26 Dec Brisbane becomes the benchmark – Shannon Davis
At a time when we judge so much of what the property market is doing based on what is happening in Sydney and Melbourne, Shannon Davis makes the point that Queensland is now the benchmark for what could be happening in 2019.
Kevin: There has certainly been a lot of focus on the Queensland market. And I think you’re going to see that accelerate into 2019. So I want to have a look back on 2018, as it relates to the Queensland market, because in some ways it’s quite a benchmark for what’s happening in the rest of Australia. Never thought I’d say that. When there’s so much news coming out of Sydney and Melbourne.
Kevin: Joining me to help me do this is Shannon Davis. Shannon has a very good handle on the, particularly Brisbane, market but also the broader Queensland market and how that relates to what’s happening nationally and internationally. Shannon, thanks. That was a big buildup, mate I hope you’ve got everything ready.
Shannon: Yeah, everything ready Kevin.
Kevin: Shannon Davis, of course, is from Image Property. Shannon, let’s have a look at the highlights, and lowlights, of 2018, firstly.
Shannon: Yeah, I think in 2018, it’ll be remembered just starting to see the beginning of light at the end of the tunnel to the apartment market. I believe we’re through the worst of it. Its hit the bottom and you’re starting to see vacancy tighten, interstate migration, and I think with the apartment side of the market, this will be the year that it sort of bottomed out and started to, in perhaps six to 12 months start get better prices and better rentals.
Kevin: Just on that point, has there been much of an oversupply?
Shannon: Oh, yeah. It was massive there, but about 2017 Christmas the construction problem stopped. So the problem wasn’t being added to. So now we’re in the absorption phase and we’re just starting to see that that part of the market’s showing the early grass green roots coming through and starting to better. So, I think that’s the good news for 2018.
Kevin: Have there been a lot of sites that you know of that have been mothballed? You know, developers who bought them and just sort of sitting on them waiting for the market to turn around?
Shannon: Yeah, definitely. Developers are shelving plans to get out of the ground. There’s also been like more emphasis on building something new to market. So you’re starting to see people build bigger three bedroom units. So they’re going to support the downsizer market. Instead of building, say, 70 of what they originally had planned they’re building sort of 40 larger ones that are going to hit another demographic entirely.
Kevin: Yeah. Responding to a changing market. Okay, so what else have you noticed in 2018?
Shannon: Yeah. It was finally Brisbane’s time to shine. So, you know, the Southeast corners done really well. Hasn’t had the boom of the Southern markets so it’s not going to have the bust of the Southern markets and finally people started seeing the gap between Southern markets and Brisbane market showed value and moved. Moved themselves up here. We’re not seeing that many investors. At the moment I think people are waiting for the federal election to see what transpires there. Or, the Royal Commission into banking. But, you are definitely seeing lots of Southern owner/occupiers buying for properties be it in rentals or sales.
Kevin: Are these units or houses they’re looking at?
Shannon: We’re seeing mostly houses. But, you are seeing people with lots of applications from down South in the rental market. They’ve still got a bit of a tenants market to choose from. So they’ve got a lot of things in their favour.
Kevin: Some of those rental markets, particularly in Sydney and Melbourne, have been very, very expensive haven’t they? Is affordability really what’s driving both rentals and sales into the Southeast corner?
Shannon: I think also we started adding some jobs which has helped. People like to move when they’ve got a job rather than lob somewhere unemployed. So, you know, that’s definitely helped. But, yeah, definitely the affordability side of things is huge when taking more than two incomes to pay off a mortgage or some people paying up to 50% of their take home pay in rent. It can hurt pretty quickly.
Kevin: Well, that paints a pretty rosy picture, particularly for Queensland. We’ll have a look at how that relates nationally in a moment. What were the lowlights? Any surprises for you in 2018, Shannon?
