Flat growth expected in Sunshine State
Different drivers pave the way for property price growth – or value slumps – in each submarket throughout Queensland, making it very difficult to forecast the road ahead
With mining towns to the north, tourist hubs in the far north and south, and the capital city in the southeast, Queensland’s property market is nothing if not diverse.
“The Queensland property market is made up of many submarkets, and each different market has reacted differently over the past 12 months,” explains Liz Wilcox, director of Metropole Property Strategists, Brisbane.
“Overall, the Brisbane market seemed to have bottomed out in the middle of last year, with homebuyers and investors returning to the market. But not all parts of the Brisbane market are moving yet.”
As with many regions across the country, the prestige end of the market is still underperforming, and Wilcox believes premium properties “will continue to languish until general business confidence improves”.
“Similarly, the first home buyers markets in Brisbane are floundering,” she says.
Growth rates across the state remain in the negative, with areas outside Brisbane most affected. RP Data January figures show regional house values retracted 1% in value over 2012, while units lost 4.6%. Heavy price discounting is common among distressed buyers, who are forced to accept values far lower than desired.
“I recently signed off on a report in Noosa, where the property originally sold four years ago for $1.2m,” says Tyron Hyde, director of Washington Brown quantity surveyors
“Our client just paid $450,000 for the property, and we estimated the original building cost was approximately $700,000.”
While this particular example (which highlights a terrible outcome for one property owner and a fantastic result for another buyer) may be extreme, vendor discounting throughout Queensland is widespread.
But there is a small beacon of hope among all of the dismal data. In the three months to January 2013, RP Data reports that there has been a modest 0.7% increase in median house prices in Brisbane over the last year. Although this growth figure is tiny, it is “very different from the previous few years, where prices were falling”, Wilcox points out.
Brisbane buyers slowly regaining confidence
The market may be flat, but that does not mean Queensland should be deleted from your potential investment list. With list prices subdued and interest rates at historically low levels, there are many opportunities to secure good-value properties that boast strong returns and solid long-term growth prospects.
“The strongest markets in Brisbane are homes and well-located apartments in inner suburbs around 5km to 10km from the CBD,” Wilcox says.
“Here, we’re finding that houses are selling quickly, often with multiple offers placed by keen buyers. Lower interest rates and increasing confidence that the Brisbane market has finally turned are likely to see this trend continue throughout 2013.”
Capital growth will remain subdued this year, Wilcox forecasts, so investors should look for suburbs that are outperforming the averages and focus on properties that can be renovated to add value and manufacture capital growth.
New apartments bought off the plan also offer an opportunity to add a positive cash flow investment to your portfolio, says Lachlan Walker, residential research, Place Advisory. He says Brisbane’s new apartment market is “slowly growing in confidence”, despite a slight softening in sales prices.
In their Brisbane Apartment Report for the December 2012 quarter, Place Advisory found that off-the-plan sales in the Sunshine State remain driven by price-sensitive buyers, with one-bedroom apartments continuing to dominate sales.
“Real estate analysts will see positive trends emerging from the inner Brisbane market during the past 12 months, as the year-on-year figures produce stronger total sales volumes and substantially larger total gross value for unconditional sales, yet softer weighted average prices,” Walker says.
Throughout 2013, he expects to see an increase in sales volumes as buyers gain confidence and optimism increases, but investors should not hold out hope for a big surge in property values just yet.
“The low interest rate environment … is beginning to drive sections of the local population toward a purchasing decision,” Walker confirms, “but we do not expect to see any significant price growth in the coming 12 months.”
Low expectations for the year ahead
One thing that most experts seem to agree on is the fact that Queensland’s prospects for growth in 2013 remain subdued.
As a result, those investors seeking immediate short-term gains will need
Even our low interest rate environment has done little to stimulate the property market, says Westpac chief economist Bill Evans.
“In previous interest rate cycles, we [have seen] quite a response from the housing market to rate cuts, but we just haven’t seen it this time around,” he says.
“Interest rates have come down a long way but … one can’t be too confident about much of a boost in consumer confidence.”
Located in central Queensland around 530km north of Brisbane, Gladstone has been topping investors’ hotspot lists due to its mining growth.
The Port of Gladstone is a major industrial centre, and as well as being Queensland’s largest multi-commodity port, it is the fifth biggest multi-commodity port in Australia, and the fourth largest coal exporting terminal in the world.
On the shores of the Port of Gladstone you will find Gladstone City, home to a burgeoning resources industry and Queensland’s busiest harbour.
Mark Spearing, principal of LJ Hooker Gladstone, says the city – which has experienced incredible capital growth of 23% in the last 12 months – is popular with owner-occupiers and investors alike.
“All roads lead to Gladstone with the local industry, and with more than 300 resource-based industries within a 400km radius of Gladstone, it’s just a great location to distribute goods and services from, and a good place to live,” he says.
“I think Gladstone is still relatively small when compared to other cities around Australia, but the dynamics are similar. The properties that are always the most popular are the ones closest to the CBD and water.”
Houses or units?
“There’s a real combination, and it’s pretty evenly split between units and houses in Gladstone. The CBD units are the most popular at the moment and are likely to see better movement than houses, but it depends on what the buyer is looking for,” Spearing says.
$65m airport upgrade
Gladstone Airport, located in the western suburbs of Gladstone about 6km from the centre of the city, had a $65m upgrade in 2011. “These facilities will play a pivotal role in the region’s future and reinforce the city’s stronghold as a powerful player in the Queensland economy,” Mayor Gail Sellers said at the opening.