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South-East Queensland Poised for Property Upturn

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South-East Queensland Poised for Property Upturn

The Queensland economy is now well into recovery stage after an inevitable slump following the mining boom.

In the third quarter of 2017, state final demand rose a significant 2.7 per cent year-on-year, which was the first time in three years this measure returned a positive result – the culmination of five consecutive quarters of positive growth.

Access Economics have also forecast the Queensland state final demand will average 3.8 per cent annual growth over the next four years, easily outstripping the average annual growth of 0.2 per cent in state final demand over the last five years.

Infrastructure boom set to takeover apartment construction

According to JLL, Queensland employment surged 4.1 per cent year-on-year to August 2017, easily surpassing Victoria and New South Wales (3.7% and 2.3% respectively) and the national figure of 2.8 per cent.

This is in spite of a clear slowdown in the construction of apartments in Brisbane that has been well underway for the better part of 18 months.

Building approvals for units in the greater Brisbane area were down 59.9 per cent for the year to August 2017 as it became harder for both developers and investors to obtain finance.

Interestingly, the pressure from APRA for banks to limit investor finance has actually benefited the Brisbane apartment market. It has inadvertently forced developers to create more appealing and better quality products – which is contributing to a change in buyer profile to more owner-occupiers and less investors and reducing the amount of “cookie cutter” apartments in the market.

Over the coming quarters, it is anticipated approval numbers will remain subdued. However, any negative employment effects felt from a reduction in construction will be offset by the burgeoning pipeline of infrastructure programs currently underway or soon to commence in Queensland.

Major Infrastructure Projects

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Cross River Rail

With the recent re-election of the Palaszczuk government, Brisbane’s $5.4 billion Cross River Rail will commence construction next year.

It will involve the construction of four new underground stations, significant upgrades to existing stations and Brisbane’s first southern CBD rail station at Albert Street.

Forecast to create 1,500 jobs annually, the Cross River Rail project is due for completion in 2024.

 

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Queens Wharf Redevelopment

The redevelopment of the $3 billion Queen’s Wharf precinct is one of the largest developments ever undertaken in Queensland. It covers 27.3 hectares, roughly one fifth of the CBD area.

At peak construction, Queens Wharf is projected to created 2,000 jobs with 8,000 jobs ongoing upon completion in 2024.

Queens Wharf will house over 50 restaurants, bars and cafes upon completion, with an additional 1,000 hotel beds and 2,000 apartments in the residential precinct.

Once fully operational, Queen’s Wharf is expected to bring an additional 1.39 million visitors and an increased tourism spend of $1.69 billion annually.

 

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Brisbane Showground regeneration

The redevelopment of the 22-hectare site is the largest brownfield development of its kind in Australia.

Due for completion in 2026, the $2.9 billion redevelopment of the Brisbane showgrounds will generate more than 2,000 jobs over the course of the development and add over $300 million annually to Queensland’s economy.

 

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Brisbane International Airport second runway

This is the largest aviation project currently underway in Australia, and one of the largest currently being undertaken globally.

Due for completion in 2020, the $1.35 billion second runway will create 2,700 construction jobs over seven years.

By 2035, Brisbane airport will handle 50 million passengers a year.

 

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Herston Quarter redevelopment

A world-class health and wellbeing precinct will become a new landmark in Brisbane’s northeast.

The $1.1 billion precinct is due for completion in 2027, creating 700 jobs in the construction phase.

Brisbane Metro

Due to commence in 2019, the $944 million Brisbane Metro project will feature two new high-capacity, high frequency metro lines connecting Brisbane’s southern suburbs and inner northern suburbs with the CBD.

Due for completion in 2022, Brisbane metro will create 7,000 construction jobs.

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Brisbane’s Property Outlook

Cyclical lows for inner city residential developments

As the cranes come down and the lights go on, we’ve officially hit the settlement stage of the inner-Brisbane apartment market.

The number of apartments being approved is now at cyclical lows and has been edging that way for quite some time.

Urbis reported the third quarter of 2017 saw only 672 apartments reach development approval status – a significantly lower number than those in the peak of the cycle which reached over 5,000 apartments per quarter in 2014 and 2015.

We’re also seeing cyclical lows for the number of pre-sales achieved each quarter, with the last four quarters averaging 348 in sales volumes.

These figures are a result of the stage of the cycle the market is in, reflecting the natural slowdown in completed stock that will likely carry through until 2020. And while small pockets of Brisbane have seen an oversupply in the last 18 months, prices have not been materially affected.

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Significant growth for house prices

This chart from JLL’s third quarter Brisbane Apartment Market report shows Brisbane apartment prices were down only 0.2 per cent as at August 2017 year-on-year, while houses returned a robust 4.2 per cent positive growth story. Given this period spans the peak supply periods of the Brisbane apartment market (2016 and 2017) this is a reasonably solid result for apartments.

