05 May Qld growth is discounted
One of the big improvers tipped for this year is Queensland and Shannon Davis gives us his view on the outlook there. He points out that while the Queensland market overall has had a solid year, it is sometimes compared to Sydney and Melbourne, where the growth has been spectacular and the improvement is discounted.
Kevin: It’s fitting as we head towards the end of the show and this great wrap that we’ve done all around Australia that we would focus very much on the Queensland state, one of the states predicted to be one of the big winners. It has underperformed in recent times, and it’s certainly not up to the expectation of a lot of people. But joining me to have a look at the Queensland market, Shannon Davis from Metropole Properties in Brisbane.
Shannon, before start, congratulations; the other side of your business, Image Property Management, just took a couple of major awards last night, as well.
Shannon: Thanks, Kevin. It’s been a lot of work down to the team, but it’s good to get some recognition.
Kevin: Large Agency of the Year and BDM, Business Development Management of the Year – accolades well deserved, Shannon, so congratulations to you and the team there at Image.
Shannon: Thanks a lot, Kevin.
Kevin: Let’s have a look at the Brisbane market. What is the sentiment? What are you hearing about Brisbane?
Shannon: The sentiment is a little bit fragile and perhaps lacking urgency. I think we’re expected to do well this year and probably be the leading, or if not leading, the second leading capital city around Australia. But just because we haven’t had the robust growth of the southern states, sometimes any negative news can have more of an impact in the Queensland market.
Kevin: The growth has been fairly well up to Brisbane’s standard, and the median price still just under $500,000. But still, we’ve had an almost 5% increase in the last 12 months, which is not too bad.
Shannon: It’s not too bad considering we’re in a pretty low-inflation environment and interest rates are quite low and money in the bank isn’t doing that much, either. Amongst those scenarios, it’s not a bad result.
Kevin: Where are the suburbs that you’d be looking out for? Where is the best buying right now in Brisbane?
Shannon: The middle ring suburbs probably have a little bit more value. The houses, especially on the south side, are really in high demand at the moment. That’s probably the hottest part of the market, I think. You have areas like Tarragindi, Holland Park West and Holland Park, and Annerley, and you’re still getting lots of numbers to open homes, multiple offers, and spirited bidding.
Kevin: What is the price range in, say, Tarragindi and Annerley, two of the well-known suburbs?
Shannon: It’s going really quickly through the $600,000s, mid to high, and even touching $700,000. All of that seems to have happened just in the last three or four months.
Kevin: The returns in those areas for investors?
Shannon: They can bank on about a 4% yield for houses. With that level of capital growth, it’s not a bad investment.
Kevin: Those suburbs you mentioned on the south side, what’s driving that growth?
Shannon: There are a lot of owner-occupiers, people who are confident of their position and jobs. They’re looking to upgrade, and other investors wanting to get some land with their investment are looking that way, as well.
Kevin: What other areas would you say to avoid in the Brisbane market?
Shannon: There is apartment oversupply in some inner ring suburbs. More than that, there is a pipeline of apartments coming, which is probably more ominous. But the supply is going to have to wait for the demand to catch up. There is going to be a lag period there. I think they’re not going to lay empty because there are so many amenities in the inner city lifestyle, but it’s taking a while to catch up.
Kevin: We are hearing about an oversupply or a looming oversupply of apartments, and you touched there on the CBD and those near-CBD suburbs. What are you hearing from developers? What are they saying? Are they tending to stand back a bit?
Shannon: I’ve heard that some projects are being, perhaps, delayed, not being commenced. The DAs are there, but not all are shovel-ready just as we speak, so maybe a little bit of hesitancy there.
Kevin: What’s impacting the markets in Queensland at present? We’ll take a broader view, excluding North Queensland because we’ve already covered that. But take a broader view of the South East corner of Queensland. What are the positive and negative influences on the market right now?
Shannon: Our transition out of the mining-type boom has been better than expected, I think. There are a lot of jobs being created in South East Queensland, largely down to the construction industry, and also tourism is seeing a big, robust injection. The weak dollar is really helping our economy. I think on the positive side, the South East corner s producing a lot of jobs and it has a good effect for investment.
Negatively, though, that sentiment can be fragile. It’s an election year, as you know, so sometimes that has an effect on big-ticket items. Also, APRA changes, which were meant to take the heat out of Sydney and Melbourne, affect Queensland borrowers because we probably haven’t had the same amount of equity growth, so we may start doing lower LBRs, only 90% lending, if we haven’t had the same growth, that has another knock-on effect to Queensland investors.
Kevin: Shannon Davis from Metropole Properties in Brisbane, thanks for that overview on the Queensland market, and congratulations, once again, on taking out those two awards, Large Agency of the Year and BDM of the Year, for the LPMA Awards. What does that stand for, by the way?
Shannon: Leading Property Managers Australia.
Kevin: Shannon’s other business, of course, is Image Property Management.
Well done, Shannon. We’ll talk to you again soon. Thanks, mate.
Shannon: Thanks, Kevin.