QLD Market Update (source: HTW monthly review Feb 2019)

Brisbane

“Brisbane? Why would you live up there?” they said. “Too humid, too hot… Couldn’t stand so much sweating!”
Well, it has been a touch tepid up here since the start of the year but we’ve seen nothing like the 40 plus degree scorchers inflicted on other capital cities in more moderate climes.

As if the weather weren’t reason enough to love us, Brisbane in 2019 looks set to offer a little more to its property buyers. We’re a city with excellent potential for growth. If you’ve been considering a move to this, the nation’s best city, perhaps 2019 should be your year. Brisbane in the coming twelve months will, generally speaking, see a stable market across most locations. We  aren’t historically prone to mighty price movements in either direction. We Queenslanders and our real estate tend to take a more laid-back approach.

As mentioned in Month in Reviews past, Brisbane has been on the cusp of substantial price rises for about six years now. While there are plenty punting on the idea that 2019 will bring big gains, we prefer to think our real estate values will strengthen in a more measured way.

Like most other markets around the nation, Brisbane was affected by macro financial changes instigated by Australian regulators that resulted in constrained credit availability. Buyers were keen but if they couldn’t lock down a loan approval, what was the point?

Investors in particular were hard hit. This group was dealing with restriction to interest-only lending as well as tougher rules from the banks. All in all, many decided it was all a bit too hard and got out of the way. Conversely, there were plenty of first home buyers willing to take up some of the slack with participation in this cohort on the rise.

This is the platform upon which 2019 has launched itself and while noises are coming out of the halls of power suggesting credit policy needs to be loosened, it might take some time to bring the confidence back.

Enough of the bad stuff – what are some of the positives on the horizon for our River City? Well, we are heading into a period of strong investment in infrastructure that only bodes well for Brisbane. It feels like it’s been a long
time coming. Apart from the obvious benefits of boosting our liveability, infrastructure drives employment and that’s an area sorely in need of improvement in Queensland.

In addition, some of these major projects will have national and international appeal – the Howard Smith Wharves project and the Queens Wharf complex in particular – which have a flow on for boosting our tourism and services sector. Also, our city’s comparatively affordable real estate is a draw card. We are the third largest capital and have the joys of brilliant coastline, hinterland and rural lifestyle on our doorstep. To many from the
south, our housing must look incredibly cheap.

Of course, we are being rediscovered, with our net interstate migration number shooting up over the past two years. It looks to have set into a positive trend and is a key leading indicator of property price growth. Add to this the ongoing low interest rate environment. We realise that getting the banks to say “yes” has been a bit tougher, but if you do have a loan approval, the decent yields achieved through real estate investment in Brisbane will offset much of your ongoing borrowing costs.

On to our picks for 2019. We’re not going to go out on any limbs because, frankly, we don’t need to. Solid fundamentals will continue to reign. While demand is always steady for near city suburbs, property seems fully priced at present. We don’t expect you’ll jag any bargains within three kilometres of the CBD, but long-term gains are highly likely. Our pick would be to shoot for some of the inner and mid-ring addresses. This is solid real estate  where our population likes to live and play. For example, this would include Enoggera out to Stafford in the north and Annerley through to Moorooka in the south.

Our tip here is to seek out specific property elements that can boost your chances of growth. Look for renovatable homes on decent size blocks, or larger allotments with good, long-term redevelopment potential. Entry level priced property in these locations is another way to better your chance of gains. Buying below the median price provides room to grow in the value stakes.

Also, if you have the opportunity to jag vacant land, or better yet, do a small subdivision, then there is upside for you. Flexibility in these well-populated locations pays dividends for property.

If you’re thinking of places to avoid, you might want to move with caution in outer lying locations along our northern and western corridors in estates that are being pitched towards investors rather than homeowners. If there’s a predominance of dual occupancy and duplex structures or generic townhouse designs on offer, tread warily if your goal is capital gains. Credit restrictions have not helped the demand side of the equation in this
sector either and with plenty of supply on hand, the result seems to be subdued growth if any for this real estate.

