- Louis Christopher, 3 Feb 2015
- Source: SQM Research
We have been receiving increasing enquiries about the South East Queensland property market. And given what happened with the state election over the weekend plus new developments on the interest-rate front, I thought I would provide the following frank update.
The market is recovering, however, the improvement appears to be slow and could stall. The rise in listings in recent months could very well be due to desperate vendors finally putting their properties on the market given they now have a stable market to be able to sell into. Have you ever heard of the catch phrase “pent-up demand”? Well there can also very well be “pent-up supply”. That’s what the Gold Coast has – too many vendors who have been sitting on their underperforming property for years. They are now finally selling their properties given the chance to unload them because the market has picked up.
Still, I think the Gold Coast is in a slow but sure recovery. Low vacancy rates and a nice rental yield are attracting investors. Economic conditions for the Coast are also favourable in that the lower Australian dollar is attracting more domestic and international tourists to the strip. Plus, there is increasing optimism on the Commonwealth Games in 2018. While there won’t be any massive infrastructure boost from current levels – it is the ‘Budget Games’ after all – there will be a positive effect nonetheless.
Overall, I anticipate Gold Coast prices will rise from here and outperform the Brisbane market, possibly posting another 5%-7% rise, which is what happened last year is most likely on the cards this year.
The Sunshine Coast council has some interesting statistics on the local economy. One of which is the main economic industry of the region, which the council describes as “health care and social assistance”. If I was writing a resume for the Sunshine Coast, I think I would want to hide that fact somewhere.
Nevertheless, the Sunshine Coast has been working hard to widen its economic base in recent years and the reality is that it has a very stable work force that commutes daily to and from Brisbane. This assists in creating a stable housing market, particularly at the southern end of the region.
Similar to the Gold Coast, the Sunshine Coast housing market experienced an extended and acute housing downturn between 2009 and 2013. Prices in some areas fell by more than a third. A combination of heavily inflated prices due to a 10-year run up (1999 to 2008), elevated unemployment numbers, a big drop in local tourism numbers, higher unemployment and higher interest rates (in 2010) all created the perfect trigger for an almighty property crash.
If you want an example of this, look no further than Noosaville. As this chart illustrates, the area went into an extended downturn. But as we can also see, there has been a recovery taking hold since this time.
I think these areas have strong futures, not just in the long term, but also over the short term, as Australians rediscover why these geographically beautiful locations have bene our playground for over sixty years.
Investors need to be very mindful that these Queensland regions have most certainly experienced more volatility in their property market, have more con men and spruikers per head of population than Nigeria, and that the best course of action is to avoid off-the-plan developments unless value can be proven.
My personal opinion is these areas are not good for novice, first-time property investors. Rather, they are potentially more suitable for experienced investors who need some diversification, who invest purely on the numbers and can see through the glitz for what it is.
Our statistics on Brisbane are not particularly exciting, other than to say we are not recording any material rise in listings at this stage. Overall, I am more cautious on Brisbane than I was 12 months ago, particularly now given that the state will have a very left leaning government in place or a hung parliament. Both of which are not exactly favourable for economic development.
Those in my industry that called for a big property boom in 2014 totally got this wrong (yet will never be held to account..once again). There was never going to be a boom last year and that was because of the ongoing overhang of housing supply that was always going to keep a lid on prices, plus the ongoing economic downturn created by state government’s austerity and the mining downturn.