A LEADING property market analyst says the Queensland economy has stalled, in part because its housing costs are no longer cheap and a tax rebate system is needed to reduce costs, encourage interstate migration and spur demand.
Reported in the Townsville Bulletin, Bill Morris, author of The Midwood Report, writing in the latest edition, said the parlous state of the Queensland economy is evidenced by a number of economic indicators including a fall in home-construction starts, and drops in household consumption expenditure and private gross fixed capital formation.
The Midwood Report said housing construction in Queensland in 2010 failed to match underlying demand with the annual home-start figure estimated to be around 32,500, well short of the estimated 45,000 new homes needed to service population growth.
It said home starts in the half-year to June totalled 16,259, equivalent to a total annual figure of 32,538.
The report claimed its estimate for the year is supported by figures for the September quarter when home starts represented a half-year equivalent of 13,296, a number well down on the preceding half-year.
“Neither approvals nor commencements have shown any sign of improvement since the global financial crisis,” it said.
Additionally, household consumption expenditure is the lowest of any mainland state at 2.2 per cent and the same is true for Queensland’s private gross fixed capital formation, which is sitting at minus 5.6 per cent.
Mr Morris said the stall is in part due to the decline in population growth, in particular interstate migration, which has fallen from a peak of about 50,000 in 1990 to not much more than 10,000 in the 12 months to March 2010 its lowest level in 25 years.
“The Queensland economy has historically relied on population growth,” Mr Morris said.
“Population growth fuels housing construction and there are the obvious multiplier effects for related building trades and professionals.
“The economic situation is not dissimilar to that of the 1970s when Joh Bjelke Petersen found a way to entice southerners to move to Queensland.
“In that case it was the removal of death duties and low taxation.”
Mr Morris said the economy has since matured and Queensland, while short on infrastructure, is now a relatively high-tax state where housing is more expensive than in Victoria.
“An innovative system of tax rebates is required in the building industry to reduce the relative cost of housing,” he said.
What all this means is that property investors will have to be very selective when investing in Queensland. Of course like all property markets there are markets within markets and some segments of the Queensland are still performing well. For example well located properties within 5 to 10km form the Brisbane CBD are still in strong demand and growing in value. Buy the right property at the right price in this type of location and it will still make a great long term investment.
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