While the well-documented oversupply of apartments, particularly in inner city suburbs, has continued to dominate commentary, we do note that there has been a turnaround in fortunes. Those apartments pitched primarily at homeowners have done well of late and much of the supply expected to come through the pipeline has slowed. Savvy developers could see the writing on the wall and region which consists of a large number of modern developing estates across all property types and a high proportion of investors. The royal commission
into the banking sector has made investment borrowing much more difficult and has had an obvious effect on market activity.

The suburbs of Yarrabilba, Flagstone, Holmview, Ormeau and Bahrs Scrub will be the main areas to watch and with affordable price points between $400,000 and $500,000, these will hopefully appeal to both first home buyers and investors. The construction happening in this region has most definitely slowed although there is still quite an oversupply in investment housing which is gradually getting better but still affecting investment and  rental returns.

Central North Region The overall feel of the property market is set to continue on from the later part of 2018. Property prices will continue to ease, with an extension of selling periods. Properties will need to be priced  right in order to sell as the market has pulled back in most of the central north region since the start of 2018.

The effects of the royal banking commission that has led to tighter lending regulations, coupled with the negative media coverage on the property either reconfigured their stock or land-banked or sold their sites. We aren’t recommending anyone rush back into this type of investor accommodation, but the future is looking less dire than it did a couple of years back.

2019 will be a year to watch in Brisbane. If we can accentuate the positive and eliminate the negatives, then property owners should do fine by annum’s end.

Gold Coast

North West Region

Over the next twelve months, a slow easing in the market with reduction in price levels and investor activity is anticipated. We have already seen this occurring in the past six months in the north-west market due to price falls in Sydney and Melbourne has resulted in a reduction in demand within our property market too. We will continue to see poor unit performance across the region, in particular Southport, Labrador and Hope Island, with a clear
focus on off the plan purchases. Construction has been slowing in the unit market due to lack of presales, however there are still units available and prices have been dropping to meet demand. A clear example of a poor performing unit is within the Southport Central Tower 2 complex. A recent contract for $378,000 in February 2019 was negotiated for a fully furnished unit. The property had a previous sale price of $390,000 in April 2015,
and was purchased off the plan in September 2008 for $475,000.

Properties with good owner-occupier appeal have also seen slight price reductions and this is expected to continue into 2019. An example is a property in Pebble Beach Drive, Runaway Bay that sold in June 2017 for $750,000 and was re-sold in November 2018 for $735,000.

Properties over $1.2 million are experiencing longer selling periods and reductions in sale prices. Motivated sellers are being forced to meet the market if they wish to sell, which is resulting in a clear reduction in value, consequently affecting surrounding property values. A clear example is a property in Coomera Court in the River Links Estate in Helensvale, where a property was previously purchased in December 2007 for $1.8 million and
re-sold in November 2018 for $1.35 million.

The next twelve months will see good buying opportunities for those able to obtain finance approval and focus on good quality owner-occupier appeal dwellings that provide unique qualities, whether it be location to schools, views or convenient surrounding development. With an increasing population and low unemployment levels, property prices within the Central North region are expected to grow over the next ten years, however purchasers should keep in mind that the market will continue to experience weaker prices over the next twelve to 24 months.

Central Gold Coast

The Gold Coast property market started to cool off in 2018 and we expect it to continue to soften slightly throughout 2019. Sales volumes in the central suburbs of the Gold Coast have eased and agents have reported that selling periods have lengthened over the past six to twelve months.

Whilst we have generally seen a recent trend of property prices softening across the Gold Coast, sale prices for the central coastal suburbs (those suburbs within a few kilometres from the beach) have been relatively stable so  far. Going into 2018, the residential property market was getting quite heated in suburbs such as Burleigh Waters, Broadbeach Waters and Mermaid Waters. These suburbs have become highly sought after in recent years with properties offering good owner-occupier appeal at a broad price range and there have been great opportunities for builders to renovate or redevelop old homes into prestige dwellings or even duplex pairs. It will be interesting
to see if these Gold Coast hot spots will remain resilient over the course of 2019.

