Could there finally be a ray of hope emerging for Queensland’s troubled housing market? It’s unlikely that anyone would say it’s unwelcome. The area has suffered significantly from the slowdown in the resources industry, tourism has been battered by the strong dollar, and interest rate rises combined with the end of the First Home Owner Grant boost have only compounded the property market’s woes.
In fact, the worst thing that could happen would be to add another element of uncertainty – such as the announcement of some kind of ‘super tax’ on the mining industry just as things start to pick up – and that’s exactly what has happened. Even so, things seem to be looking better for Brisbane, although it’s not time to break out the champagne yet.
House prices are stabilising after recent falls. Admittedly, they’re not in the black yet, with growth measured at -0.23% in the three months to May, but it’s certainly better than the larger slumps seen in recent months. Meanwhile, unit price growth increased to 3.32% for the same period. Stability seems to be the watchword right now, and the Real Estate Institute of Queensland (REIQ) reckons it’s about time.
“What we’ve seen in the last few months is that the market has levelled right off,” says the institute’s managing director, Dan Molloy. “In 2009, the market was driven by first-time buyers: that’s changed now, especially as questions about affordability have come up due to rising interest rates.”
Even so, Molloy believes that Brisbane and the south-eastern corner of the state have been quite resilient. He also points out that investors have been increasingly returning to Brisbane since the end of 2009.
Laying the foundations for future growth
What does all this mean for Queensland’s capital city? Molloy argues that the foundations are now in place for future growth, and that the temporary freeze on interest rates signalled by the RBA could help buyers who have been forced to repeatedly rethink their budgets due to rate changes. “What we now have is a steady market that augurs well for the future,” he says.
Angie Zigomanis, project manager at BIS Shrapnel, is more bullish about Brisbane’s prospects. While he feels that Sydney will show the most impressive growth over the next 12 months, he also believes that Brisbane won’t be too far behind. Even so, he cautions that growth will be tied closely to affordability and increases in income – as it will be elsewhere.
Matthew Bell, economist at Australian Property Monitors (APM), still believes that Brisbane – and Queensland – will be the star of the future. “I’ve been surprised that the weaker capital growth over the last six to nine months has continued into this quarter,” he says.
“I expected places like Brisbane and Perth
to be stronger, as they’re more exposed to resources recovery. Admittedly, the situation hasn’t been helped because the rental vacancy situation isn’t as tight as [it is] in Sydney or Melbourne.”
However, Bell believes that rental yield is better here than in the other eastern cities, and that you can’t beat Brisbane for capital growth potential in the medium to long term.
There are two apparent reasons for this: first, the aforementioned exposure to the resources boom; and second, because Queensland’s population and income growth statistics outstrip all the other states.
“There’s plenty more to come,” reports Bell. “Yes, it will be tough over the next three to six months – as it will be everywhere – but Brisbane (and Queensland) is definitely the place to be for property investors.”
The picture is mixed in regional Queensland, however. As has been the case for some time, the strong performers are those that are central to the mining industry, and particularly those areas which are seeing significant infrastructure investment.
Zigomanis believes that despite the recent travails, the rural market will benefit from new projects coming on board, and highlights familiar hot spots such as Gladstone
and Mackay. However, he also injects a note of caution for any investor expecting an instant goldmine.
“It is likely to be two or three years before activity in the resources industry ramps up to full strength, purely due to the time it takes to get these projects up and running – and that doesn’t count delays,” he says. “By that time, we expect the wider economy will be firing on all cylinders. We may even be seeing the RBA raising interest rates again to react to inflationary pressures and effectively bring about a downturn. If that happens, it could well coincide with an upturn, and gains may be cancelled out by rising interest rates. Yes, the rewards are potentially great, but it’s also a high risk strategy.”
Molloy is more sanguine, and advises investors to go back to basics.
“At this stage, the fundamentals haven’t changed: the mining sector remains strong, and investors need to look at where there’s strong activity and infrastructure spending.
“There are plenty of opportunities out there for savvy investors who are looking for a good deal.”
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