OZ, The Great & Powerful. Now that should be the title of this missive. But we just don’t want to believe it. Most of the rest of the world does. But still we don’t see it.
The weekend papers ran headlines like: “Forget talk of gloom, this is all boom” & “We’re doing so well yet we keep whingeing”.
At dinner on Saturday night a mate summed up our current malaise in a nutshell: “We worry more about the Greek economy than the Greeks do.”
The Herald-Lateral Economics Well-Being Index (which measures both individual economic circumstances & happiness) shows that we should be doing very well. Our well-being is up 5% on last year. But still we whinge.
Well, there shouldn’t really be much to whinge about when it comes to residential property, especially in my neck of the woods, being Queensland & in particular the south-east corner of the state.
But still, there are many Doubting Thomases.
On a broad scale – interest rates are low & still falling; gross rental yields are now often in positive territory; the share market is improving & we have plenty of money saved – in term deposits; in our superfunds or in advanced payments on the mortgage.
The past shows us that it usually goes – cash first; shares second & property third. The experienced keep telling me you make your cash-flow by trading shares & real money in buying & holding property. You make your money in property when you buy, not when you sell.
In addition, this time around we have self-managed super funds, which hold over $1.5 trillion dollars in assets. Yet these funds have little exposure to property, though they can borrow (with strict rules) to buy property assets. This segment will be a big part of the residential investment scene over the next five years. They will add considerable momentum to this residential recovery.
Now for mine, it is a great time to buy in Queensland & especially in Brisbane.
10 reasons why it could be a great time for you to buy a property in Brisbane:
1. Queensland’s population growth increased by 75,000 last year – up 50% or 25,000 on 2010’s 50,000 annual increase. History shows that Queensland attracts a third of Australia’s annual population growth.
2. According to the ABS employment figures, 30,000 new jobs have been created in Queensland since late last year & more than half of these were in Brisbane.
3. Based on last year’s statistics, Queensland looks to be heading towards a massive undersupply, with 33,000 new dwellings needed during 2012, yet just 26,000 supplied – an undersupply to the tune of about 20%. The inner Brisbane apartment market is also undersupplied & in this case by as much as 40%. There is a need to build 2,650 new apartments across inner Brisbane every year, but just 1,600 new properties have been delivered (each year) since 2006.
4. The Brisbane vacancy rate is currently 1.9% & whilst rental growth has slowed down, median rents still rose across much of the state last year. Importantly, rental properties are showing good rental returns, averaging 5.5% gross.
5. Economic forecasters, BIS Shrapnel, predict that Brisbane’s dwelling values should start to grow in earnest during 2013, accelerating in 2014 as the economic upturn gains momentum & the underlying dwelling deficiency becomes more pronounced.
6. Official statistics show that new property prices across Brisbane have already risen by 4.9% during 2012, which is strong against the national average increase of just 1.4%.
7. There has been a 6% drop in the number of properties listed for sale across Brisbane during 2012. Resale supply is starting to tighten.
8. In addition, there has been a 10% increase in the number of settled sales across the south-east corner of Queensland over the last twelve months. Overall properties are now selling faster than new ones are being listed.
9. Whilst Brisbane isn’t an auction city, but when comparing Brisbane auction results so far this year, against those from early 2012, there has been a 56% increase in the number of properties sold at auction. There are increasingly bigger crowds at auctions & better results on the day.
10. Finally, Brisbane is now quite affordable, being the third most affordable major urban place in Australia. And this is one reason why Queensland’s population growth is increasing again.
It is a somewhat closed circuit – a Queensland & even Australia-wide residential recovery – it starts with improved liquidity; improving profits (& a better share market); competitive (often real) returns; higher household formation & scarcity – perceived or otherwise. Human nature slows & stops the cycle – being overly cautious now & in due course greedy. Confidence is the key. It is missing now.
OZ, The Great & Powerful. Yes, but only if you believe! Now that would make a great title for a movie, don’t you think?
Michael is the director of independent property advisory Matusik Property Insights and writes the Matusik Missive which is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.