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On a citywide level for apartment price growth, even the so called “hotspots” have remained relatively buoyant, despite the “oversupply” story.

The table below shows the five strongest and weakest performing suburbs for median price growth for Brisbane houses and units for the 12 months to August 2017.

Supposed “problem suburbs” such as Newstead and Brisbane City have only seen a median price drop of 2 per cent each for the year and other challenging areas such as West End have achieved small positive returns in the 12 months to August 2017 (again, approximately 2%).

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Brisbane housing values remain steady against soaring Sydney

The Brisbane housing market has not seen the same run up in prices as our east coast sister cities, Sydney and Melbourne. As a result, Brisbane should be insulated from any major price correction some economists are forecasting for these cities.

In fact, Brisbane’s housing is now valued at only 43 per cent of Sydney’s – which is at both historical and cyclical lows for the last two decades. The chart below shows the relationship between dwelling values in Brisbane as a percentage of Sydney’s and net interstate migration.

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So what does this chart tell us?

  • Over the last two decades, Queensland’s net interstate migration peaked at just under 40,000 people (2002). This coincided with Brisbane’s housing being at its lowest value in relation to Sydney’s (43%).
  • In 2017, the ratio was at the same level as it was in 2002, as a result of Sydney’s recent bull market run up in prices.
  • Queensland’s net interstate migration has been steadily increasing since 2014 and history suggests that the dwelling price difference to Sydney (and Melbourne) should lead to a surge in interstate migration in the coming years and a subsequent surge in dwelling values in Brisbane.

Indeed, according to the Macquarie Bank equity strategy team we can expect “another great wave of interstate migration into Queensland.”

Based on past patterns, approximately 130,000 people could be expected to make the migration north into Queensland over the next three years.

The average number of migrants over a three-year period is greater than the peak year in the above chart.

Migration on this scale would more than likely soak up any additional supply in the Brisbane apartment market, and could also drive up real estate prices.

Over the medium-term, the Brisbane property market is looking steady due to:

  • Lower apartment supply and surging interstate migration.
  • Political stability and a burgeoning pipeline of major infrastructure project.

JLL’s outlook for the Brisbane property market for the 12 months out from December 2017 can be seen below. While there is still some supply to work through the system, the outlook for unit prices in the next 12 months is steady, and they expect price appreciation in the housing market.

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Gold Coast to see improving state employment and net migration

The Gold Coast property market boasts similar features to Brisbane – and is likely to see the same benefits as a result.

  • Wide price differential compared with Sydney and Melbourne
  • Improving state employment picture
  • Increasingly stable state government
  • Expected increase in net state migration.

Where the Gold Coast market differs is on the supply side of the equation – particularly since the global financial crisis.

Lenders exposed to the Gold Coast apartment market experienced losses at this time, and as a result lending on large developments all but dried up in the ensuing years.

Under normal circumstances, a chronic lack of supply would lead to a sharp upturn in prices – but in the case of the Gold Coast, there was an equal lack of confidence from buyers, particularly from interstate investors.

So, for the Gold Coast, prices are only really now getting back to pre-GFC levels for off-the-plan apartments in desirable beachside locations.

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Source: McGrath Projects

What can we see from this chart?

  • The median apartment price for Gold Coast has practically flat-lined since around 2008.
  • Historically, the median apartment price of Gold Coast and Sydney have converged after Sydney has had a run up in prices. This should give confidence to buyers of Gold Coast apartments in the short to medium term, given the gap is at the widest it has been in the last 20 years.

Looking ahead

South-east Queensland’s property market seems to have weathered the worst of the economic storm and the oversupply of apartments in and around the Brisbane CBD.

The economic and demographic signs are now positive for both Brisbane and the Gold Coast:

  • Strong employment growth
  • Extremely strong outlook for the state economy (projections for State Final Demand)
  • Huge pipeline of infrastructure yet to be complete
  • Net interstate migration story.

If the latter plays out as expected, this should provide an enormous transfer of wealth from the southern states – and would have far reaching positive outcomes for the economy and property prices as a whole.

If the market can navigate 2018 safely, the ensuing years could potentially experience some of the strongest years of price growth for south-east Queensland property since the early 2000s.

Originally Published: brisbaneinvestor.com.au

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Opinion

Experts warn of ‘debt bomb’ as housing downturn worsens

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debt bomb
AUSTRALIA is facing a “debt crisis” — and the property market and our entire economy are at risk as a result.

That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg.

According to reporter Tom Steinfort, the current slump is actually “more like falling off a cliff”, with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.

