State of mixed markets
While many commentators are shouting about the outlook for the Sunshine State, one expert is more wary – and urges careful analysis of the state’s many and varied markets
With most commentators talking up the future prospects of Queensland, it might seem like the sky is the limit for the state’s property markets.
However, not surprisingly, the reality is more complex.
According to the latest CoreLogic RP Data Home Value Index, home values did rise in Brisbane in both the last month of 2014 (0.8%) and in the final quarter (1.8%). The city’s year-on-year result was a solid 4.8% increase in home values.
These results are steady – but far from breathtaking.
Domain Group senior economist Andrew Wilson’s view of prospects for the Sunshine State’s market is somewhat removed from the trend.
“My outlook for Queensland is not as bullish as many commentators. There is light and shade there because the state’s many different markets offer up a mixed bag when it comes to housing market performance.”
On top of this, the state itself is carrying economic baggage, he says, a view that’s supported by the latest CommSec State of the States report. Ranking Queensland fifth of the states for economic performance, it notes that the soft job market and relative underperformance on population growth are constraining growth.
Wilson says the big disparity in performance between different regions of Queensland means it is necessary to analyse each of the state’s major markets. In that spirit, he provides the following breakdown of Queensland’s markets for Your Investment Property readers.
Capital city prospects
Brisbane’s property market experienced a much better year in 2014, with reasonably solid growth. Growth has been best in areas close to the CBD, and that should continue in the coming year.
There is some catch-up going on. Also, low interest rates haven’t had as much impact as elsewhere. “Therefore Brisbane has been late in coming to the party, but it is finally getting there.”
Markets in the outer suburbs – like Ipswich
and Logan – are quiet. Job security remains an issue; plus, there is lots of stock on such markets. This will impact on the city’s overall price growth. Over 2015, Brisbane will still be one of the better performers of the capital cities.
“I would forecast that Brisbane will see around 5% growth in the coming year, similar to the year just been. In terms of performance, it should move into second place behind Sydney.”
However, Brisbane’s economy is waiting for significant improvement. “That will continue to drag on the market, so it will be those value perceptions that keep kicking it all along.”
Long favoured as holiday destinations, the markets in these tourism hotspots are poised to be solid performers that should deliver decent results.
The Gold Coast:
Much like Brisbane, the Gold Coast has been through some tough times. It is now starting to show moderate improvement. Again, like Brisbane, growth – driven by value perceptions – is likely.
The Sunshine Coast:
Formerly slow and sleepy, the Sunshine Coast has been a strong performer of late. That should continue. Once again, this is driven by value perceptions. But it is a lifestyle market, so some of the activity is likely to be driven by interstate buyers.
Queensland’s smaller markets will continue to record modest results, while the larger regional markets offer up a varied scorecard.
Mackay and Gladstone:
Both of these markets are suffering from an overshoot of fundamentals several years ago. There are no real signs that those markets have bottomed out: Prices are still falling; rents are still falling. It is going to be a lengthy adjustment phase due to the oversupply of residential properties. Further, there has been some shakeout from the downturn in the resources industry.
Traditionally a big lifestyle market, Cairns is now buzzing with healthy economic activity. The unemployment rate has improved significantly, and the housing market has followed.
The city’s market has shown healthy growth of over 5% of late, and it should continue to be strong. It is set to be the best performer of Queensland’s markets going into 2016.
This market has been in a correction phase over the last 12 months. Due to an oversupply of supported properties, the market is imbalanced and under pressure. Plus, unemployment is rising.
This means that private investors are struggling to get tenants, and there has been a shakeout in prices and rents. As a result, the adjustment phase will continue.
SUBURB TO WATCH
It could well be Chinese buyers who are driving up the appeal of leafy and peaceful Sunnybank Hills, which sits in Brisbane’s outer south.
Long known for its multicultural and family-friendly nature, the suburb has been posting strong growth figures in recent times. Not only was its last 12-month growth figure 16%, but its five-year growth figure sits at 31%.
According to Tom Xiao Yi of Yong International Real Estate, the suburb is one of interest for the Chinese market.
“Sunnybank, Robertson, MacGregor, Eight Mile Plains, Sunnybank Hills, Cannonvale, Stretton – these are sought-after suburbs in the Chinese market. It’s because they are close to lots of cultural centres, restaurants, shopping and, importantly, to university and good schools.”
Located 14 kilometres from the Brisbane CBD, the suburb has easy motorway access to the city, which makes it convenient for commuters. This, combined with the relatively affordable prices available, is also driving interest.
Demand for housing in Sunnybank Hills is steadily growing. A good example of this is the vacancy rate, which is currently 1.33%. This time last year, it was 1.43%.
Beaudesert Road, which is part of Brisbane’s highway system, runs along one border. Streets like Booral Street and Lamona Circuit – which are back from the highway but close to amenities – are considered preferable.
In keeping with its popularity with families, houses with several bedrooms and gardens are the suburb’s dominant property type.