The recent drop in values is making Brisbane properties attractive once again.
The weakness in Brisbane’s median house values extended in the September quarter with Residex recording a 0.64% drop to $438,500. Over the past 12 months, median house values fell by 4.05%. The latest reading from RP Data confirms this trend, recording a slightly bigger drop of 7.1% over the same period.
While this is not encouraging news to Queensland property owners, it has brought Brisbane values back to an affordable level that may encourage buyers back into the market.
“If we can go into the Christmas period with a degree of certainty around interest rates, that confidence should result in increased activity next year,” says REIQ managing director Dan Molloy.
“We said at the beginning of the year we felt the first half of 2011 would be difficult, and after the natural disasters, we braced ourselves for an even harder period,” he says.
Last month, RP Data revealed Queensland had the greatest percentage of properties in negative equity at 6.3%. The hardest hit was Far North Queensland, where regions such as Cairns, Port Douglas, Palm Cove and Innisfail copped a 13.5% decline in growth, with unit values 20.4% lower than they were three years ago. While mother nature is partly to blame, tourism also suffered on the back of a strong Australian dollar.
Economic recovery on its way
According to Deloitte Access Economics, Queensland’s economic growth is surging back, boosted by a post-cyclone rebound in coal output and a big burst of resource development. However, “the pain from interest and exchange rates means little recovery is yet being felt by the burghers of Brisbane, Cairns and the Gold Coast,” it says.
Yet just as the floods and cyclones were a massive hit to the state, the recovery from them is a similarly massive boost says the report. “More to the point, a bunch of it is yet to show up in the figures – coal exports are still well down on where they were at times during 2010.”
The report points out that the larger part of the growth story is not, however, the recovery from floods and cyclones – it is the stunning surge in engineering work now commencing in Queensland.
“Spending by corporates on capacity expansion is already a bigger share of the economy than it was just ahead of the global financial crisis, and the lead that Queensland has on this measure is already bigger than it was back then. Or, in other words, if Australia as a whole sees its growth prospects pinned on big engineering works, then that’s true in spades for the Sunshine State,” says the Deloitte Access Economics report.
The view is generally a positive one, but there’s always potential for volatility. Molloy cautions investors to exercise their due diligence and factor in the stock of available properties when hunting for hot spots, and be particularly wary of mining companies seeking approval for fly-in-fly-out workforces.
“That’s potentially a challenge going forward, I don’t think it’s a recipe for the market to fall backwards but things are changing, and I think investors need to be conscious of it,” says Molloy, adding that it’s not all about the real estate aspect, but the whole environment, including the employment strategies mining companies enforce.
As far as growth goes, it’s still all about the mining.
“Places like Gladstone are going gangbusters; Mackay’s market conditions aren’t what they are in Gladstone, but there’s a feeling the resource-rich areas are starting to find a little more traction,” he says.
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