

As a result, we are now seeing a steady flow of Sydney and Melbourne buyers heading north. Southern investors are chasing capital growth and the highest yields of the major capital cities, while young families are seeking affordability and lifestyle.

Owner-occupiers are purchasing Queenslander-style family homes in blue chip areas where they are paying half what they would in Sydney for an equivalent home. Many are leasing these properties for decent yields while they look to secure work before moving here permanently.

On the Gold Coast, the sub-$1 million market has been buzzing with a mix of local upgraders and southern investors and seachangers. It has also been an excellent year for prestige property with the entry level of the region’s Top 50 Home Sales (Gold Coast Bulletin) in FY15 rising to $2.5 million from $1.323 million in FY14.

The China Factor – a key element in Sydney and Melbourne’s booms, is increasingly at play in Queensland and especially on the Gold Coast. The property portal reports purchasing intent up by 1,120% YOY, which is not surprising as more Chinese developers build locally and market their projects directly back home.

Construction on the long-awaited $1 billion Jewel hotel and apartment project at Broadbeach by its Chinese owners began in March and the first non-stop flights from the Gold Coast to China have now commenced.

On the Sunshine Coast, the market is bullish especially above $1 million. Locals who have been waiting out the post-GFC downturn are upgrading now and we are seeing a significant influx of southern seachangers. Buderim is among the favourites due to its schools; and lifestyle homes are popular in Noosa, Mooloolaba and Sunshine Beach.

I remain very optimistic about South-East Queensland. The weakening dollar will boost tourism, there are a slew of new infrastructure projects underway and the economy appears to be responding to new political management.

While the Gold Coast has always had a good international reputation, Brisbane is increasingly asserting itself as a sophisticated global city, particularly following the G20 in 2014. The ‘big country town’ stigma of old has been eroded by a continuing undercurrent of social, economic and cultural change.

Once state economic conditions improve and Sydney slows further, the South-East Queensland property market will be ready to roar.


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