It seems that many people are betting everything they have on the continuing growth of the QLD property bubble against the trend of the other states particularly the Sydney and Melbourne markets. This in my opinion is very dangerous as it could be a strategy that basic economic and social fundamentals do not support.
Lets explore some of these fundamentals that firstly continue to push up prices in QLD while Syd. and Melb. are flattening out.
Investors are pushing most areas much more than ever before. This will however reduce when interest rates increase in the next few months and fewer properties make for a good investment. The two main numbers that are important to an IP performing well are the purchase price and the interest rate. When both of these are high then IP’s do not perform well. At present purchase prices are high but interest rates are low but this may change faster than many anticipate turning some good performing IP’s into bad performing IP’s.
QLD is seen as a Baby Boomers migration zone. This is obviously because people in these age groups are finding the Syd. and Melb. markets too expensive at present and value for money seems to be high in QLD.
In terms of foreign immigration to QLD this state accounts for very much lower levels of foreign migrants than Syd. and Melb. with no sign of this changing. People will go where the jobs are!
I do not believe that the most important fundamental for continuing price growth namely job growth or business growth are evident in QLD. Businesses, especially bigger businesses are not migrating to QLD and bringing more jobs to the state in any significant numbers. This is proven by the fact that the unemployment rate in QLD is very similar to that of the rest of the country. If there were more businesses moving to QLD these businesses would be looking for more staff and one would expect a decrease in the unemployment rate in QLD.
The “Smart State” label has just not proven to be true and the only major brand to locate themselves in QLD in the last 5 years is Virgin who only did so because of huge incentives (both tax and allowances) from the state government. So clearly increased business activity is not the major stimulus for property prices in QLD.
It is also true that the property market as a whole across the country has pushed each area along and in some cases dragged it with the incredible momentum that it has gathered over the last 10 years.
This along with the fact that QLD started from a lower base means that the market has room to catch up. At what point though do people decide that the QLD market no longer provides good value, as the prices get closer to the other major capitals?
Next lets look at the fundamentals that have driven people away from the Syd. and Melb. markets.
As mentioned earlier, the main reason people would opt out of these markets is affordability. This should improve as the market flattens (in real terms declines) or undergoes a major correction. People would obviously prefer to live close to the rest of their families (in most cases-lol) and this means that they would stay in the Syd. and Melb. areas as these become more affordable.
Sea-change or Lifestyle locations near Syd. and Melb. like Central and Northern NSW coasts and Gippsland have also become less affordable. These will probably also be far more desirable locations to Baby Boomers than relocating interstate to QLD if and when they become more affordable.
A conclusion that could be reached from all of the above is that as the Syd. and Melb. markets continue to soften and even undergo a reasonable correction that the very reason that people have been pushed out of these markets reduces. I would propose that property in Syd. and Melb. and the coastal locations in their proximity will fall back into the reach of more people causing a move back to living closer to ones origin and family and hence preventing a migration to QLD. As people start to realise that the QLD locations are no longer good value for money, they will look back to their traditional first choices.
Any comments?
Some interesting points made. However if the status quo is maintained nothing much will change. Many boomers do move north in their later years, but many younger people are moving north at the same time for lifestyle reasons. A young market helps property owners more than boomers who traditionally are owners not renters.
Lots of good points there, some of which I have posted in various threads myself. Als being a Qld’er I can tell you that the very reasons people are moving here will soon be eroded by the number of people moving here.
The current price rises are being driven by investors from down south who want to buy property and can’t afford it southern states and / or see Qld as an opportunity / good value.
As you say, once interest rate rises push the yields down there may well be an investor exodus.
But will prices retrace? Looking at the info supplied in another recent thread, it seemed prices only fell about 5% (maybe up to 10%?) after previous property booms and then remained static for long periods.
Alot of good points raised however show me the statistics.
Actually our state has managed to invite more businesses than Virgin. Other organisations include; Boeing, Optus, IBM, Oracle amongst a huge list of other organisations relocating to Brisbane. Just check out the source below for the full listing.
Source: http://www.sd.qld.gov.au/dsdweb/docs-bin/v2/invest/ss_macquarie_bank.pdf
The other key factor is that our state government is providing resources to those types of organisations that provide not just employment opportunities, but areas that can greatly affect humanity, ie in areas of Biotechnology and Information Technology. This is not to say that it is not being done in other states, but definately not on QLD’s same scale.
