Does Brisbane still stack up?

[Green Grass]

Hi all, there are so many threads here from investors looking to buy in Brisbane, and I am one of them but I have concerns that the Brisbane economy is following Perth's recent path..noting Queensland/Brisbane has a similar (but smaller) reliance on mining for its economic stability.

I attended a bank Chief Economist presentation last week and he noted the following in relation to Queensland:

1. Consumer spending growth per capita (per head) is zero. By comparison NSW is above +2% and WA -1%.

2. Labour income per capita is down 2.3% (NSW up 0.1%) in past 12 months

3. Unemployment is on an upward trend, currently approx. 6.7% - above national average. WA is approx. 5.6% and rising. NSW and VIC both around 6%.

Rising unemployment, slower spending and lower incomes point to a weak demand story for Brisbane which may well continue with forecast 10%+ reductions in mining investment expected over the next few years.

From a purely property perspective, it was interesting to note:

1. Dwelling approvals at record levels across Australia - approx. 230,000 annualised but high rise unit approvals increasing from approx. 2200 per month around 9 months ago to 6300 per month today (mostly driven by VIC and NSW).

2. While the current approval levels almost cover Australia's current housing shortage (approx. 240,000), problems exist across the States given the NSW shortage is 60% of the nation's shortage and VIC's shortage is only 3% of the nation's shortage. I would be very concerned on this information investing in new build city centre Melbourne apartments.

3. Brisbane's house price growth is close to zero and the growth rate has substantially slowed in the past 12 months (6 month growth rates annualised). WA down approx 3%. They used CoreLogic RP Data, APM, ABS and Residex as sources.

I understand that the Brisbane median price is way below the Perth, Sydney and Melbourne (no sustained post GFC and floods recovery) but what other factors makes so many Somersoft investors look to Brisbane as the next market to take off. Economic factors make me concerned that 2012 was the time to invest there and its period of reasonable growth has past or is passing. If there are property fundamentals that make Brisbane still attractive despite its deteriorating economic environment, I would welcome any comments.

Thanks
GG

 

[jerrybee]

Those are all valid points. I would say one of the key differences between Perth and Brisbane is that Perth already went through a significant boom whereas Brisbane has remained static (I don't consider 2011-2013 real growth, just a correction after the flood + public sector scale backs).

One point I'd like to add to the list - what impact does the new state government have? I don't follow politics at all so I've been curious to hear from people more political savvy than me...is this a good or a bad thing?

 

[MIW]

Most analyst suggest for property growth we require population growth and wage growth, so yes, economy and jobs and people are required to sustain that. Well, who has a crystal ball?
I suppose the figures you presented suggest slight slow down, so I do not predict substantial growth as Sydney is experiencing right now, but how can we predict what can happen in the future?
If you are invested in major cities where there is that growth then perhaps the IPs will track along, but in more remote areas there could be a concern.
Anyway, if the fundamentals and your strategy stack up then why worry?
Remember what Warren Buffett says, ?Be Fearful When Others Are Greedy and Greedy When Others Are Fearful?....especially if investing for long term, never to sell!

 

[natedog]

I guess it depends on the specific property you are looking at, but this could be said of any market anywhere in Australia.

I still see areas in Brisbane where you can purchase today for prices close to what they previously sold for 6-7 years ago, but the yields have increased making today's buying price "seem" good value.

 

[Angel]

One point I'd like to add to the list - what impact does the new state government have? I don't follow politics at all so I've been curious to hear from people more political savvy than me...is this a good or a bad thing?

I work for EQ. The LNP state govt repealed many IR laws, effectively making it possible to sack anyone anytime in the PS. One of the first things the new govt is doing is reversing that, improving job security and reducing one of the drivers of low consumer confidence.

The previous Labor govt doubled the charge for Stamp Duty on OO houses in 2011/12 but it was changed back again after the real estate industry ground to a total standstill.

 

[jerrybee]

I work for EQ. The LNP state govt repealed many IR laws, effectively making it possible to sack anyone anytime in the PS. One of the first things the new govt is doing is reversing that, improving job security and reducing one of the drivers of low consumer confidence.

The previous Labor govt doubled the charge for Stamp Duty on OO houses in 2011/12 but it was changed back again after the real estate industry ground to a total standstill.

Are these policies potentially game changing? If not, are any of their policies potentially game changing? Is there anything that they have planned reason to get excited or are they more or less the same as the last govt with a few bells and whistles on top?

 

[marg4000]

It seems to be a case of "wait and see".

Projects have already been cancelled. Previously approved developments and projects are being re-examined with a view to cancelling.

I can't see anything much happening in the next year or so.
Marg.

 

[sumterrence]

It seems to be a case of "wait and see".

Projects have already been cancelled. Previously approved developments and projects are being re-examined with a view to cancelling.

I can't see anything much happening in the next year or so.
Marg.

Are there any supports of this claim? not trying to challenge you but more so in my own interest

 

[Azazel]

I agree, there is nothing in the usual drivers to indicate Brisbane will pick up in the short term.
'Experts' have just spouted the same line - "It's Brisbane's time." Doesn't seem very scientific to me.
Besides rising unemployment, the auction clearance rate is consistently well below Adelaide and Canberra. And the 'experts' are still talking Canberra down.

 

[marg4000]

Are there any supports of this claim? not trying to challenge you but more so in my own interest

Project cancelled - Gold Coast cruise terminal.

Project recalled - huge residential estate west of Samford.

More under review.
Marg

 

[Encarta]

I agree, there is nothing in the usual drivers to indicate Brisbane will pick up in the short term.
'Experts' have just spouted the same line - "It's Brisbane's time." Doesn't seem very scientific to me.
Besides rising unemployment, the auction clearance rate is consistently well below Adelaide and Canberra. And the 'experts' are still talking Canberra down.

