Since way back in 2012-13, when improving economic conditions in Sydney and Melbourne started their respective property market growth cycles, every commentator in the Land has sprouted that Queensland was on the cusp of strong price growth of its own.
Six years on and we are still waiting!
Everyone wants to know what’s really holding back Queensland property markets.
In three words, the short answer is ‘the State Government!’
There are many really solid underlying fundamentals for property markets right across Queensland and double-digit annual price growth is well within its potential in the near term. But the four areas which (collectively) have caused prolonged stakeholder frustration lays in the hands of the Queensland State Government.
An action plan to make the most of the world-wide tourism boom, increased infrastructure investment, private sector employment growth, and a genuine first home owner’s grant continue to be important missing links for Queensland real estate.
Once Australia’s economic powerhouse, Queensland’s economy has slipped further from a position of underwhelming to disappointing. Only Northern Territory (currently in the deepest economic downturn of any Australian state or territory since Victoria woe’s way back in the early 1990’s) and Western Australia rank lower than Queensland in CommSec’s latest State-Of-The-State’s Report.
Queensland represents 20 per cent of Australia’s total population however, only 15.9 per cent of new jobs created in Australia over the 4-years ending February 2019 were in Queensland. Underperforming!
What’s frustrating is that areas for improvement are easily identifiable yet, year after year, there’s no sign of action.
The Sunshine State scores an epic ‘fail’ for not capitalising on enormous economic opportunities from a world-wide tourism boom which commenced way back in 2012.
A high proportion of Australia’s best-performed property markets over the last five years have implemented initiatives to capitalise on tourism opportunities. The resultant benefit to local jobs and confidence made a significant contribution to the performance of their respective property markets.
In comparison to other Australian states, Queensland is a shorter flight from Asia, has a longer coastline, better weather, and a greater number of well-established regional cities to visit. These natural advantages should have resulted in Queensland tourism leading the nation for growth. When we then throw in one of the biggest events on the global calendar – the 2018 Commonwealth Games – the state should have broken all sorts of tourism records.
‘…Should have…’, but it didn’t!
One of the best measurements of tourism activity is airport passenger volumes. Domestic and international combined, there’s been a 13 per cent national increase in airport passenger volumes over the last five calendar years.
The strong airport passenger growth in Sydney (17 per cent), Melbourne (23 per cent) and Hobart (28 per cent) is a barometer of sorts for economic performance and property market performance.
In Queensland, Brisbane (9.9 per cent), Hervey Bay (13.3 per cent), and Townsville (3.6 per cent) certainly didn’t set any records. Mackay (minus 29.8 per cent) and Rockhampton (minus 20.8 per cent) aren’t renowned tourism locations however, their numbers still tell an important economic story.
As for that major global tourism event supposedly being the panacea Queensland tourism, growth in Gold Coast airport passenger volumes of 12.7 per cent is an epic ‘fail’. It seems Queensland is getting good at underperforming!
Of all major Australian tourism destination, Cairns is the closest to Asia. Its 19.5 per cent increase in passenger volume numbers is still somewhat disappointing when compared to several other regional locations.
Sunshine Coast (47 per cent) is the only Queensland standout.
Property Market Performance
Over the last three calendar years, Australia’s best-performed capital city property markets were Hobart (28.5 per cent), Melbourne (22.5 per cent) and Canberra (17.7 per cent). The capital city with the biggest increase in airport passenger volumes also was the best-performed property market and vice versa. Hmm.
Brisbane City Council produced an underwhelming 9.7 per cent increase in median house prices over the last three years.
The best-performed property market in Queensland, Australia’s most decentralised mainland state, over the same three years was Sunshine Coast with a 16.5 per cent increase in median house prices. There’s that connection to tourism growth again.
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The Gold Coast infrastructure boom associated with hosting the March 2018 Commonwealth Games didn’t translate into the much anticipated real estate boom. The median house price increased by a moderate 12.5 per cent over the last three years.
From recession in 2013 to now the state with the third best economy, Tasmania’s ability to seize the opportunity from tourism has played an important role in the strength of its real estate markets.
While Tassie’s growth in international visitors over the last six years is twice as high as all other states, what makes their success even more mind blowing is that, unlike mainland cities, they don’t have direct international flights. What’s their secret? It’s called a Strategic Plan and Action!
International tourism growth in Canberra, Melbourne and regional Victoria is also reflected in their strong economies and above-average property market performance.
