04 Oct Why investing in South East Queensland is a good idea? – Gavin McPherson
In today’s show Gavin McPherson from Oasis Properties tells us why he and his colleagues are focused on investing in South East Queensland.
Kevin: I’m delighted to have back into the show Gavin McPherson. Gavin is the CEO for Oasis Property. They work all around Australia, but it’s interesting to note that they’re predominantly looking at the southeast corner of Queensland right now, and I’m curious to know why.
He joins me. Hi, Gavin.
Gavin: Good day, Kevin. How are you?
Kevin: Good, mate. Thank you for your time. I’m very keen to talk to you about this. I don’t want to talk hotspots, but why the particular focus on South East Queensland?
Gavin: A really important… A bit “wonkish” point to make, but a very important point. Ever since 1988 – so you could say as long as Australia has been a global economy – Australians have always spent between 33% and 55% of their household incomes. Now, you’re looking at those southern states, Sydney and Melbourne, we’re there – 54.6%, 55% – whether you want to argue over a decimal point or not, we are there. It’s over.
Now, if you marry that with the fact 62% to 68% of people getting home loans at the moment, so they’re the homebuyers we know of, they’re investors, and investors are after only one thing – money. If they can’t get that growth out of Sydney and Melbourne – which they are not going to get, in my opinion and in almost every person’s opinion; they’d be breaking new records if they did, put it that way – then they have to move somewhere else.
Then you have the discrepancy between Sydney markets and your southern markets. Now, as you move down that channel of 4.7 million people in greater Sydney, 4.4 in greater Melbourne, you’re moving down to the markets like Gold Coast and Brisbane. You have up to a 65% discrepancy in house prices. But let’s not forget us in Queensland. We only have a 12% loss in wages, so somebody has to close that gap.
If there was deficiency in those southern Queensland markets insofar as the fundamentals, then I’d have a problem. But there isn’t a deficiency. Brisbane has great drivers. It actually is Australia’s fastest growing capital city and is expected to be so until 2030. Gold Coast, again, has got its other drivers.
Kevin: What’s going to slow the market? Do you see it continuing to grow in Sydney and Melbourne, and is there an opportunity for Brisbane to play catch-up?
Gavin: Yes, I do. There are two comments here. When I say I expect Sydney and Melbourne to stop that growth, I think it’s happening already. I know my business operates anywhere up to 200 inspections a week, and I can tell you right now it’s getting thin on the ground. Agents are getting away with high prices and, again, there are expectations there, and affordability is good because of interest rates, but I think that’s temporary.
Second to that also, let’s not forget where Brisbane currently is at the moment in regards to its price discrepancies. I would say it’s quite disingenuous to say that Brisbane hasn’t already grown. Let’s have a good look at just state one example. Give or take where you get your numbers from, Brisbane grew by about 7% last year – nice moderate growth, but nothing spectacular.
But then again you go to somewhere like New Farm, I’m seeing examples of 25% to 30% growth. I’ve certainly got that, and certainly some of the market is worth participating in. But then you go out to Chirnside and get minus 2% growth last year.
I’d suggest to you that absolutely there is growth but there are certain growth corridors, and there are some disingenuous comments out there at the moment that you can take a dartboard of Brisbane and throw a dart and you will make money. I think that’s pretty incorrect at the moment. I think that you could have made that statement two years ago, but you have to be very careful.
I think people are being overcritical of Brisbane at the moment in some particular areas where they’re overbuilt. But I think they’re right in your Woolloongabbas, your West Ends, the Portside of Hamilton, Newstead, and South Bank. I think those areas will be overbuilt and investors should stay away. But the areas of high demand where they’re really not letting any more stock out – Paddington, Auchenflower – I think those places will thrive.
Kevin: Let’s have a look at the differences between Gold Coast and Brisbane. It’s easy to say South East Queensland, but there are two major markets there, even if you exclude the Sunshine Coast. Let’s have a look at Gold Coast versus Brisbane.
Gavin: Absolutely. First and foremost, you have some great commentary out there by Bernard Salt at the moment in talking about Brisbane especially and Gold Coast and those two being intertwined possibly by 2035 and definitely by 2050. I think people should expect that sort of growth corridor to occur over a meaningful period of timeframe.
But let’s deal with meaningful timeframes like we have to deal with as investors – three years, five years, seven years. Gold Coast right now, people have just gotten so used to the comment that Gold Coast is oversupplied with property – they’ve been saying it so long – they’ve actually gone the other way.
The biggest proof in that pudding is vacancy rates. The areas that we’re participating in – Main Beach, Mermaid Beach, Broadbeach, Surfers Paradise – those vacancy rates now are down. Even though they’re actually at 1.8% across the board of Gold Coast, we’re finding more like 1% in those areas, and that’s a great symptom of undersupply.
Now, it’s true to say that places like Jewel and the new buildings that are coming up in Broadbeach and the like, those things will provide more stock on the market. However, they’re not going to be creating dwellings until about 2019 and 2020. There will be more of an undersupply, it will put more pressure on those vacancies, and I suggest also provide some really good yields. The problem with Gold Coast, it moves very quickly.
Kevin: Do you think running up to the Commonwealth Games, things are going to tick along quite nicely on the Gold Coast? What will happen after the Games? Is that when we’ll see that oversupply?
Gavin: It’s a really good question. It’s a great question. I think it’s a big coincidence that the date happens to coincide with what I think will tend to a peaking out of Gold Coast, but it is just a coincidence. It’s like people saying that Sydney was stimulated by the Olympic Games. I think, again, it was just another collision of all the stars and a blue moon that it just so happened that Sydney thrived after the Olympic Games.
The Commonwealth Games is a great line in the sand, so I think it fast-tracked a lot of infrastructure that was absolutely needed. I do know from the office of Tom Tate himself that they want a world-class city, and I know that all the energy is behind that.
So barring unforeseen circumstances – like a different persuasion of local government – I think Gold Coast is probably going to attract a lot more upside volatility – meaning growth – in the short-term, and certainly outstripping Brisbane for the most part. That’s not to say that Brisbane won’t be a better bet by 2030, however.
Kevin: Very good insights. Thank you so much for your time. Gavin McPherson, CEO for Oasis Property, and a good look there at the Gold Coast and Brisbane markets. I’d like to get us back sometime, too, to talk about Sunshine Coast because we’ve heard about a major oversupply of stock in that area for many years, so it would be good to get your take on that, too.
Gavin, for the time being, thanks for your time.
Gavin: My pleasure, Kevin. Thank you.