06 Jul Why John McGrath loves SE Queensland – John McGrath
Find out the reasons why John McGrath say that South East Queensland is the hottest place to invest right now.
Kevin: I read with interest the other day that John McGrath, possibly one of the best-known real estate agents in Australia – and the CEO of McGrath Estate Agents, of course – has said that right now he favors South East Queensland as the only place to buy right now. And he joins me.
Good day John, thanks for your time.
John: Good day, Kevin. No, I think it’s the best place in Australia to buy without a doubt. In fact, I was just presenting to a group of our clients this morning on the Gold Coast, and I just said to them that I think in the next five years, there is not one part of Australia that is going to come close to the sort of growth that I’m expecting in South East Queensland.
Kevin: What’s behind that, John? Is it building of infrastructure, or is it on the back of what’s happened in, say, Sydney and Melbourne?
John: Two or three things, Kevin. Definitely, there’s no doubt that there’s been a strong building of infrastructure, especially when you look at what’s happening in Brisbane and now the Gold Coast and Sunshine Coast. There are a lot of good things happening – the Toowoomba airport that’s going in. There has been some really strategic and good quality investment in South East Queensland. That’s number one.
The second thing is the value gap. When you look at the cost of buying an equivalent home in the southern states of, say, Sydney and Melbourne, which have traditionally been very strong feeder for investment and for sea changes coming out of the southern state, now the value gap is now far too large.
In Sydney today, you’re probably going to pay $700,000 to $800,000 for one-bedroom inner-city unit – one bedroom – and as you would know well, in South East Queensland, in any number of beautiful cities and towns and regionals, for $700,000 or $800,000, you’re getting some of the best property available, not a one-bedroom unit.
So I think investors are going to see a very attractive proposition value for money. I think first-home buyers who can’t afford any longer necessarily to live in the big cities are going to look for value for money and quality lifestyles. And I think a lot of the baby boomers are going to look for a sea change and say “Well, I’m only an hour away from the kids if they live in Sydney or a couple of hours from Melbourne, and I really want to have a better lifestyle, I want better climate, and I want better value for money.” They’re going to take the money they’d made from their southern properties and I think they’re going to cash it in, buy a beautiful home up here and perhaps a couple of investments, as well.
Kevin: John, we talked about South East Queensland and that takes in Gold Coast, Sunshine Coast and Brisbane. Is it predominantly Brisbane you’re looking at, or are you including the two coasts, as well?
John: No, I think all of the areas… Brisbane is the big city and Brisbane obviously has a number of great investment opportunities, but I’ve had a very soft spot for the Gold Coast for years. I know that it’s really been hit very hard or was hit very hard during the GFC, and we’ve seen some improvement, but nowhere near [2:28 inaudible] like we’ve seen south.
I guess Brisbane is the easiest and strongest investment proposition, because it’s the biggest city, but I think if someone was prepared to be a little bit more speculative and look a little bit left field, I think Sunshine Coast, Gold Coast and Toowoomba are great cities and they offer great value for money, but in any of those areas, I think you’re going to see strong growth.
Kevin: Let’s talk about the Commonwealth Games for a moment. There has been some comment that the Commonwealth Games is really just a one or two-week festival and that it’s not going to make that much of a difference. Do you subscribe to that theory?
John: In reality, they’re right, and it will be a huge boost for tourism and it’s going to increase profile, but what you’re going to see… And I know it’s different for the Commonwealth, but when Sydney had the Olympic Games, it was a catalyst or a reason for people to feel optimistic and do something again.
If you look right now on the Gold Coast, there are more cranes than I’ve seen for many, many years, and some of those are public infrastructure and some of them are private development. I think it’s a good line in the sand, it’s coming up in a couple of years, it’s a big event, it’s going to bring a lot of tourism focus and hospitality opportunities to Gold Coast in particular, so I think that it’s more than just a two-week event, but most importantly, it is a reason to start getting on with life.
That’s really what this area has probably needed, because it was hit hard, and a lot of people really felt bruised by the GFC, and I think this has given people a reason for optimism.
