Back in the black: Things are finally looking up for South-East Queensland

The tipping point between caution and optimism has finally passed.

It is often a fine line, but sometime in the past six weeks it has gone from dark to light (well, lighter) when it comes to residential real estate across South-East Queensland.

Property cycle

There is an eight year property cycle – yes, the text books talk about seven years – but the Australian statistics suggest it lasts about eight years.  But what’s one more year between friends.  Usually, it is five years of good and three years of, well…not so good.

But for more than five years, South-East Queensland real estate has been subdued to say the least.  The 2008 financial knock-down began a slump that was prolonged by deluges, cyclones and domestic political uncertainty.

But now it looks like South-East Queensland has just started to enter its growth phase.  It is likely to be growth this time round, not GROWTH!  But we are going to the black side of the ledger and finally leaving the red.  About time!

Sales volumes

Sales volumes are up across South-East Queensland for the first time in years.

When looking at detached house sales for the last 12 months:

• Sunshine Coast                   5,800 sales     (up 26% on year before)

• Moreton Bay                       6,650 sales      (up 21%)

• Brisbane City                      16,000 sales    (up 14%)

• Redlands                               2,600 sales      (up 23%)

• Gold Coast                            6,500 sales      (up 22%)

• Logan                                     4,000 sales      (up 18%)

• Ipswich                                  2,800 sales      (up 12%)

• Lockyer Valley                   526 sales           (up 29%)

• Toowoomba                         3,250 sales      (up 25%)

When it comes to apartment sales, they are also up – 27% on the Sunshine Coast; 3% in Brisbane (apartment sales in Brisbane have been rising for two years now, with today’s volumes up 19% on 2011 figures)and up 20% on the Gold Coast on last year.

Townhouse trading is also increasing, quite quickly in fact, up 49% on the Sunshine Coast (it must be all that new Kawana infrastructure, hey Kochie!); up 20% in Moreton  Bay (Caboolture; Pine Rivers and Redcliffe); up 23% in Brisbane; up 27% in Redlands; 17% on the Gold Coast and 22% in Logan.  Falls in townhouse sales are still occurring in Ipswich and in Toowoomba.

Increasing prices

End prices are also starting to rise across South-East Queensland.  Price rises always lag sale volumes.

When looking at typical detached house prices for the last 12 months:

• Sunshine Coast                   $453,000        (up 4% on year before)

• Moreton Bay                        $390,000       (up 3%)

• Brisbane City                       $520,000        (up 4%)

• Redlands                               $455,000         (up 4%)

• Gold Coast                             $490,000        (up 6%)

• Logan                                      $353,000         (up 1%)

• Ipswich                                   $298,000        (up 2%)

• Lockyer Valley                    $290,000        (up 4%)

• Toowoomba                          $327,000        (up 10%)

A similar trend can be seen for apartment and townhouse sales across the south east corner of the state.

The entry-level market - up to $500,000 (oh, and how it is so easy to dismiss half a million bucks these days) – is quite strong and occupies a large part of the price bell curve.  There is still a lot of property priced under $250,000 across Queensland, and even in the more populated and relatively expensive South-East.

Sydney leads

Traditionally, South-East Queensland lags the southern markets, following behind Sydney by about 18 months and when their market is moving, then twelve months behind Melbourne/Victoria.

Investors (and some residents) are forced out of the southern markets.  I read that Sydney’s current median price is $690,000 and BIS Shrapnel are predicting it to exceed $800,000 within the next three years.

I recently suggested at a housing conference presentation that the Brisbane (region) median detached house price could reach something like $530,000 over a similar time frame (mid 2016).  Many in the room smirked, some even guffawed.   Today, the middle price across the Brisbane region is about $450,000.  So $25,000 or a 5% gain per annum over the next three years, doesn’t seem that unrealistic to me.

More jobs

Anyway, that is really academic for now.  In order for South-East Queensland to experience such price growth, more jobs need to be created in Queensland.  Whilst investors will follow potential, interstate migrants move because of work first; cheaper housing second and a distant third, because of our warmer climate.

Whilst mining is holding up somewhat better than many expected (for now) and gas, tourism (somewhat) and agribusiness is helping Queensland’s economy, new housing construction, as we pointed out last week, is the missing ingredient.

Easier housing construction means more jobs.  More jobs mean more interstate migrants, which will lead to more sales and higher end prices.

The South-East Queensland market during 2014 depends on one thing - new jobs.

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Michael Matusik is the founder of Matusik Property Insights, which has helped over 550 new residential projects come to fruition.

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