Economic Performance
The only reason that the Queensland State Budget isn’t still in deficit is a recent increase in mining royalties following the bounce-back of commodity prices.
Over the history of mankind, an improvement in economic conditions is the precursor for practically every property market growth cycle. As for Queensland’s economy, we have to go back ten (10) long years for when the state’s unemployment rate was last below the national average.
With the exception of a good year in 2017, Queensland’s job creation numbers have been underwhelming for quite some time. Even then, these numbers include a higher than normal proportion of taxpayer-funded public sector jobs, effectively meaning that the unemployment rate makes the state economy look ‘better’ than what it really is.
Employment opportunities, housing affordability, and lifestyle (a very subjective characteristic) are the primary drivers of population growth. Locations which manage to achieve the trifecta will invariably have sustainably strong property markets.
The likes of Sydney, Melbourne and Canberra have been strong performers on the employment front and therefore attracted high levels of population growth. But their housing is expensive.
Brisbane, and all of Queensland, is less congested, has better weather, and has very affordable housing. But job creation?
More existing Australian residents chose to relocate from one city to Queensland last year than any other state. In fact, Queensland’s interstate migration last financial years was a gain of 24,698.
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The difference between this and past interstate migration peaks is that, instead of a strong Queensland economy enticing people to relocate for employment purposes, they are being squeezed out of cities like Sydney and Melbourne because of housing affordability and congestion pressures.
While Brisbane City Council is home to 25 per cent of the state’s total population, it only attracted 10 per cent of last year’s interstate migration.
The biggest beneficiaries of migration were Gold Coast, Sunshine Coast and Moreton Bay. Again, their respective economies are a bit stronger than metropolitan Brisbane.
For a few years, parts of Queensland suffered from an overzealous construction industry that created an over-supply of housing. Low building approval volumes in recent years has seen much (in some cases, all) of the surplus absorbed.
Queensland rental markets are now among the tightest in Australia. Vacancy rates right across the state are tight and landlords are now benefitting from rent rises, especially so in regional Queensland.
Infrastructure Investment
As with every location, there are projects underway and in the pipeline. A few of them are quite exciting, while the bulk of them are no more than what one would expect at any given time for a state with a population of 5 million people.
Suggestions by some of a Queensland ‘infrastructure boom’ is exaggerated. Queensland is batting below its weight!
Weak state government finances, which includes having the largest debt in Australia, is a significant impediment to the state’s ability to invest properly in much needed infrastructure. In addition to the essential social benefits, if the Queensland Government’s infrastructure investment improved to proportionate levels of New South Wales and Victoria, the economy and property markets would also improve.
Looking Ahead
Along with Real Estate Institute of Queensland (REIQ), I’ve said for several years that it’s an indictment on Queensland to not have a genuine first home buyer grant. The existing grant limits buyers to only 2 per cent of the property stock – new dwellings – because the very purpose of the state government initiative is to support the construction industry, not the buyer.
On the economic front, it’s a different picture in different parts of the state. According to government statistics, Mackay (3.9 per cent), Gold Coast (4.6 per cent), Cairns (5.3 per cent), and Darling Downs (5.5 per cent) all have a lower unemployment rate than Brisbane (6.5 per cent).
Regrettably, there’s no suggestion of an immediate end to Queensland’s prolonged economic frustration as a look over the front bonnet suggests a retraction in job advertisements. Alas, once again, it’s a better story elsewhere in the country.
For as long as commodity prices remain positive, private sector mining giants can be relied upon for the continued growth of the resources sector. Mackay is already cashing in. Rockhampton, Gladstone, Townsville, Toowoomba, Roma, and Brisbane will also benefit directly and indirectly in coming years.
It’s reasonable to assume that the construction sector can’t depend on new high-rise apartment projects for job creation for some time yet. All the more reason why the infrastructure pipeline needs to increase.
Given the enormous extra demand from Asia’s rising middle class, the potential for Queensland’s agriculture sector is exciting. The federal government has played their part by finalising several Free Trade Agreements and funding for the $10 billion Inland Rail Project. Farmers will do the rest if governments can sure-up water security through funding of irrigation projects.
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And that leaves tourism. Over to you, Queensland Government. If it were up to me, I’d start by checking out Tourism Tasmania’s strategy success.
Mark my words, double-digit real estate price growth exists in many Queensland locations. Whether or not that potential is realised is largely dependent on economic leadership.
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