Despite the recent drop in confidence in the local market, we have seen a healthy level of construction activity between Mermaid Beach and Main Beach, with many small and large scale residential developments recently completed or now underway. The Ruby on Norfolk high-rise development at Budds Beach in Surfers Paradise
was completed prior to Christmas and other large scale high-rise projects due for completion in 2019 include Qube Broadbeach at Broadbeach, Northcliffe Residences and the three-tower beach front residential and hotel project known as Jewel Residences at Surfers Paradise.

With the anticipation of tougher market conditions ahead, we understand that sales rates have been a growing concern for developers. The unit market, particularly within Surfers Paradise and Broadbeach, is heavily reliant on investors from interstate and overseas. We expect that developers will be offering various incentives or rebates
for their balance stock to attract buyers as the investor market begins to shrink. The volume of new unit stock to be introduced this year on the central Gold Coast may cause an oversupply. In declining conditions, we have noticed in previous cycles that the high-rise unit market, particularly in Surfers Paradise, is often the hardest hit in a depressed market. There may be some volatile times ahead for this market sector. Watch this space.

It is unlikely that we will see any significant price growth in the central suburbs in 2019. The question is “Which suburbs will hold their value well in the next twelve months?” Suburban housing in the central suburbs of Benowa
and Ashmore (both east of the M1) and Mudgeeraba (west of the M1) have been fairly strong over the past couple of years with buyers seeking affordable detached housing with close proximity to various schools and amenities. A typical price for a three-bedroom brick house in Benowa is currently $625,000 to $675,000, $575,000 to  $625,000 in Ashmore and $500,000 to $550,000 in Mudgeeraba. We are expecting property values to remain stable in Benowa and Ashmore, however buyers should perhaps be cautious buying in Mudgeeraba as house prices have had a very strong run with the market becoming quite heated. In late 2017 and the first half of 2018, it was not uncommon for an entry level detached house in Mudgeeraba to sell within a two-week period.

Agents have now reported signs of this market definitely cooling off and selling periods have lengthened considerably going into 2019.

The prestige end of the housing market is likely to struggle in 2019. The market for properties priced above $2 million has been historically volatile. Agents have noted that there has been a strong reliance on interstate and foreign buyers (mostly from Asia) of late. The tighter lending regulations will test both buyers and sellers in this sector in the upcoming months. We wouldn’t be surprised if prices for prestige properties fell ten per cent or
greater if we continue to experience similar market conditions into 2020.

Far Northern NSW

The Far Northern New South Wales coast became a very segmented market towards the end of 2018 with mixed results. Across the majority of the market, agents have advised more stock levels and longer selling periods, but relatively stable prices.

Although there’s been no clear evidence that prices have eased, we believe discounts will become more evident throughout 2019 and will particularly hit properties over $1 million on the Tweed Coast. It was becoming more apparent towards the end of 2018 that the Sydney and Melbourne buyers are not as abundant as they were six to twelve months ago and this, as well as tighter lending policies courtesy of the Royal Banking Commission, will affect overall market values. Investors have also disappeared with most purchasers in the Tweed Shire being
owner-occupiers.

A segment that may buck the trend and continue to stay steady throughout 2019 is rural residential properties under $1 million. There is limited stock and high demand for this property type and not only is this property type popular with local purchasers, it is also popular with Brisbane buyers looking for a tree change or a weekender.
Another segment that may buck the trend and remain steady over 2019 are properties located in prime and tightly held locations, including properties on Kingscliff Hill and Murwillumbah’s Hospital Hill. These locations offer views, close proximity to town and amenities and character dwellings. In the case of Kingscliff where the new
Tweed Valley Hospital is being built, agents have advised of an increase in buyer interest in the area due to the new infrastructure and job creation with the new build over the coming years.

Sunshine Coast

2018 was a good year for the Sunshine Coast property market with good levels of activity and increases in values across most sectors. We are predicting it will start to ease over the coming year. This is not to say we are expecting a year of negative growth, however the coast market is expected to slow over the coming year and return to what could be called a normal market.

