It was great to be back on the Gold Coast for the 21st annual Australasian Real Estate Conference (AREC), attended by over 4,000 of Australia’s best industry professionals. While I was there I was once again reminded of how much potential the South-East Queensland property market is offering both sea changers and investors at this stage in its market cycle.
In my view, Brisbane is the best market in Australia currently for short to medium term price growth, with the value gap between it and the other big East Coast capitals as large as I’ve seen it in many years.
When you factor in the key drivers for future growth – liveability, affordability, scale and future economic prospects, they all suggest that Brisbane is a market to invest in. Check out the latest statistics from CoreLogic below.
Value gap – median house prices
Value gap – median apartment prices
I’ve been bullish on Brisbane for many years and in hindsight, I called its next growth phase a couple of years too early. It’s had some growth in recent years but there is a lot more to come over the next few years.
According to McGrath’s top prestige agent in Brisbane, Alex Jordan, one of the dominant trends today is downsizers buying up luxury apartments.
Alex says: “Despite the reported oversupply in Brisbane’s inner city apartment market, we are seeing great strength in the prestige apartment sector.
“The luxury apartment market ($1M+) is driven by owner occupiers, particularly baby boomers and empty nesters, who are attracted to less maintenance and better accessibility.
“Popular suburbs include New Farm, Newstead, Teneriffe, Kangaroo Point, South Brisbane, St Lucia, Paddington and the Brisbane CBD. These areas offer a desirable lifestyle with an abundance of shopping, dining and entertaining precincts at their doorstep.”
South East Queensland has so many options for asset-rich, cash-poor southerners. Many of our customers in Sydney and Melbourne are looking closely at South East Queensland both for investment and a potential sea change. I believe its affordability will continue to attract record levels of interstate migration.
If you live in Sydney or Melbourne and you’re struggling with the mortgage and cost of living, Brisbane is a fantastic alternative. It offers big city job opportunities, high quality education options and the chance to transform your financial future.
The boom delivered Sydney and Melbourne home owners a capital gain of up to 75% – that’s enormous new equity that could be cashed in to fund an amazing new lifestyle with far less mortgage stress up north. Plus, you’d be buying in just before Brisbane’s next wave of price growth. It’s the perfect scenario.
I believe the area from the Gold Coast to Toowoomba and up to the Sunshine Coast is Australia’s golden triangle right now.
Toowoomba, with its expanded airport facilities which have opened up easy access to the south, is the perfect and affordable treechange destination. Known as Queensland’s Garden City, about 2,300 people moved here from Brisbane last year for its cheaper house prices and enjoyable regional city lifestyle.
Both the Gold Coast and Sunshine Coast are also appealing sea change options benefitting from a raft of new infrastructure that will drive further population growth and generate more local jobs.
Brisbane is one of the world’s great cities but I don’t think this is fully realised as yet. If you haven’t been to Brisbane for a number of years, get on a plane. This is a thriving city that offers many of the lifestyle amenities you love about the southern capitals but at a much cheaper price.
I think Brisbane will also become very attractive to migration and investment from Asia in the years ahead.
South East Queensland is offering opportunity everywhere for both owner occupiers and investors alike. Now’s the time to consider what Australia’s premier lifestyle market can do for you!
‘Perfect storm’ to collapse capital city house prices by 20%
AMP Capital has revised its forecasts for the Australian property market downwards as a perfect storm of factors turns the property boom to a “bust”.
The wealth manager had previously predicted top-to-bottom price falls of 15 per cent in Sydney and Melbourne spread out to 2020, or about 5 per cent per year.
In a client note on Thursday, AMP Capital chief economist Dr Shane Oliver said that was now likely to be 20 per cent as “credit conditions tighten, supply rises and a negative feedback loop from falling prices risks developing”.
That would take average prices back to early 2015 levels. Dr Oliver maintained that a “crash”, defined as 20 per cent plus fall in national average prices, was unlikely – but his revised forecast points to near-crash territory.
“The risks are starting to skew to the downside – particularly around tighter credit and falling capital growth expectations made worse by fears of a change in tax arrangements,” he said. “Auction clearances in recent weeks have been running around levels roughly consistent with 7-8 per cent per annum price declines.”
CoreLogic figures show national house prices fell for the 12th consecutive month in September, with Sydney and Melbourne now 6.2 per cent and 4.4 per cent down from their respective peaks in July and November 2017.