If that happens, it would also cause an economic “catastrophe”.

Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn.

“At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.

“There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

“That’s higher than any other country in the Western world by a long way.

“There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”

Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.

“As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,” he said.

“We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.”

debt bomb

Melbourne homeowner Mohammed Souid told 60 Minutes his family was experiencing mortgage stress. Picture: 60 MinutesSource:Supplied

It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year — a shocking $200,000 plummet.

He said foreclosures had also risen by 600 per cent in the region.

“The mortgage stress is definitely being felt especially in this area,” he said.

60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being “hounded’ by their banks.

What does a million dollars buy in Aussie capital cities?

debt bomb

Market analyst Louis Christopher of SQM Research said the market had been “clearly overvalued”, labelling the downturn as the “correction we had to have” — at least in Sydney and Melbourne.

“On our numbers, Sydney was effectively over 40 per cent overvalued. And Melbourne was overvalued by about the same amount,” he said.

But property investor Bushy Martin said the blame lay squarely at the feet of buyers who “mortgaged themselves up to their eyeballs” in a bid to snap up dream homes before being able to afford them.

debt bomb

Property investor Bushy Martin says homeowners are to blame for the crisis. Picture: 60 MinutesSource:Supplied

However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated.

One Reddit user branded the report as an example of “alarmist journalism and scare tactics”, while another said it was “dramatic and cringe-worthy”.

Others also criticised the segment for making it seem like all homeowners would be affected, when the downturn was actually mainly focused in the NSW and Victorian capitals.

And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.

That was in response to comments made by one homeowner on the program, who said the bank had “suddenly switched the mortgage to interest and principal”, raising his repayments by 57 per cent.

“The interest only part annoyed me the most. The bank didn’t ‘suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,” one Reddit user said.

Related article: Experts warn of ‘debt bomb’ as housing downturn worsens

Source: news.com.au

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Opinion

Australia’s best place to invest is here in Queensland

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Australia’s best place to invest is here in Queensland
Experts are hailing the Sunshine Coast as the best place in the nation to invest in property.

EXPERTS are hailing Queensland’s Sunshine Coast as the hottest place in the nation to invest in property right now.

A lack of housing, a tight rental market and a rapidly growing population mean supply is failing to keep up with demand in the region – creating perfect conditions for investors.

Leading real estate industry figure John McGrath said the Sunshine Coast presented one of the best opportunities for capital growth because of its liveability, affordability and future economic prospects.

Australia’s best place to invest is here in Queensland
Main Beach at Noosa is a popular attraction with both locals and tourists.

“From an investment point of view, where in Australia right now can you invest your dollar and get better returns than the Sunshine Coast or southeast Queensland?” Mr McGrath said.

” I don’t think there is a location that’s going to offer better investment growth in the future.”

His views are echoed by prestige property agent Tom Offermann of Tom Offermann Real Estate, who claims the Sunshine Coast “is on the cusp of the highest growth period in its history”.

“This is being driven by a raft of infrastructure projects that are delivering exceptional lifestyles, which in the past required some compromises for people coming from big cities,” Mr Offermann said.

The region is in the midst of an infrastructure boom, with billions of dollars being invested in upgrading and creating new facilities.

Work is underway on a new runway at the local airport, which is set to become international by 2020, and a new hospital and health precinct has recently been established.

“These are game changers,” Mr Offermann said.

“Astute property investors who recognise what is happening, and take action to secure the best located property they can afford, will reap the rewards of their foresight.”

Local agents say the region is crying out for more investment properties to cater to the needs of the increasing population.

According to demographer Bernard Salt, the Sunshine Coast’s population of around 298,000 residents is set to rise to 550,000 in 23 years, which will require more than 100,000 new homes to be built.

The latest Real Estate Institute of Queensland figures show the rental vacancy rate on the Sunshine Coast is just 1 per cent, with Caloundra having the tightest vacancy rate in the state at just 0.5 per cent.

Australia’s best place to invest is here in Queensland
Canal front homes on Noosa Sound. Photo: Lachie Millard.

It’s good news for investors, who are currently achieving healthy rental returns of around 5 per cent.

In its recent report, Herron Todd White noted an increase in investor activity in the Sunshine Coast market, with the sub $350,000 unit and townhouse sector particularly popular.

“It’s not uncommon to see townhouses selling for $220,000 attracting a rental of $280 per week – over 6.5 per cent gross return,” the report said.

For investors looking to capitalise on the growth in the region, McGrath Real Estate founder John McGrath said now was the time to get into the market.

“I think there is a great opportunity, in particular right now, because we’ve seen Sydney and Melbourne have shown unprecedented growth over the last five or six years,” he said.