Whilst there appears to be some headwinds coming, there are so many positives for the coast.

Headwinds – Negatives

The first quarter of 2019 will be a good indicator of how the year will unfold with the continued slowing of the major southern markets of Sydney and Melbourne and to what extent that may impact the coast market. In addition, 2019 is a federal election year, so the uncertainty that generally follows an election will present
a challenge. The effect of the election will be magnified given a possible change in government and potential changes to negative gearing.

Tailwinds – Positives

The massive infrastructure projects underway should attract new investment to the coast. The Maroochydore CBD and Sunshine Coast Airport expansions have been moving along with the Sunshine Coast International Broadband Submarine Cable project dovetailing in beautifully. Providing Australia’s fastest telecommunications connection to Asia and the second fastest to the United States is an unbelievable opportunity for a regional centre.
It is expected that the larger estates of Aura located to the south of Caloundra and Harmony at Palmview will continuing to generate good interest from owner-occupiers and investors. We are also expected to see good interest in hinterland subdivisions in the railway townships, such as Habitat in Palmwoods, with larger land sizes being the driver.

As always, proximity to the beach given the coast lifestyle is a driving factor for purchasers and this is expected to continue. The coastal strip from Noosa to Caloundra in the sub-$800,000 price range is expected to continue to be in demand.

The northern coastal areas of the Sunshine Coast and the prestige markets in the Noosa area are expected to continue to see some good activity throughout 2019 on the back of some record sales in 2018. However, this may be an area to watch as the prestige Noosa market is heavily impacted by the confidence of Sydney and Melbourne markets as these continue to slow.

Anecdotally, we have been advised that some ex-pat and international buyers have helped fill some of the void on the back of the weak Aussie dollar.

There are a number of unit complexes under construction or proposed for 2019 which will see an increase in supply, particularly in the Maroochydore area. There are good levels of interest in owner-occupier style units within smaller complexes with low body corporates. This swing to permanent living units has been reflected in the number of new unit complexes under construction that directly target this market.

2019 is expected to see some good activity across the residential market however maybe not to the same levels achieved in the past 24 months. We will just have to wait and see.

Darling Downs/Toowoomba

2019 looms as an interesting year for the  Toowoomba market. 2018 saw a continuation of the trends in 2016 and 2017, with slowing levels of sales activity and some value stabilisation following the boom period from 2014 to mid 2015. Although sales activity has been steady across the board, the market has continued to be multi-speed and property specific. There has been little consistency with variations in sale prices and buyer interest
making it difficult to establish well-performing suburbs and specific property types. This is expected to continue throughout 2019.

Toowoomba is currently a hub for major infrastructure projects including the Toowoomba Second Range Crossing road construction expected to be completed early this year and the recent completion of QIC’s Grand Central Shopping Centre extension. Also in the imminent pipeline benefiting the Toowoomba area will be the Inland Rail Project.

These infrastructure projects are believed to have assisted in holding vacancy rates low with many employees living in the Toowoomba area through the construction processes. This is expected to continue throughout 2019.

The key development areas for new housing included the suburbs of Glenvale, Cotswold Hills, Torrington, Kleinton, Highfields, Cambooya and Westbrook. Demand for vacant land has slowed significantly as a result of reduced investor demand and limited local buyer enquiry for lots less than 500 square metres in size. Sales rates for land in new housing estates are very slow, especially compared to recent years when projects often sold out off the plan. Developers are starting to look at buyer incentives to attract interest in their respective projects.

West of Toowoomba, towns within the Surat Basin have experienced significant declines across the board following the decline of the construction phase of the mining and gas boom. These towns have reverted to levels which are more aligned with their predominantly rural-based economies, and as such, local employment factors are now contributing to the trends witnessed in each of these towns. This stabilisation is expected to continue in 2019 with enhanced interest for dwellings from owner-occupiers as affordability has returned and a significant over supply situation in the unit market which will continue to place downward pressure on the sector. The Roma
market is relatively inactive and downward pressure appears to continue, while Dalby is showing good signs of stabilisation with a strong occupancy rate currently being enjoyed leading to positive movement in rental values.