Shannon: Yeah. I think the effects of the Royal Banking Commission, I just didn’t expect that to sort of play out so soon. Just the market, but really it’s … I would say that we’re in the middle of a credit crunch already. The real crackdown on borrowers spending patterns, especially with the advent of something like PayPal, there’s really no hiding anything that you’re spending these days. So, things like Netflix and Uber Eats and all that sort of stuff. If you’re a compulsive user of those type of apps that’s going to hurt you when it comes time to go for credit.
Kevin: Yeah, interesting that. It’s something that I’d never really thought of. We carried a story on that recently about how you’ve got to be careful of not putting those things onto a credit card or, as you mentioned, their PayPal. I hadn’t thought about PayPal. But the banks certainly probably always had access to that information, but they’re really focused on it now.
Shannon: Yeah. Definitely. In all our opens recently just the investors, I can remember probably three out of last 100 people attending our open homes have probably been investors. So, you know, that’s just where we are in the market right now. People that are moving for home reasons, not investment reasons.
Kevin: Okay, any other points?
Shannon: Yeah, I think the lowlight also is proposed changes to negative gearing and capital gains tax. I want to focus on the capital gains tax discount because I think that’s the one that people are sort of missing the point of. Everyone’s mentioned negative gearing but if you come to sell your property with the new changes that Bill Shorten’s endorsing and say there’s a $500,000 profit KT, well originally with a 50% discount you’re going to pay taxes on 250 grand. But, that’s going to change now and you’re going to pay taxes on 375 grand under that change. So, that’s quite a lot more tax. I don’t know if everyone’s sort of been focusing on that. But you could have, in some cases, a falling market and double the tax rate when it comes time to lock in your profits. So, it might be one for investors that are thinking of selling to maybe bring forward their decision into the early part of next year.
Kevin: Oh, that’s interesting. Yeah, bring it forward or, in fact, after the election maybe hang on for a little bit longer.
Shannon: Yeah. Well, it won’t coming over night on election night. It’ll still need to pass both houses of Parliament. But, you know, I sold something for a decent gain this year. Under those laws I would have been up for a lot more tax, I think, I was set to be about another $25,000 in tax. So it’s something that you need to take into your account if you’re thinking of offloading soon.
Kevin: Just to round this out, Shannon, let’s look nationally. How do you think Queensland fits into the national scene going into 2019?
Shannon: Yeah. I think Brisbane investors and locals can have a lot more confidence in their property prices and values. I think the house markets been, standalone house markets been charging along. You’re starting to see those gains where other markets are sort of going backwards. You’re also starting to see the apartment oversupplies been largely absorbed and vacancy rates are tightening as well. So, you’ll probably see that it’s in good news in 2019.
Kevin: Yeah, that’s certainly good news. What about the regional markets around Australia? How do you think they’re going to fare? Because, some pretty sobering stories coming out of Sydney and Melbourne right now, aren’t there?
Shannon: Yeah. I think Newcastle and Geelong have done really well of Sydney and Melbourne property upturns in the last three years. I think the Queensland central coast market is starting to improve, areas around Mackay and Gladstone and Rockhampton have seen that with the uptick in commodities that, that regions going to go a little bit better as well. Your tourism areas like Cairns, they’ve seen a few hard years but as long as cyclones and that don’t come to pass too much they should continue to benefit from the Chinese tourism that’s been going out. There’s also talk Western Australia’s markets finally bottomed as well.
Shannon: So, you know, I think there’s some good news around. What we need now, my wishlist Kevin, would be for the Royal Commission not to over correct and make lending too hard. Your banking’s the archery of the economy and we need a good credit environment to be able to continue the positive growth of the economy.
Kevin: Thanks, Shannon. A great insight there as to what happened in 2018. Some high points and some low points, which is what we like to try and do. Bring a bit of balance. Shannon Davis there from Image Property. Shannon, thanks very much for your time. All the best for Christmas and the New Year mate.
Shannon: You too, Kevin. Have a great holiday season and see you again in 2019.