Almost anyone will know that making forecasts about property markets is easy. Something that’s a lot harder is to get it right.
Just ask research companies like BIS Shrapnel. In December the company’s senior residential research manager Angie Zigomanis forecast that a recovery would occur in Brisbane over 2012. He expected it to be more concentrated towards the second half of the year and that sentiment would take a turn over the first few months of the year.
Pitching in another forecast with a tint of optimism was RP Data’s senior research analyst Cameron Kusher. He stated at the time that he suspected Brisbane was close to the bottom of price falls that had occurred across 2011. He said that if confidence took a turn for the better, Brisbane and much of Queensland would see renewed property price growth.
Sitting on the fence was Residex director John Edwards, who in December, told Your Investment Property that the situation in Queensland was too hard to pick, although Edwards admitted that he saw Brisbane property being roughly 12 months away from showing growth.
But have any of them been right?
2012 isn’t over yet and many important indicators won’t be coming in until early next year, but on the surface the answer would appear to be ‘partly’. RP Data figures show that Brisbane prices have taken a knock of about 3% over the 12 months to June, but when compared to the preceding year’s price falls of around 6%, this is a marked improvement.
If what economists said eventually rings true, it would appear that the Brisbane market may well be on track to show the growth promised to come by year-end.
A number of independent indicators illustrate how this might happen. The Real Estate Institute of Queensland (REIQ) reports July figures showing vacancy rates that are tightening across the state. REIQ chief executive Anton Kardash says that Brisbane itself showed a July vacancy rate of 1.6% within its inner regions and that this has had a marked effect on the rental market.
Kardash says REIQ accredited agencies are reporting some solid rent increases taking place and that this has been on the back of strengthening demand. The potential impact of this is that more first homebuyers, tired of paying increasing rents, may enter the market. This spike in activity would then spur prices growth.
“The first three months of the year are generally the busiest in the Queensland rental cycle… while we are seeing an increase in the number of first home buyers and renters in the sales market, their activity will take some time to flow through,” he says.
For now, evidence of a market recovery is perhaps best seen in sales numbers. RP Data figures show that May sales figures for all property types across Queensland showed a 3.1% increase on figures for July 2011. This could be as much a show of returning optimism among buyers as it is a sign that buyers could be catching on to the benefit of having had successive quarters of negative growth: affordable property prices.
As Australian Property Monitors senior economist Andrew Wilson points out, Brisbane house prices have fallen each quarter for the last two years. He adds that Brisbane property prices are now 30% cheaper than in Sydney. However, Wilson is also adamant that local market factors will have the final say in whether affordability does coax more buyers into the market – indirectly pushing up prices.
“There are still issues with the tourism industry, but certainly there is an increased vibrancy about the Queensland economy,” he says, adding that recovery has been fairly one sided because of the resources boom.
Vote of confidence
Deloitte Access Economics’ Business Outlook report concurs that state-wide recovery has not necessarily been filtering down to Brisbane. “Queensland continues to recover strongly… but [it’s] focus is tightly constrained to specific geographic areas,” the report says.
At the same time, the report also mentions that the Queensland retail sector, which is led by Brisbane, is healthier than the national average. This, the report says, is something of a vote of confidence among the state’s residents.
It harkens back to days when property pundits were saying confidence was what Brisbane needed. In December RP Data’s Cameron Kusher identified this explicitly: “I suspect Brisbane might be close to the bottom. I think what needs to happen is we need some more confidence back into the market,” he told Your Investment Property.
So, appearing modestly on track to do so, will the Queensland capital ultimately see a return to price growth in the last parts of 2012? Well, the year isn’t over yet.
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