Cairns

Wet season rain came early in Far North Queensland and the year in property ended with more of a whimper than a roar.

Early January is quiet with most people concerned about what 2019 might bring.

The optimists amongst us are still hoping 2019 might be our year with a return of southern buyers and a counter cyclical wave as in the early to mid-2000s, discovering the great value and strong returns available up here, driving our market out of the stagnation of the previous three years.

Unfortunately, the pessimists have a fairly strong counter view with falling markets in the southern states, tighter credit and a negative sentiment for property in general.

Our best guess is more of the same with 2018-like conditions of patchy markets, some good results and other results being fairly soft. We may even end 2019 a little below where we are now in terms of median price and activity levels. We would, however, be happy to be proven wrong.

Rockhampton

2019 has all the potential to be a solid year for the Rockhampton region.

A number of new infrastructure projects are due to start construction in the short to medium term including Rookwood Weir, the Rockhampton Road, duplication of the Capricorn Highway between Rockhampton and Gracemere and the South Rockhampton Flood Levy. Each project is anticipated to provide an economic benefit across a number of sectors, including employment. This, together with the stabilisation of the market throughout 2018 and the consistent tightening trend of the rental market (currently between two and three per cent) provides a sound start for the property market in the year ahead.

The sectors to watch in 2019 are expected to be the lower end of the market (up to $250,000). This sector has been sluggish for some time, however with vacancy rates tightening and some agents reporting $20 to $30 per week rent increases starting to be accepted by tenants, this sector will become more enticing to investors, particularly given the major southern markets are now starting to cool. These rent increases may see more first
home buyers becoming active also.

The upper end of our local market has remained reasonably consistent over the past few years and is expected to continue this trend.

On the Capricorn Coast, 2019 is expected to see a continuation of improved market activity which really started to take hold in 2018, with some modest price rises noted for very well-presented and well-located properties. Steeply sloping vacant allotments are expected to remain slow to sell given the difficulties arising from the practicality of living on a sloping allotment and to a lesser extent, the cost of construction on such sites.

The coastal prestige market (price points over $750,000) is expected to be sporadic in 2019 after an active period in 2018. Great Keppel Island has also provided renewed focus with the lease changing hands to an international investor and plans to start construction in late 2019.

Local agents acknowledge that there is an increase in confidence in the market with many reporting limited stock available. Further, vacancy rates on the Capricorn Coast are at their lowest point in twelve months, currently sitting at between one and two per cent.

Of course, it’s prudent to consider the risk that some (or all) of these projects may become delayed or not come to fruition as expected and what effect this will have on the property market. For quite some time now, the region has been pushing for major infrastructure projects to boost employment as this appears to be our missing link to a vibrant local economy.

As we have seen with other major projects such as Adani, it can become a very long road between approval and shovels in the ground. Funding, elections, the greater economic climate and severe weather events all have the potential to delay start dates for any major project. Should there be a delay in any projects forecast to provide the economic boost the region has been searching for, it is anticipated that our local markets would remain stagnant for the course of 2019.

We are without doubt looking forward to seeing a number of these factors providing a positive influence on the property market before year’s end after a period of decline over the past few years.

Gladstone

2019 is likely to be a gradual continuation from last year for the residential market in the Gladstone region with slow capital growth predicted for the year ahead. By the end of the year, we predict that all market sectors will have shown signs of recovery. The market is still being driven by affordability and we will likely see further value
increases across 2019.

We expect rental levels to continue to incrementally increase on the back of a downward trend in vacancy rates. The construction of new homes for mostly local residents is expected to be ongoing and will continue to provide steady employment for local trades persons and businesses. The supply of vacant land should remain stable, however a number of developers are in early planning stages for future lots.

Near level, 800 square metre plus allotments are in greatest demand. There is still an oversupply of small lots in Gladstone. We have seen a recent trend of developers combining two or more smaller allotments to create larger lots which suit the current demand. We expect to see more of this in 2019.