Source http://www.qld.gov.au/business_and_industry/business_development/technology_and_innovation.html
This is also being introduced into our education system which rates highly not just domestically but also internationally. Private schools for example are a lot more affordable in Brisbane than either of Sydney and Melbourne, but cannot be argued that it delievers a lesser quality of education. Our universities are regurarly voted no.1 in the country. UQ and QUT namely. So is our Business Schools, perhaps not with the same reputation as our international counterparts, but we are young and relatively new.
Also there is much more that makes a city a target for people to immigrate to. For example infrastructure, cost of living. Queensland boasts the cheapest petrol of all states, on average it also boasts cheaper shopping trolleys.
There are many reasons for the southerners to move here aside from affordability. Take for example the weather, Brisbane vs Melbourne’s four season days.Brisbanes infrastructure is on the improve, with ugrades in and around the city, this includes City Bypasses, quick routes to the city, a city train link to the airport, links to the Gold and Sunshine coasts. Our roads boast less trafic congestion and public transport is being improved to be more widely accessable.
After all we have two great sporting teams up here to support, in the League the mighty maroons and for the aerial ping pong fans the mighty lions. what more could you want [
].But seriously these stack up as excellent reasons for continued growth. Of course there will be a correction, but in my Humble opinion it will not be because of interest changes, but perhaps a lack of demand in the mid term.
budakajana
Few of the companies you mention below have moved their head offices to QLD. They have introduced some jobs to the state but not a vast number (nothing close to a number that may affect the property market in any way).I also think that you overrate the quality of our education here in QLD. If QLD institutions are cheaper (which they are) then that should imply an inferior quality education!
The weather, yes well okay you can have that one in relation to Melb. but not in relation to Syd. or any part of the NSW coast up to Tweed.
The petrol subsidy may make petrol cheaper but don’t think the state gov. is not taking it back somewhere else!!!
Infrastructure is improving but still very poor in comparison with large western cities. Thank goodness the roads are not as busy though.
Sport NRL and AFL well I don’t think I need to argue that one!
The point of my post is not to have a swipe at my home state of QLD but rather to point out that NSW and VIC may start looking good again when rates rise and prices fall.
Houses,
Its all about affordability. Sydney & Melbourne are out of reach for many, & that’s why there is a good chance that rate of growth will slow. The people that are going to get hammered, are the investment unit buyers,because of an over supply problem,and the fact that in comparison to houses on a land basis, they are more expensive. It’s the land that doubles every 7-10 years, not the house itself. Houses & Buildings depreciate, land appreciates always & forever will. Does the government allow you to depreciate the land on an IP? I don’t think so, & there is a good reason for that!
Units have less than 10% of land content, & the majority that buy are investors, not owner occupiers.
Qld is still affordable, & still growing in population terms.Its affordable for those who have the income to negative gear for the long term, but for positive cash flow investors, your going to find it hard to get in there now.You will have to go further North.
Regarding infrastructure.
A recent report predicted that Brisbane will have the worst traffic problem of any Australian city within 10 years.
Most people moving to Qld list lifestyle as the number one reason. But that lifestyle is chnaging because of the phenomenal growth in the small pocket of S.E.Q.
Yet it is investment that is currently driving the housing market here.
I don’t think anybody is trying to put down Queensland. We’re just trying to ascertain whether this current climate is going to change from an investment POV (in the short term).
QLD has strong population growth.
The Majority of this growth is from Sydney and Melbourne migration.
Home owners in Sydney and Melbourne are selling their homes (many that have doubled in price in the last 5 years alone)
The most cashed up buyers in the entire country are heading to QLD, while overseas immigrants are taking there places in VIC and NSW.
This is and will continue to be, at least the medium term, the driver for property prices in QLD.
Slum Lord
I think that it is too simplistic to categorise deciions that idividuals and families make to change their lives into economic ones. If you make a decision to turn your life upside down and/or that of your family, economic reasons become justifications for those decisions not the main catalyst.
Brisbane has long been categorised by some as a place where you don’t have the opportunities offered by the bigger cities when it comes to corporate careers, to a large degree that is true (if you don’t work for the government!), but it is more often used as an excuse rather than a conclusion drawn based on research!
When you uproot yourself from the relative career security of Syd/Melb to come to corporately challenged Brisbane, you are forced to consider your working life differently – and that can be healthy.
By the way, how can you compare the Central Coast of NSW and Gippsland to QLD?
Another reason that QLD property market may be a little stronger in the face of flagging Syd/Melb property prices could be the fact that Bris has not seen a proprty boom since about 1988, so there was a LOT of room to move. I see no signs of the pressure for well located property waning.
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