Is the Queensland property market a basket case?

In another insightful market commentary, Brisbane based analyst Michael Matusikexplains what’s really going on in the Queensland Property Market. He says: Apparently the south east Queensland housing market is a “basket case”.  Well, that’s the view from the follicly challenged Louis Christopher, Managing Director of SQ Research.

Now Louis, whilst we share the same hairdo, we don’t share the same outlook.  In fact, your beloved Sydney and Melbourne are at the top of their cycles, whilst Brisbane is close to the market bottom.  If any market is likely to tank over the next 12 months or so, it is likely to be the southern capitals.  Yes, the housing market is pretty crappy up here at present – even real estate agents think so – but that doesn’t mean that house prices will plunge.

Being out of step with the other housing markets across the world might be making you a bit nervous.  Other property bears believe that it is only a matter of time before house values plummet, not only in Queensland, but across the country.  But I wonder.

With a strong “all things being equal” caveat, there are several reasons why I believe we will not see major falls in home values across Australia any time soon.

1. Population growth.  Whilst it has slowed in recent years, we maintain strong population growth. Our domestic population is aging, but our migrant intake is largely in the 20s to late-30s cohort, which means increasing household formation and greater demand for dwellings down the line.

2. Tight lending practices.  Our interest rates have room to fall – in many countries they don’t. We have full recourse loans, giving lenders the right to take any assets of the borrowers if repayment is not made. Many overseas markets which experienced a housing crash have non-recourse loans, which essentially allow borrowers to walk away from debt if things get too tough.

3. High equity.  According to mortgage broker AFG, current loan-to-value ratios are around 53%, reflecting our current conservative position towards debt. The long-term average is around 65%. The latest official statistics also show that Australia’s housing debt to housing assets is 29%, and our debt to overall assets is just 19%.  So in other words, we, as a nation, own around 70% of our homes –a far cry from the “jingle” loans that typified the US housing market collapse. In addition, household balance sheets are being strengthened by additional savings.  We are currently saving 10% of our disposable income, which amounted to a staggering $74 billion last year alone. This improved state of our personal finances further reduces the risk of house prices collapsing.

4. Undersupply.  Not for every dwelling type, but at the bottom third of the market.  This helps place a floorboard under property values.  Due to a range of reasons, mostly political, there is an undersupply of basic, affordable housing across our capital cities and now in our major regional centres too.  This is especially the case in Queensland.

5. Economy growth.  Whilst many of us would like to earn more money, and some feel poorer today than a few years back, nearly all of us can find work.  Housing markets usually crash in concert with large falls in employment.

6. Low unemployment.  As long as our unemployment rate stays below 8%, then wholesale falls in property values are unlikely.  It is currently 5.0% in Australia and 5.6% in Queensland.

7. Few mortgage defaults.  Whilst recent headlines screamed, “Rising mortgage arrears”, latest figures show just 1.37% of home loans across Australia are 30-days in arrears and 0.54% are three months behind in mortgage payments. The trend is upward, from 1.30% and 0.48% respectively on the previous quarter, but the number of home loans technically in default across Australia is very low.

It pays to take a long-term view.  Residential property values – when looking at resale performance rather than simplistic medians – have risen across Queensland by just over 10% each year over the last decade.  Over the last five years this has dropped to about a 6% annual gain and during the last 12 months, values have declined slightly by about 1%.

There is little doubt that house values are now falling across Queensland. How far they will continue to fall is unknown but I don’t think it will be anywhere near as far as most property bears believe.

Louis, there are some weak spots up this way, such as the new apartment market on the Gold Coast; poorly positioned second hand stock along the Queensland coast and investment properties in and around those suburbs inundated by January’s flood, but a few fallen trees doesn’t mean that the forest is dying.

Whilst the next three to six months might be hard, the strength of the 2012 Queensland summer might surprise you.  I suspect that any actual losses made during this “transition” period will be remade, and quite quickly, once the flood and cyclone rebuilding get underway.

In short – slow yes, crash no.

“This report is republished with permission of Matusik Property Insights.”


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit

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