Investors, set your sights on Queensland

I have no doubt that Brisbane will be the big improver among the capital city markets in 2014. And, in terms of the states and territories, Queensland is where investors should be concentrating.

Brisbane ranked well down the list of capital cities for house price growth this year. Data for the end of the September quarter had Brisbane fifth (ABS House Price Indexes), sixth (RP Data Home Value Index) and seventh (APM’s House Price Report), depending on whose figures you prefer.

Brisbane has lagged Sydney, Perth, Melbourne and Darwin in house price growth because of a triple whammy of events. As well as the national downturn that hit after 2010, there were the 2011 floods and later the extensive jobs and spending reductions by the state government.

As 2013 has worn on, there has been gradually improving evidence of recovery in the Brisbane market. The ABS recorded a 4.1% rise in the Brisbane House Price Index in the 12 months to the end of September. I expect growth to build as we get into 2014.

One piece of supporting evidence is the significant rise in sales volumes in many Brisbane suburbs.

Suburbs such as ALDERLEY, Algester, Aspley, Bridgeman Downs, Carindale, Camp Hill, Clayfield, Darra, Deagon, Ferny Hills, Holland Park, Moorooka, MORNINGSIDE, NUNDAH, Paddington and many of the suburbs of Ipswich City have recorded consecutive quarters of rising numbers of house sales, with the biggest uplift coming in the June quarter.

Early results for the September quarter (it takes time for all the sales to work through the system) suggest the pattern is continuing.

That sprinkling of suburbs listed as examples indicates that the recovery is widespread, including expensive and affordable suburbs, and locations in the inner, middle and outer rings of the Brisbane metropolitan area.

The suburb of Moorooka provides a good illustration of the pattern: for four consecutive quarters, the number of house sales has been 39, 46, 54 and 68. So far, median house price growth in the suburb has been moderate (about 7% in the past 12 months, according to APM figures). Why? Because there is usually a time lag before an uplift in sales volumes translates into strong price growth.

There’s evidence, too, that other Queensland markets are strongly mounting comebacks. That’s particularly so of regional economies based on tourism. Cairns, the Sunshine Coast and Hervey Bay have had struggling property markets for the past three to four years, because of their lack of economic diversity, a faltering tourism industry and dwelling over-supply.

Now, they’re all showing signs of recovery. Previous surpluses have been largely absorbed, there is increased spending on infrastructure and the tourism industry is strong again.

Other rising markets in Queensland include strong regional cities like Toowoomba, Townsville and Rockhampton.

Gladstone will take time to work through its over-supply issues and should be approached with caution in 2014. Both Mackay and Emerald have also suffered because an injection of new supply has coincided with a reduction in demand, while the Bowen Basin coal mining industry works through its problems with rising costs.

Of those central Queensland locations, Emerald is likely to recover first, as Galilee Basin coal projects get under way, with the state government offering financial incentives to the first ventures to get under way,