Property buyers might think that south-east Qld will be the next region to boom, but forecasters have cautioned that growth may be far more moderate than anticipated.
Speaking at the BIS Shrapnel Forecasting Conference last week, the company’s managing director Robert Mellor said previous predictions that Brisbane and surrounding regions would follow in Sydney’s footsteps and see rapid property price growth may need to be adjusted.
“If you’d asked me 12 to 18 months ago I would have said Brisbane is really the next hot place to go, [but now] I would be very cautious because the population growth is probably not going to be as strong as we thought in the past and certainly there are some big risks with apartments,” he said.
Kim Hawtrey, BIS Shrapnel’s associate director – building forecasting, said Brisbane in particular was heading into serious apartment oversupply.“Too many apartments [are being] built,” he said. “Attached dwellings have gone into dramatic oversupply.”
Mr Mellor said investors would likely find more success if they looked beyond the inner city.
“You’re probably better off buying houses out in the suburbs, where there is probably still an undersupply,” he advised.
Mr Hawtrey said demand for detached housing in the region remained “unsatisfied” but, according to Mr Mellor, even this didn’t guarantee the price growth people had previously been anticipating.
“It’s not like it’s a foregone conclusion that Qld is just going to be the next place – particularly south-east Qld – to take off,” Mr Mellor added.
“I think the growth is going to be modest price growth compared to what we’ve seen in NSW.”
Even though Brisbane appears to be undersupplied in aggregate terms, according to BIS Shrapnel’s figures, it remains at “significant risk” of oversupply, Mr Mellor said.
“They’re building about two to three times [the average] level that they were building over the last 10 to 15 years. […] While we do not deny there is a significant shift in the demand by both owner-occupiers and renters for high-density apartment living, while that shift is occurring, we don’t believe the current numbers across the country justify how much high-density construction we’re seeing – and that will result in oversupply.”
Mr Mellor questioned whether the current level of construction in south-east Qld was sustainable.
He said it was a certainty that a “downturn will be underway” in Brisbane within 12 to 18 months. He forecast the “very significant construction boom” would peak “very shortly” and predicted a median property price fall of four per cent by the early part of 2017.
Dr Hawtrey said the downturn would hit the apartment market first.
“High-density will see the correction first; [it’s in] for a sharp correction in Australia and the law of diminishing returns is about to set in. Indigestion in the market is about to set in.”
He added: “We believe that the record-high levels [of dwelling commencements] which we’re at are largely unsustainable. And we’re going to see that be the first sector of the market to get the correction.”
RateCity predict June and then August rate cut
Home loan comparison website RateCity.com.au expects the Reserve Bank to cut rates at the June meeting, and then again as early as August.
RateCity’s research director Sally Tindall said cutting rates was no longer an “if’, but “when” scenario for the RBA.
“Governor Lowe has been extremely hesitant to cut the cash rate, but he’s working against a backdrop of rising unemployment, falling inflation and less than impressive wages growth,” she said.
“If he doesn’t cut tomorrow, he’ll catch much of the nation by surprise.
“The decision seems close to a foregone conclusion. The one thing that could hold him back is the fact that he only has a few trump cards left in his hand before he bottoms out, but he’s made it very clear he’s prepared to play.”
RateCity’s forecast for two cuts would take the official interest rate down to 1 percent.
If the cash rate is cut to 1 percent, owner occupier variable home loan interest rates are set to drop below 3 per cent, while investor rates could fall as low as 3.24 per cent.
“If a rate cut does happen, there will be pressure on the banks to pass it on in full.
“Banks have been hiking rates since 2017 due to the high cost of funding, but this pressure has dissipated, so the next RBA cut should, in theory, be passed on in full.
“That said, it’s been a tough year for the banks in a slowing home loan market, so some lenders may choose to hold part of the cut back,” she said.
APRA Moves to Scrap 7pc Loan Buffer
In a move that is most likely to benefit owner-occupiers and the wider property market, the Australian Prudential Regulation Authority is proposing the 7 per cent serviceability buffer on home loans be removed.
With housing prices continuing to fall sharply in Sydney and Melbourne, APRA’s unwinding of its restrictions is part of a coordinated action by the prudential regulator, central bank and government.
The decision, in the wake of the weekend’s federal election, will provide banks with credit growth and reduce pressure on margins by lessening the need for rate cuts.
This may be more good news for the banks, following their big rise in the markets on Monday, but the news could also have negative implications on Australian household debt levels.