Dr Oliver said the tide started to turn about a year ago due to a number of factors including poor affordability reducing the pool of buyers, tightened bank lending standards under pressure from regulators, and a “significant pool” of interest-only borrowers scheduled to switch to principal and interest in the next few years.
Adding to that was banks withdrawing from lending to self-managed super funds, reducing the pool of property investors, and a sharp fall in foreign buyers due to Australian government crackdowns.
Chinese investment in Australian property has fallen by 70 per cent since 2015.
Meanwhile there is rising unit supply, out-of-cycle mortgage rate increases, expectations of changes to tax concessions if Labor wins the next election, and falling price growth expectations creating FONGO, or “fear of not getting out”.
“On their own some of these are not significant, but together they risk creating a perfect storm for the property market,” he said.
Dr Oliver said a crash would require “much higher interest rates or unemployment, neither of which are expected, or a continuation of the recent high construction rates, which is unlikely as approvals are falling, and a collapse in immigration”.
“Strong population growth is continuing to drive strong underlying demand for housing,” he said, adding that while mortgage stress was a risk, “it tends to be overstated”.
“There has been a sharp reduction in interest only loans already, debt servicing payments as a share of income have actually fallen slightly over the last decade, a significant number of households are ahead on their repayments, and banks’ non-performing loans remain low,” he said.
“However, the risk of a crash cannot be ignored given the danger that banks may overreact and become too tight and that investors decide to exit in the face of falling returns, low yields and possible changes to negative gearing and capital gains tax.”
Even without a crash, the property downturn will affect the broader economy “via slowing dwelling construction, negative wealth effects on consumer spending, less demand for household goods and via the banks as credit growth slows and if mortgage defaults rise”.
“This will provide an offset to strong growth in infrastructure spending and solid growth in business investment and will constrain economic growth to around 2.5-3 per cent which in turn will keep wages growth and inflation low,” he said.
AMP’s housing market forecast is the most bearish of the major financial institutions. Morgan Stanley last week said it was expecting 15 per cent falls, “which would mark the largest decline since the early 1980s”, while ANZ and Macquarie have predicted falls of 10 per cent.
Population Boom in Brisbane Won’t Lift House Prices: Opinion
The figures include interstate migration movements.
Queensland’s improving population growth is usually accompanied with rising property values. But this doesn’t appear to be the case at present.
Before I explain what I think is going on, let’s quickly summarise where things are at when it comes to population growth.
- Australia’s annual population growth is rising and currently growing by just under 380,000 per annum
- Three-fifths of this growth is due to net overseas migration
- Some 250,000 or two-thirds of this growth is taking place in NSW and Victoria
- Queensland’s annual population growth is now 83,000, up from 58,000 in 2015 – a big improvement.
Talk has now turned to it being Queensland’s turn to enjoy some serious property value appreciation as residents migrate north from Sydney and, in some instances, from Melbourne.
Many believe this to be the gospel truth. Trying to contradict this mindset is increasingly hard.
So, I will let the four charts do a lot of the talking.
Chart 1: Queensland annual population growth
Chart 1 shows that Queensland’s net interstate migration is improving, up from 6,000 people in 2014 to 24,000 over the last twelve months.
But it still accounts for less that 30 per cent of the state’s annual population growth.
So, the other components of population growth – being natural increase and net overseas migration – are really having a bigger impact.
Chart 2: House price growth v population growth
To that end it often pays to take a wider view, so chart 2 shows total Queensland population growth – advanced by twelve months, see the grey line on chart 2 – compared against annual house price growth (red line) in Brisbane.
In general, there is a relationship between the two – higher population growth usually means more upward pressure on house price growth. Yes, sometimes this relationship has lapsed for a period of time but there have been valid reasons why – as I have noted in chart 2 via the grey highlights.
And importantly chart 2 suggests that property values across Queensland, and in particular across the south east corner of the state, should be improving at a much faster growth rate (see my blue highlight.)
Yet the annual growth rate remains sluggish and has even taken a backward step over recent months, despite the lift in population growth.
Yes, the recent overbuilding of inner Brisbane apartments is having an impact but in the overall scheme of things this impact is small.
Something else must be going on.
Chart 3: Annual employment indicators
That something else is shown in chart 3.
