QLD Excerpt from the 2014 June Market report

Market revs up as sentiment improves

Queensland is experiencing a dramatic turnaround in fortune amid rising confidence and improving fundamentals

A dramatic turnaround in fortune is not far off in Queensland, particularly in Brisbane, which is currently experiencing intense interest from interstate buyers.

According to the latest RP Data-Rismark Hedonic Home Value Index results, Brisbane recorded a 1.5% increase in dwelling values over the quarter to 31 March. The capital city’s median dwelling price is now $435,000.

But even better, Rismark’s managing director, Ben Skilbeck, says Brisbane’s performance is worthy of note, “given this market remains 5.2% below its previous peak and has one of the best rental yields of the capital cities”.

The strong rental yield looks set to get even better with the recent Real Estate Institute of Queensland (REIQ) report showing vacancy rates dropping significantly during the past three months in Greater Brisbane areas after increasing during the last quarter of last year.

“Queensland is seeing a return to a tighter rental market,” says REIQ CEO Anton Kardash. “Stronger tenant demand and a decrease in the availability of stock are the common themes across the state.”

RP Data’s research director, Tim Lawless, adds that Brisbane is likely to be the market to watch. “Compared with the other major capitals, Brisbane dwelling values have recorded a much softer performance despite a lift in buyer numbers and the strong yield scenario.”

Even SQM Research’s Louis Christopher, who once described the Gold Coast market as a “basket case”, with overvalued housing, an oversupply of stock, too many dodgy spruikers and a “one trick pony” local economy, has changed his tune. He recently released a positive report on that same market.

Queensland is a large and diverse state and is made up of many varied markets. Not all of those markets are currently experiencing great fortune. In fact, some are still at the bottom of their cycles and, thus, still struggling. But there is little doubt that the tide has turned and a recovery is underway.

This scenario is somewhat overdue in the view of many. The 2011 floods are said to have had a negative impact on Queensland’s markets and delayed recovery. This means the current positive environment is being particularly well received.

Michael Matusik, from Matusik Property Insights, says the recovery will not be as strong as past upturns – although the fundamentals, like population growth and vacancy rates, are good. This is because there are some affordability issues, even though wages are relatively high.

As a result, in Brisbane more people are renting, rather than buying. There are also increasing numbers of tenants choosing to share rental accommodation. All of this impacts on the market generally.

Matusik believes the recovery will be in terms of sales and saleability, not necessarily prices. There will be price growth, he says, but not of the 20%-plus type; it will be more of the 5–8% type.

“This should continue for the next 12 months. It will probably repeat in the 2015 year and then the market will peak, in terms of recovery and upswing, in mid to late 2016. Then it will be back in the decline phase again. That is the way it goes.”

In the meantime, he hopes the market won’t overheat. Parts of the Brisbane market – notably the city apartment market where sales are up and price growth is high – are already hot. He says this means investors should tread with caution in this sector.

Trends to watch

There are several noticeable trends emerging in this recovery, Matusik says. One of these is a move to higher-density, more compact housing like townhouses and apartments.

While this is largely occurring due to affordability issues and demographics, there is also an ongoing shift to a more European, cosmopolitan style of living.

Maybe in Australia many of us have been living in houses which are too big on blocks that are too big, he says.

“I think there is a defi nite move towards houses being built on smaller blocks, houses with granny flats, and a growing diversity of housing product.” Another related trend is a growing appreciation that it is location and title that equate to value in property, rather than the size of the property. In Brisbane, that means suburb selection, Matusik continues.

“There is a great desire to live in particular locations or suburbs, which is gentrifi cation. We are going to see more discussions about title, location and selection over the coming years. It is all about selection.”

He recommends that investors purchase Brisbane property in a good location with rentability in mind.

“But buy to hold long term, because there is not enough heat in the market to buy and fl ick. And keep in mind long-term owner-resident appeal and an understanding of why certain demographics might want to live in the area.”

Gordon Park

Signifi cant change is fl owing into one of Brisbane’s smallest suburbs due to recent transport infrastructure developments. Gordon Park, which is made up of just 1,000 properties, once had a slightly isolated, small-town quality. However, when the airport link tunnel was constructed a couple of years ago, the main entrance was placed right next to Gordon Park. Also, two major stations on the Northern Busway have now been built in the suburb.

Garry Jones, from Place New Farm, says this means that Gordon Park, which is only 6km from Brisbane’s CBD, has easy access to everything. “Nothing that you might need is further than fi ve minutes’ drive away.”

Bordered on three sides by the Kedron Brook and walkway, leafy Gordon Park also has plenty to off er families and those seeking outdoor lifestyle options. As the last character suburb on the north side, it has a mix of property types. There are two-bedroom apartments from the 1970s, townhouses, new builds, and fi ne examples of old Queenslanders on up to 800sqm blocks.

There is still a lot of untapped renovation potential, Jones says. “Gordon Park has relaxed demolition controls. So, for investors, there are development opportunities.”

There is a great deal of interest in the suburb, Jones adds. “Prices in neighbouring suburbs have gone up, but Gordon Park remains more aff ordable, with the prospect for good rental returns.”

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