The banking regulator said it was putting its 7 per cent minimum interest rate “floor” under review, because the policy may have reached its use-by date after reviewing its “appropriateness”.
APRA first introduced the serviceability guidance in December 2014 as part of its efforts to reinforce sound residential lending standards in an attempt to temper ballooning house prices and surging housing investor loan growth.
They required the banks to assess all home loans against a floor of 7 per cent or 2 per cent above the rate paid by the borrower, whichever was higher.
Banks have typically added a further 25 basis points to the 7 per cent threshold taking it to 7.25 per cent and a buffer of 2.25 per cent.
If the changes were to go ahead, authorised deposit-taking institutions (ADIs) would “be permitted to review and set their own minimum interest rate floor for use in serviceability assessments”.
“APRA introduced this guidance as part of a suite of measures designed to reinforce sound residential lending standards at a time of heightened risk,” APRA chairman Wayne Byres said.
“Although many of those risk factors remain – high house prices, low interest rates, high household debt, and subdued income growth – two more recent developments have led us to review the appropriateness of the interest rate floor.
“With interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7 per cent floor and actual rates paid has become quite wide in some cases – possibly unnecessarily so.
“The changes, while likely to increase the maximum borrowing capacity for a given borrower, are not intended to signify any lessening in the importance that APRA places on the maintenance of sound lending standards.
“Rather, it is simply recognition that the current interest rate environment does not warrant a uniform mandated interest rate floor of 7 per cent across all products.”
The proposed revision comes as financial markets are anticipating the Reserve Bank will lower official interest rates to 1.25 per cent in the coming months.
In an attempt to rebound lending growth, APRA has been quick to support the banking sector, removing its 10 per cent growth cap on investor lending and 30 per cent limit on interest-only lending.
Lowering the floor could also provide some welcome support for the stricken housing market, following a 10 per cent slide in national house prices.
APRA has set a four-week consultation period on the proposals, closing on 18 June, but they are expected to be confirmed.
Luxury Noosa home fetches $8m as buyers rush to cash in
INTERSTATE buyers lusting after the Noosa lifestyle are forking out millions for waterfront properties, as they rush to cash out of Sydney and Melbourne’s flagging housing markets.
INTERSTATE buyers lusting after the idyllic Noosa lifestyle are forking out millions for waterfront estates, as they rush to cash out of Sydney and Melbourne’s flagging housing markets.
The ink has just dried on the purchase of an ultra luxurious, waterfront home in Noosa Heads for a cool $8 million in one of the biggest settlements in the resort town so far this year.
Selling agent Adam Watts of Century 21 Conolly Hay Group said the four-bedroom, four-bathroom Hamptons style property, with its own private jetty, at 45 Witta Circlehad just settled after selling to an expat to use as a holiday home.
Mr Watts said interstate and international inquiry for Noosa’s prestige market was strong, with many people wanting to move there for the lifestyle — not just to buy a holiday home.
A luxurious house on the waterways of Noosa Sound has also just sold for $5.75 million to a Melbourne buyer planning to retire in the sunshine state.
Selling agent Nic Hunter of Tom Offermann Real Estate said another two, older-style properties had gone under contract in the same street at the weekend for around the $4 million mark each.
And down the road in Sunrise Beach, another four bedder on the beachfront has just been signed for $4.2 million.
Mr Hunter said the buyer of 27 Mossman Court had previously owned a holiday villa in Noosa, but decided it was time to move there for good.
“There are five bedrooms, so plenty of room for all the family to come and visit,” Mr Hunter said.
“He wants to enjoy fishing out on the jetty with the grandkids.”
Mr Hunter said the increase in interstate migration to Queensland was being felt strongly in the Noosa region, with buyers snapping up properties on the water with proximity to Hastings Street and room to park a boat.
“It’s a big trend going on here at the moment,” he said.
“The higher-end, lifestyle seekers are fuelling the market — mostly from interstate.”
The latest Herron Todd White property market outlook reveals expat buyers benefiting from the weaker Australian dollar are looking to the Sunshine Coast as Sydney and Melbourne investors feel the effects of a softening market.
The report cites proximity to the beach as a driving factor for purchasers, which was expected to continue in 2019.
HTW expects the prestige markets in Noosa to continue to see “some good activity this year on the back of some record sales in 2018, but it may be impacted by the slowdown in confidence in the Sydney and Melbourne markets.
Originally published as Cool $8m for Noosa dream home
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