I don't know how many times people keep telling you this on here, but auction clearence rates mean jack in Brisbane-

 

[see_change]

Project cancelled - Gold Coast cruise terminal.

Project recalled - huge residential estate west of Samford.

More under review.
Marg

Technically that project , not projects ....

Cliff

 

[Angel]

Huge estate west of Samford? I'm thinking the one at the back of Ferny Grove and The Gap. Cedar Creek past Samford is very desirable Acreage. Samford Valley is all acreage as far as I know. New estates "Parkland Residential" and no, I cant afford to live there (doing dummy spits)

For those of you looking to escape the unaffordable rat race known as Sydney - for a scenic rural lifestyle well under $1m and an easy commute to the city - may I present Samford Valley. Beautiful one day, perfect the next.

It makes Eatons Hill look positively Bogan

 

[Angel]

I think the new government ministers, most of whom have several portfolios and have never been in Parliament before, are still standing around in total awe or looking over their shoulders for knives.

I don't recall anything much happening really since the election. All I recall has been a royal baby, the new minister who used to bash his wife, Anzac Day and the earthquake in Nepal. You noticed anything else happening, Marg?



Darn, I shouldn't have said anything about the government. Now you guys will never invest here

 

[hugh72]

Project cancelled - Gold Coast cruise terminal.

Project recalled - huge residential estate west of Samford.

More under review.
Marg

Despite new estates creating building jobs I think new residential projects not going ahead leads to increased demand for existing stock and higher prices

 

[impermanence]

I am interested in Brisbane more for the long term fundamentals than anything else, it fits in well with my strategy.

It is the cheapest of the 4 biggest cities in Australia, it has the 3rd largest population, it has solid population growth, there are some headwinds there but I would say it is a pretty safe bet long term.

This is based on my expectation that the existing population will continue to gravitate towards big cities in the coming decades, overseas migrants are likely to settle in the big cities and foreign capital is more likely to find a home in a capital city than in a regional town.

I would say from a population growth, undersupply and strength of economy point of view, Sydney would be preferable to invest in. It looks like Sydney's prices have run way ahead of fair value at this point, so Brisbane is the next best option in my opinion.

 

[Azazel]

I don't know how many times people keep telling you this on here, but auction clearence rates mean jack in Brisbane-

Why don't you count them and let me know, since you're keeping such a keen eye on it. Will you need all 11 toes?
Are you trying to say the auction 'clearance' rates 'don't mean anything' in Canberra and Adelaide either?

 

[INVSTOR]

I think Brisbane is due for some steady growth due to property investors wanting to invest somewhere that hasn't risen much yet.
It does usually start it's cycle after Sydney peaks also.

 

[Morbius]

Why don't you count them and let me know, since you're keeping such a keen eye on it. Will you need all 11 toes?
Are you trying to say the auction 'clearance' rates 'don't mean anything' in Canberra and Adelaide either?

It's true. Auction clearances pretty-much don't mean jack in Brisbane. Relatively few properties even go to auction, and most get passed in anyhow.

I do take a mild interest when I start to see properties of a kind that rarely go to auction start having an auctions announced in any quantity.

 

[JDP1]

Hi all, there are so many threads here from investors looking to buy in Brisbane, and I am one of them but I have concerns that the Brisbane economy is following Perth's recent path..noting Queensland/Brisbane has a similar (but smaller) reliance on mining for its economic stability.

I attended a bank Chief Economist presentation last week and he noted the following in relation to Queensland:

1. Consumer spending growth per capita (per head) is zero. By comparison NSW is above +2% and WA -1%.

2. Labour income per capita is down 2.3% (NSW up 0.1%) in past 12 months

3. Unemployment is on an upward trend, currently approx. 6.7% - above national average. WA is approx. 5.6% and rising. NSW and VIC both around 6%.

Rising unemployment, slower spending and lower incomes point to a weak demand story for Brisbane which may well continue with forecast 10%+ reductions in mining investment expected over the next few years.

From a purely property perspective, it was interesting to note:

1. Dwelling approvals at record levels across Australia - approx. 230,000 annualised but high rise unit approvals increasing from approx. 2200 per month around 9 months ago to 6300 per month today (mostly driven by VIC and NSW).

2. While the current approval levels almost cover Australia's current housing shortage (approx. 240,000), problems exist across the States given the NSW shortage is 60% of the nation's shortage and VIC's shortage is only 3% of the nation's shortage. I would be very concerned on this information investing in new build city centre Melbourne apartments.

3. Brisbane's house price growth is close to zero and the growth rate has substantially slowed in the past 12 months (6 month growth rates annualised). WA down approx 3%. They used CoreLogic RP Data, APM, ABS and Residex as sources.

I understand that the Brisbane median price is way below the Perth, Sydney and Melbourne (no sustained post GFC and floods recovery) but what other factors makes so many Somersoft investors look to Brisbane as the next market to take off. Economic factors make me concerned that 2012 was the time to invest there and its period of reasonable growth has past or is passing. If there are property fundamentals that make Brisbane still attractive despite its deteriorating economic environment, I would welcome any comments.

Thanks
GG

Markets within markets and all that...

Its a very diverse place.
The economic fundamentals of Brisbane City and surrounds are quite good. Not necessarily so in other QLD areas. Brisbane BCC can stand on its own feet even with coal and LNG prices in the toilet, and that's what its currently doing.
Its a tough place to read because some commentators categorise GC into Brisbane, some the whole SEQ, some SC+Brisbane+GC... hence the diversity of opinion.