“Now those markets have come to a plateau and a lot of people are going to be saying; ‘Do we take our profits and reinvest them, or, in fact, do we move up north and get better value for money?’

“So, I think right now there’s a terrific window of opportunity where people can capitalise on the immense growth we’ve seen in the southern states.”

Australia’s best place to invest is here in Queensland
John McGrath, founder of McGrath Estate Agents.

Reed & Co director Adrian Reed the increased international access the new airport would provide would likely change the profile of buyers in the Noosa region.

“We’re currently seeing an increase in Australian expats buying back into the market, but if accessibility becomes easier, we’re expecting a more aggressive upward trend in high-end premium property,” Mr Reed said.

Australia’s best place to invest is here in Queensland
Aerial image over Sunshine Coast Airport. Photo: Lachie Millard.

He said that lending restrictions and the impact of the banking royal commission had had little impact on the region’s prestige market.

“The vast majority of deals I’m doing at the top end of the market are cash,” he said.

“They’re self funded retirees who’ve already sold their principal place of residence.”

Owner/builder Paul Saunderson, who is selling his home in Noosa Heads through Peter TeWhata of Tom Offermann Real Estate, said the local market was “out of control at the moment”.

“There are houses getting knocked down and new dwellings being built everywhere,” Mr Saunderson said.

He said the contemporary, four-bedroom, three-bathroom property at 20 Sanctuary Ave, Noosa Heads, which he lived in with his wife and two children, was attracting strong interest from interstate and overseas investors.

Australia’s best place to invest is here in QueenslandThis home at 20 Sanctuary Ave, Noosa Heads, is for sale.

“It’s a good investment opportunity because it’s been valued as holiday letting, which is anywhere from $6000 to $10,000 a week during peak season,” Mr Saunderson said.

Jamie Smith of Century 21 On Duporth in Maroochydore said he’d never seen so much activity in the Sunshine Coast property market, with strong interest from both local and interstate investors.

Mr Smith said many investors were looking to buy in the less expensive suburbs, where new housing developments were popping up, such as Caloundra, Sippy Downs, Birtinya and Mountain Creek.

“It’s definitely unprecedented in terms of what we’re seeing on the Coast,” he said.

Australia’s best place to invest is here in Queensland
The Sunshine Coast University Hospital’s emergency department. Picture: Jono Searle.

But Mr Smith said investors who were not already in the market needed to act fast.

“If you were here three years ago, you could have bought between $400,000 and $500,000,” he said.

“Now you’re looking at anywhere from $600,000 plus, so it’s definitely changed a little bit.”

SUNSHINE COAST SUBURBS FOR BEST CAPITAL GROWTH

Suburb Property type Median price 12 month change in price

Minyama House $1.31m 45.8%

Kenilworth House $399,000 40%

Yandina Creek House $820,000 32.3%

Beerwah Unit $375,000 25%

Mount Coolum House $676,200 23.2%

Mapleton House $543,250 21.3%

Mudjimba House $739,500 20.7%

Peregian Springs Unit $475,200 18.8%

Battery Hill House $579,500 18.4%

Montville House $707,500 17.9%

(Source: CoreLogic)

Australia’s best place to invest is here in Queensland
An artist’s impression of the Sunshine Coast Airport Expansion project.

Source: www.ipswichadvertiser.com.au

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Opinion

Queensland is the next property hotspot, experts say

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Queensland is the next property hotspot, experts say

As New South Wales and Victoria continue to experience weakness. Queensland is expected to take the lead, a National Australia Bank (NAB) poll of property professionals revealed.

According to the survey, industry experts project house prices in Queensland to increase by 0.7% next year and 1.3% in two years.

Some areas seen to perform strongly over the next year include Brisbane, Cairns, the Gold Coast, and the Sunshine Coast. Out of the suburbs, Coomera and New Farm are expected to realize robust gains.

Meanwhile, Queensland’s rental market is also poised to enjoy an upward boost, growing by 1.3% next year and 1.9% in two years. This is despite the stricter rules on housing investment.

The respondents of the survey also expect Queensland to retain foreign buyer interest. In fact, the share of foreign sales hit a four-year high of 22.8% over the previous quarter.

The results of the survey go against NAB’s own projection of the market. For instance, the bank expects house prices to remain flat in Brisbane over the next three years. Unit prices, on the other hand, is seen to fall by 4.5% over the next year.

NAB chief economist Alan Oster said Brisbane’s housing market seemed to be going sideways and its unit market still creates concern.

“It hasn’t peaked yet, so that’s good. We’re seeing quite strong economic activity in Queensland, so that always helps,” Oster said, as quoted by The Courier-Mail.

Source: brisbaneinvestor.com.au

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