Southeast Queensland houses are expected to enjoy solid capital growth thanks to a number of factors which will provide an unexpected boost to an already relatively buoyant property market.
The return of a Coalition government and with it the elimination of the number one risk to the property market, namely the introduction of Labor’s taxation changes, combined with the high likelihood of two interest rate cuts by the RBA this year, the introduction of the First Home Loan Deposit Scheme and APRA’s removal of the 7 per cent ‘stress test’ replacing it with a 2.5 per cent buffer, means this healthy market should reap the benefits with gradual price increases expected.
While the Queensland market greatly varies between its high and low-performing areas – with the mining towns in Central and North QLD generally experiencing low demand – houses in popular beachside suburbs on the Gold Coast and the Sunshine Coast have delivered strong capital growth. In addition, houses in other popular areas of Greater Brisbane, such as Brisbane – Inner City and Brisbane – West, have delivered reasonable capital growth in the range of 3.5 - 3.6 per cent in the past 12 months.
Houses enjoy good demand in southeast Queensland for a number of reasons, one of them being an improving Queensland economy and major infrastructure projects and developments in the works by the State Government. Units, however, carry a higher level of risk in many areas due to oversupply or simply insufficient demand, as houses are a preferred dwelling option.
With the Queensland Government taking significant steps to grow its economy, and Brisbane in the midst of a $15 billion infrastructure boom over the next few years, the local property market is likely to prosper and, as a result, the state will continue to attract a high number of interstate migrants in search of affordable housing and employment.
Projects include the $5.4 billion Cross River Rail, the $3.6 billion Queens Wharf Project expected to create more than 11,000 jobs, the $1.5 billion upgrade to Eagle St Pier, $100 million dollar upgrade at the GABBA, the creation of the $2 billion Brisbane Live arena and the $944 million Brisbane Metro
The Queensland Transport Roads and Investment Program 2018-19 to 2021-22 outlines $21.7 billion in transport and road infrastructure which is estimated to create around 19,200 jobs, while the Advance Queensland initiative is also designed to create knowledge-based jobs, drive productivity improvements and help position the state as an attractive investment destination with a strong innovation and entrepreneurial culture.
Advance Queensland initiative is also designed to create knowledge-based jobs, drive productivity improvements and help position the state as an attractive investment destination with a strong innovation and entrepreneurial culture.
A second runway is also under way at Brisbane Airport while the $158 million Brisbane International Cruise Terminal should be operational by mid-2020.
Other major developments include the $1 billion Herston Quarter and the $2 billion Millennium Square at Bowen Hills.
This is all good news for investors and is boosted by interstate migration, its relative affordability compared to Sydney and Melbourne and its attractive lifestyle.
In addition, when you have significant slowdown and price reductions in Sydney and decelerated prices in Melbourne, as is the case now, this traditionally means southeast Queensland attracts more interstate investments. There has been a lot of uncertainty and volatility in the Sydney and Melbourne markets due to lending restrictions and the outcome of the Royal Commission, and while it is expected they should bottom out by the end of the year, this still presents a good opportunity for investors in southeast Queensland.
The region has good fundamentals right now with strong population growth and therefore demand for houses, improved jobs and economy, weakness in other markets and modest capital growth. So, it’s not an out-of-control market and the long-term outlook is extremely positive.
What we are seeing is good projections. You won’t see a red-hot market with double digit growth, but you will see, overall, a balanced market between buyers and sellers with some small pockets leaning towards sellers in high-demand areas. Usually, you won’t see buyers paying inflated prices.
Even areas with a relatively high level of supply of new houses absorb their stock relatively easily and also deliver capital growth. These include the Sunshine Coast with 6,612 houses in the pipeline (6.1 per cent increase to the current stock) and the Gold Coast with 5,718 houses in the pipeline (4.1 per cent increase to the current stock).
Also, the median price for houses in Greater Brisbane is $532,308 and for units $370,583, which means there’s a good selection of suburbs in southeast Queensland that provide the desired quality and location without the million-dollar price tag, and with the second benefit that they are likely to enjoy long-term capital growth.
It should be noted, however, that units, particularly those in the inner-city, continue to perform badly and carry a high level of risk, especially as demand for them among owner-occupiers is low.
Also, in addition to APRA’s credit restrictions, units in some suburbs are subject to voluntary lending restrictions by the major lenders, such as lower loan-to-value ratio due to oversupply, which means that many of them are at risk of negative equity.
CEO / Founder
RiskWise Property Research