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Subject: Residex on Brisbane Market of Interest December 2014
Article by Pete Wargent of interest
“The models are indicating that Brisbane is likely to be the standout performer in growth terms when compared to other cities. Equally, the models are indicating that the rates of growth are likely to be quite moderate when compared to past growth cycles.
It is not particularly difficult to find justification as to why Brisbane will do better than most cities in the next period of growth. The following is provided in support the hypothesis:
- It is one of the most affordable cities for housing when compared to the other major cities (as is shown in Table 3);
- The median cost of a property is now lower than all cities, other than Adelaide and Hobart. On a historical basis this is not typical. In the past, cities like Darwin and Perth have been less expensive than Brisbane;
- Rental yields in Brisbane are now more attractive than in other major capital cities on the east coast, and there will be situations where rental yields of better than 6 per cent can be found;
- The Government has been taking decisive action to correct budget deficits. With the significant expansion in the Liquefied Natural Gas (LNG) projects in the state, it is likely that, notwithstanding the recent significant falls in carbon based energy resource prices, the economic growth in the state will move to being potentially the highest in the nation1;
- The reduction in the value of the Australian dollar will be of significant benefit to the tourist industry and positively impact on the Queensland economy.
Our chart packs are in agreement with these conclusions. After a rough few years for Queensland, housing finance is steadily building both for owner-occupiers and from investors suggesting price growth ahead in certain suburbs.However, there are two significant caveats:
Firstly, unemployment rates are rising in many areas of regional Queensland. We will cover this in a little more detail in the next blog post, but we would be much more inclined towards a Brisbane investment than a cheaper regional option.
Secondly, asset selection is key since generic price growth will be weaker than that seen in cycles past. Off-the-plan apartments in larger developments may not be a great choice, for example. Investors need to do better than that and understand the market at a closer micro level.
Best Regards Linda & Carlos Debello “Your Local Property Management Specialist” LJ Gilland Real Estate Pty Ltd (http://www.ljgrealestate.com.au) PO BOX 19 ZILLMERE 4034 (07) 3263 6085 0400 833 800 (Mob 1) 0413 560 808 (Mob 2) 0409 995 578 (Linda)
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