Kevin: You mentioned the number of cranes not only in Brisbane but on the Gold and Sunshine Coasts, as well, but let’s look at Brisbane for a moment. The number of cranes in inner-city Brisbane is leading to a lot of talk about a glut of inner-city apartments. How do you feel about that? Do you share that concern?
John: I don’t in the medium term. I think in the short term, they’re probably right. If you look at it in the Valley, there’s a lot of activity and a lot of it is concentrated in small areas, but over time, we are still undersupplied in property, not oversupplied, so what might happen is you might find when some of these come on the market, there could be a short-term correction or stagnation, but what we’re going to find is in the longer term, they’re providing more supply, they’re providing more choice, and great rental accommodation as well as great buying opportunities.
What I think is that we will see perhaps a little period of just plateauing of those particular markets – not necessarily housing, but perhaps inner city… And Melbourne is the same, Kevin. As you know, Melbourne has had a lot of development in that inner-city market, but Melbourne and Brisbane are great cities with strong demand going forward.
The other thing that I was saying to the audience this morning, I met recently with HSBC Bank in Sydney and I was just talking to them about their influx of high-wealth overseas – particularly Chinese – buyers.
They said that they have seen a material shift from people saying when they come to HSBC, rather than buying in Sydney and Melbourne, they are now looking for value, and number one on their list is South East Queensland, which is the first time I’d ever heard that in terms of statistically. They said it is quite a big sample they took, and now their clients are saying, “Well, unless we’re going to live in Sydney or Melbourne, in terms of value and capital growth, I’m more interested in South East Queensland.”
Kevin: That’s quite amazing. Let’s move outside South East Queensland for a moment, John. Any regional areas in Queensland you’re favoring at present?
John: I think all of the coasts. I was in Townsville a couple of weeks ago [5:46 inaudible]. There are areas like Townsville and Cairns that are great cities. Some of them obviously were negatively impacted by the resources contraction and the unemployment that results from that, and some of them are feeling a little bit of pain at the moment, but that will move through.
I think all of Queensland is undervalued compared with perhaps New South Wales and Victoria, so I think any of the regionals, especially the coastal regionals are going to have good medium-term growth, because people are going to be looking for lifestyle. A lot of baby boomers between 50 and 75 years of age are saying “We’ve made money down south, we want a better climate, what can we get and where can we move to?” Whether it’s Byron Bay or Cairns or Townsville or Sunshine Coast, I think a lot of those areas are going to be attractive.
The other thing or the other trend is telecommuting. You and I aren’t sitting in the same studio today; we’re doing it by telecommunications. People are using the Internet, they’re using Skype and they’re using all sorts of other technological advancements, and they no longer have to necessarily be in Brisbane to do work in a Brisbane company. A lot of journalists we speak to are living two hours out – a lifestyle choice location – but they’re still able to conduct business.
I think a combination of sea change, an improving economy, and telecommunications, I think those things are all going better for this particular era.
Kevin: Earlier in our chat, you mentioned the market of Toowoomba. I guess that’s a classic example of an area where you could go and live and have a great lifestyle but still work in mainstream by using the Internet. Areas like Toowoomba, we’ve been waiting for that market to grow for almost decades now. Is that the answer for it, do you think?
John: I think the airport is going to be the biggest beneficiary to the Toowoomba market, but you can go there and for $375,000 buy a really nice home or investment property. You can’t do that in many parts of Australia in terms of decent sized cities anymore.
I think Toowoomba, which used to be a plane trip from the south and then a two- or three-hour drive from a major center, you can now fly directly in, and I think as that gets better now and people discover it… Of course, the Internet nowadays, so many people who could never discover areas like Toowoomba, they’d heard of them but they didn’t know about, they can go on to Domain or RealEstate.com, and they can look at properties, they can play videos, they look at floor plans
So I think you’ll find a lot of these good quality regional lifestyle areas are going to be more popular with investors and tree change and sea change.
Kevin: John McGrath, CEO for McGrath Estate Agents. Thanks for your time, John.
John: Always a pleasure. Thanks, Kevin.