Queensland’s property market was being touted as a confidence-sapped buyers’ market, but one with potential to make a slow comeback this year… and then the floods hit
It’s been a tough time for the Queensland property market of late. Gloomy reports from property professionals in many of the state’s regions have only been compounded by January’s tragic and widespread flooding.
As APM research director Andrew Wilson explains, Queensland’s property market has been suffering from a real lack of buyer confidence, and Mother Nature has done her best to delay any recovery.
“There’s a general lack of confidence in the Queensland property market; especially Brisbane, the Sunshine Coast and the Gold Coast which are the major markets,” he says.
“We were anticipating a breakout in house price growth in Queensland towards the middle of this year, but of course this terrible incident certainly puts a spanner in the works.”
Employment worries had contributed to Queensland’s confidence issues but, somewhat perversely, the post-flood reconstruction work that will need to take place may well go on to improve its unemployment figures.
“There will obviously be the need for reconstruction; for support – which will come from the federal government – so it may be that employment growth will be underpinned by what has to happen in Queensland,” Wilson says.
Before the floods, the general consensus among property professionals was that the amount of stock on the market, coupled with a general lack of confidence in Queensland property, put the balance firmly in the buyer’s favour. And given the scale of recent events, RUN Property CEO Rob Farmer doesn’t see buyer activity picking up in the near future.
“I don’t see anyone in any hurry to buy a property until they work out what’s going on. I think really we’re going to see a wait and see attitude,” he says.
“People are going to take a more serious look at whether it’s in a flood zone and those properties are going to be even more difficult to sell, whereas before, these thoughts were far from people’s minds. The market was already slow and this is not going to help things at all.”
It appears that January’s floods couldn’t have come at a worse time for the Brisbane and south-east Queensland property market, as the reports from 2010 indicate that last year was far from vintage.
John McEvoy, managing state director for LandMark White in Brisbane, wrote in his Annual Wrap-up that the traditional strengths of the Brisbane property market – migration and undersupply – appeared to be dissipating. But he did find some cause for cautious optimism.
“The good news is that unit projects in the market are achieving good presales at prices that in some cases are setting new levels. There is some concern about the proposed stock, particularly in the inner northern areas. Research indicates that there are approximately 6,000 units mooted for this precinct,” McEvoy wrote.
And with unit projects having proven to be a popular choice last year, Wilson believes that the post-flood reconstruction process could see an increase in the number of apartment developments that are given the go-ahead.
“Brisbane CBD was just on the cusp of embracing the type of inner-city living that Melbourne and Sydney have embraced. It may be that the flood might be the catalyst for this in some way,” he says.
“I know that’s left-field, but I do think there was a growing culture and opportunity for developers to do those sort of projects. And this might be, in an obtuse way, an opportunity for that to go forward with some government help.”
Farmer believes that the key issues for the rental market will be housing those people who have been displaced and the likelihood that a large number of the city’s tradespeople will be tied up with the rebuilding effort.
“I think it’s going to tighten up the rental market over the next year or so, but I don’t think it’s going to push rents up substantially. I think landlords will be fairly understanding of people’s circumstances and won’t take advantage,” he says. “And I think over the next year access to tradespeople to help manage your rental properties will be an issue.”
Another big issue will be how the floods impact on the ability of affected homeowners to service their mortgages. In a report on the subject, credit rating agency Fitch Ratings points out that flooding is not covered by LMI and not all affected homeowners have flood insurance.
“Moreover, the market value for properties located in the flooded areas might now be permanently adjusted downwards due to future flooding risk,” says the report.
The mortgage repayment issue will, however, be mitigated by the support offered to flood victims by banks and lenders, such as repayment holidays of up to three months. Government grants will also play their part.