This chart shows that job creation isn’t getting ahead of the increase in population, so Queensland’s level of unemployment isn’t changing much.
In other words, a large proportion of the interstate migrants moving to Queensland are unemployed.
On that note most of Queensland’s interstate migrants come from Sydney and in the most part are young couples trying to make a new start in Brisbane.
In short, they are economic refugees.
Chart 4: House price growth v net economic benefit per person
And chart 4 brings home the bacon.
This chart shows that the net economic benefit per capita or head of population in Queensland is in a slump. It is rising in both New South Wales and Victoria.
This chart also shows that there is a strong connection between economic benefit per head and house prices. When we aren’t all sharing in the economic spoils, local property values either flat line (as they did in the early to mid-1990s) or actually fall (like they have done in the recent past).
Because of the delay factor between economic wellbeing and house values, the recent fall in economic benefit per head suggests that local house values, could actually stagnate, not rise, in the coming years ahead.
So, more bums on a Queensland seat – this time around – isn’t shining everyone’s backside.
Yes, the total rate of economic growth in Queensland has lifted of late, but this isn’t being shared among the local residents as it has in the past.
To summarise, in Queensland, there are too many people and not enough economy.
It gets to the stage where just increasing the size of the local population isn’t enough.
So, while there is increased interest from interstate (and an overall lift in population growth), unless we see a dramatic improvement in the state’s economy, more bums on seats isn’t really doing the average Queenslander much good.
And this is why there is limited house price growth. In fact, Queensland’s housing market may actually be punching above its weight. Generic house price growth in south east Queensland over the next year or two is far from certain
Property Market Confidence ‘Collapsing’: Survey
According to an industry pulse check released by NAB, confidence fell sharply for the second straight quarter with Sydney and Melbourne, the twin engines of Australia’s house price boom, the key drivers of uneasy sentiment and “collapsing” market confidence.
APRA’s lending curbs and the fallout from the banking royal commission have received the lion’s share of the blame, with housing confidence dipping to new lows.
Sydney prices are now 6.2 per cent lower than their July peak, while Melbourne, which peaked in November, has fallen 4.4 per cent.
This was especially acute in Victoria where house price falls are now tipped to be much bigger.
To date, the weakness has been concentrated in houses, with the declines in apartment prices less severe.
NAB Hedonic House Price Forecasts (%)
|Cap City Avg||7.3||4.0||-3.7||-1.0||0.0|
NAB’s residential property index forecast that house prices would continue to “correct” over the next 18 to 24 months, with Sydney falling around 10 per cent peak to trough and Melbourne 8 per cent.
“NSW had gone from the top of the ladder to the bottom,” Property Council NSW executive director Jane Fitzgerald said.
ANZ and Property Council of Australia’s seperate survey revealed similar declines to property industry confidence with NSW dropping 14 index points from 134 to 120 over the quarter and 27 index points over the 12 months to December 2018.
The survey assessed the views of more than 900 participants, including owners, developers, agents, managers, consultants and government – across all major industry sectors around the country.
Across Australia, prices have fallen for 11 months in a row with fewer active buyers within the market leading to higher inventory levels and reduced competition.
“A combination of tighter lending, a slower residential market and lower economic growth expectations have driven lower sentiment,” Fitzgerald said.
“What we do not want is for this lower sentiment to result in lower housing supply.”
“We have been building more homes over the past five years to meet growing demand however this must continue; the housing targets outlined in the Greater Sydney Commission’s plans must be met and then we must set more for the next 6-10 years.
NAB Hedonic Unit Price Forecasts (%)
|Cap City Avg||3.5||5.1||-3.0||-4.4||-1.0|
The gloomy outlook for the once soaring property market has not all been bad news, with falls in NSW and Victoria offsetting gains in Queensland.
The NAB survey of more than 300 property professionals revealed sentiment in Queensland had improved and is forecast to lead the country for house price growth in the next 12 months, with prices increasing by 0.8 per cent.
Perth has weakened again recently after showing some signs of stabilisation.
The other capitals and regional prices have generally held up better over the past year.
Hobart continues to be the exception with prices up 9.3 per cent over the year, though conditions appear to be moderating there too.
The index also highlighted that the boom in Australian housing sales to foreign investors has also run its course.
Overseas share of total sales has fallen to a seven-year low of 8.1 per cent in new markets and a survey low of 4.1 per cent in established markets.
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