If you have invested in the property market in South East Queensland over the past seven years, you may have been disappointed with your results. In fact, this market has been a terrible place to have invested as property prices have remained flat or even gone down a little in some cases.
So why would you want to consider investing into an area which has underperformed for so long?
Well, there are several factors that drive property prices, and they are pointing to the likelihood of South East Queensland being the market where the best returns will be in 2014. There are five main ones we will discuss today:
- Population Growth;
- Interest Rates;
- Economic Activity;
- Infrastructure and access to amenities; and
- The Property Cycle.
Recently the Australian Bureau of Statistics released their population growth numbers. By 2040 the population in Queensland will have grown from 4.6 million people to over 7.3 million, with the largest majority of those in the South East corner of the State.
These people will require a roof over their head, consequently pointing to a continuing demand for property. We are also starting to see a pick up in interstate migration as job opportunities increase in Queensland.
When it comes to interest rates we have been at very low levels for a while now. This has been great as it has meant that we have been able to get the mortgage under control, but it has also meant that the returns that have been achievable on our investments has been underwhelming.
We are starting to see investors looking to gain greater returns by looking towards the property and share markets. With interest rates likely to remain around the current levels for the near future the number of people looking for greater returns will be increasing.
At some stage though, interest rates will start to move up again. Interest rates rise when economic activity is strong and the RBA is trying to slow the economy. During times like these traditionally what this has meant for the value of investment property, is that prices rise and rental returns increase as well.
The three fastest growing economies in Australia are WA, NT and Queensland with growth well above the national average. Higher levels of economic growth lead to increasing employment and increasing population. The mining sector has remained strong in Queensland and now the Tourism sector is rebounding quite strongly, leading to greater confidence.
Infrastructure and Access to Amenities
The list of new infrastructure projects in the South East Queensland region are way too long to mention, from new airports in Toowoomba and new runways in Brisbane, to tunnels and highway upgrades. From new tourist projects, casinos to cruise line terminals, the list is quite extensive.
Major retailers are also very active with Ikea building a new store at North Lakes (Northern Brisbane), and major upgrades to almost all of the large shopping centres. Public transport is also very important and the Gold Coast light rail will become a significant feature of the transport system in that city. New train lines are also being built to Redcliffe and Springfield.
These projects do not go ahead unless there is a demand for them, and they are wonderful for creating new jobs.
The Property Cycle
It is fair to say that the South East corner of Queensland has missed out on the latest property market advances. This is clearly evident when you look at the median house prices in the major capital cities across the country.
Source: Residex, October 2013
When we consider the Brisbane, Melbourne and NT property markets, since the GFC we can see that the capital gains have been significantly greater in these other areas.
Source: Australian Bureau of Statistics
Accordingly, the South East Queensland property market has some catching up to do with the other markets around Australia. We can have a good deal of comfort knowing that the fundamentals that lead to investment property capital gains are all in place.
In the next instalment we will consider the top five investment locations in South East Queensland, as well as the four areas to avoid.
At Power Tynan, through our relationship with leading Australian Property Investment Group NPA, we are helping our clients to get started in property investment and to grow a portfolio of investment properties.
If you would like to discuss how we could partner with you to achieve your financial goals, please arrange a complimentary consultation via our website.
Geoff Doyle is a Property Consultant of NPA Property Group.
About NPA Property Group
Owned and managed by CEO Craig Whaley, NPA Property Group is a national property analyst company specialising in market research and building property portfolios. NPA is a market leader with a trusted reputation for client service and sound property advice.
The Power Tynan Group has recently partnered with NPA Property Group to provide clients with the full range of financial services from one organisation, including direct property investment.