Bundaberg

The latter part of 2018 saw a softening in values in the established lower end of the market and quite the opposite in vacant land sales, with construction of new homes in both new estates and rural residential estates exceeding expectations. We forecast this will continue in 2019.

The increased scrutiny by lenders in the lower end of the market will continue to have an impact, however the recent lifting of regulations by APRA on investment loans may bring investors back into the market.

Mackay

Welcome to 2019! We hope all our avid Mackay readers had a fantastic Christmas break and are looking forward to the year ahead. With that in mind, we will give our predictions on the year ahead for the Mackay residential market.

So, what does the future hold? Well, the best indications for future events are by analysing the past.

2018 was definitely a turning point, not only for the residential property market but the general Mackay economy. During 2018, we saw the residential market gain momentum due to a buoyant resource sector and increased large infrastructure projects which caused increased employment, population growth and a more positive market sentiment. We witnessed increased demand across most sectors of the residential market, decreasing time listed for sale and modest capital growth.

On the rental market, we saw a significant tightening of vacancy rates, falling below one per cent, the lowest in regional Queensland. We saw rental values start to increase due to the increased demand.

All in all, 2018 was considered a positive year for the Mackay residential market.

So, where does that leave us heading into 2019?

We think the residential market will continue its momentum throughout 2019, following through from 2018. There appears to be no slowdown in employment opportunities related to the resource sector and infrastructure projects throughout Mackay and the adjoining Bowen Basin. These increased employment opportunities, coupled
with (relatively speaking) cheaper cost of housing and rentals (compared to boom time levels) has seen many people move to the Mackay region. The tightening of the rental market will see increases in weekly rentals, which will have the two-fold effect of:

1. Bringing investors back into the Mackay market based on increasing yields and potential for capital growth; and
2. Increasing demand for owner-occupier purchases as cost of rents increase and become more difficult to secure.

Notwithstanding any major economic crisis associated with world trade and the market for our most valuable export (metallurgical coal), we think the Mackay residential market will go from strength to strength during 2019 with growth predicted in both rental values and market values.

The difficult part is predicting the extent. Momentum is a funny thing in real estate. At the moment, there is a definite shift in sentiment, both in the general economy and residential market, with all the momentum on the positive side of the ledger.

We are quite optimistic about the year ahead and after the downturn we experienced between 2013 and 2017, that makes a refreshing change!

Hervey Bay

2019 is likely to be a gradual continuation from last year for the residential market on the Fraser Coast with slow capital growth and generally stable returns.

Supply and demand for house and land packages is expected to remain fairly balanced with some package prices showing signs of lifting from last year’s levels. Competition between estates to attract buyers is however likely to remain strong which can limit this capital growth. The supply of vacant land appears to be rising in Hervey Bay with in-fill and balance land of estates so it will be interesting to see how quickly these sell in the short term. Land prices are potentially going to stabilise after some improvement over the past twelve months due to supply levels. There is a risk of oversupply however this will depend on the volume of lots and the time at which developers release each stage. The construction of new homes for mostly local residents is expected to be ongoing and will continue to provide steady employment for local trades persons and businesses.

The increase of sales of dwellings over $500,000 is expected to continue with the expansion of medical facilities and allied health providers relocating to the area. Unit prices may see some improvement as there is very limited new stock and returns for investors are attractive. In the short term, property priced appropriately is achieving one to two month selling periods so buyers are active.

Emerald

We should see Emerald and the Central Highlands region in general continue to firm throughout 2019. The resource sector continues to demand an increased workforce through current mine expansions, closed mines reopening and proposed new mines starting to pop up again. We are seeing wages rise and working conditions
change to benefit workers in efforts to maintain workforce and to attract or poach workers from elsewhere as there continues to be a high skilled labour shortage.

This is all having a positive impact on property values with our vacancy rate low and new housing construction increasing. The level of increase in values will largely depend on how quickly the skilled workforce can be found to continue to fill job vacancies and the coal price remaining high.

 would like to thank Herron Todd White for their valuable, local insights into the Queensland residential property markets. Further information about other States and Territories and other property sectors can be found on their website here.