Market Report Queensland - (January 2009)

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17th April 2009

Buyers are working their way back in Queensland where there's a glut of choices in the top end at discounted prices enticing investors .

Property prices in both houses and units in Brisbane and around the state may have reached a level now favourable to win back some investors, say experts.

But there is no doubting the negative effects of the economy and slumping confidence throughout the state.

"Queensland is definitely feeling the effects of the current economic situation, and probably more so now," says Jonathan Rivera, state director of PRDnationwide and Colliers International.

Most of that negative effect has been in the top end, where Rivera says prices above $800,000 "have really come off."

In the state's capital, much of the same could be seen there, says George Kafantaris, director of Metropole Property Investments in Brisbane.

"What I'm seeing is an unprecedented number of high end properties for sale," he says. "Not that there's anything wrong with the property. But the owners have had to sell due to their own financial reasons."

But this fall in value doesn't always relate to a correction in price, but rather the desperation of the owner to sell.

"The intrinsic value hasn't dropped," says Kafantaris. "But because of the pressure to sell, you can actually buy them less (relative to market value) than you ever have been able to before."

Demand coming back

At least in some areas, these lowered prices have pulled investors back sensing the markdowns as bargains.

"The demand from buyers is coming back, we've seen it come back quite strong," says Kafantaris.

Population growth has also continued in Brisbane, pushing up demand more.

"Because there aren't as many houses being built for the supply, it puts an upward pressure on prices," says Kafantaris. "But not all properties behave the same, and not all properties have had the same growth."

That's especially true in parts of the Gold Coast, which has lately contrasted to Brisbane in terms of demand. There's an oversupply in the Gold Coast, and rental yields currently low for investors.

Still, even there, Rivera says there are emerging buying prospects again, as the heavy stock has pushed prices to competitive levels.

"The Gold Coast was an area well bashed, but I think there are some opportunities there," he says. "It's safe to say there's an oversupply both in new and general real estate, in which we'll see some competition in price."

But while that demand is back coming back, banks are no longer funding as carefree as in the past. It's harder to bet a loan, both for investors and developers in the state.

"The banks still will loan money, but they are selecting a lot more cautiously, and rightfully so," says Kafantaris.

Risky in regional areas

Aside from the strengths in the heavy population areas, Queensland has been a popular destination for investor dollars in mining regions. As some of these mines have closed and pushed away local employment, so too have many of these regional areas lost substantial property value and rental demand.

What happens next will rely heavily on the fate of unemployment rates, says Rivera.

"Going from what's happening now, not so many of those hot spots will continue has they have," he says.

Regional areas with both mining and other diverse employment will fare better with any continued downturn.

Tourism is also a big employer along the coast, especially near Cairns. That area too could face a continued slump in prices if the situation doesn't improve.

"Hopefully with the low Australian dollar, that can entice more visitors and turn things around for them again," says Rivera of the state's tourism industry. "But if we look at Asian countries like Japan (which supplies a large number of tourists), they are in worse shape than us."

Where to buy

Despite the many areas struggling, there are plenty of areas that have good buys available for investors in the state still.

"A lot of people focus on the negatives, but I think there's a lot of positives out there right now," says Rivera.

In looking for some of the best areas to invest in, Rivera recommends the middle ring suburbs. He says investors should especially look for those which didn't show as much growth in the past few years and could be catching up in price with their neighbours soon.

In particular, he highlights Moorooka, which is located close to transport and the CBD, and is experience somewhat of a renovation boom lately, he says.

Kafantaris says professionally done renovations are popular right now, as many builders have got extra time on their hands are offering lowered rates.

He says that within a10 km radius of the city, demand for development sites are very strong. Sites ranging from 600 to 1,000 square meters are selling for about $600,000 to $900,000.

Below that, first homebuyers have also been making a final push lately with the belief the first homeowner boost will soon run out.

"The activity under $600,000 has been enormous," says Kafantaris.

Above that, though, investors shouldn't expect many jumps in prices anytime soon.

"If you're looking for capital growth, a lot of people know that there's no real story anymore in the top end of the market," says Rivera.

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