Our report card comments would be…“Trying hard; is tentative most of the time; much more focused since 24 March last year but is capable of a better result. Continuation of the current work ethic will help turn the B grade into an A. Removing all distractions would be a big help.”
Here are ten things about the Queensland economy.
- Qld economic growth is expected to fall to 2.8% during fiscal 2014, down from 3.3% during 2012/13. Picking up again in 2015, with an annualised expansion of 3.1%.
- According to Standard & Poor’s, Queensland currently has a AA+ credit rating.
- Good news is the projected turnaround in the Qld state budget, from a -$6,699 million deficit this year, to a $783 million surplus in 2013/14. By the middle of 2015, Qld could have $2,700 million in the state coffers. Fingers crossed.
- State fiscal consolidation is to keep unemployment relatively high, at about 6% for the next 18 to 24 months.
- Qld shares 20% of Australia’s economic growth. Household consumption makes up for half of the Qld economy, followed by the public sector (25%) & private business investment (21%).
- When it comes to industry type, services makes up for two-fifths (44%) of the Qld economy. Retail trade holds a 12% market share; followed by mining & construction with 10% each. By way of comparison, mining makes up 35% of the WA economy & accounts for 20% of the economy in NT.
- Another positive is population growth. Qld’s annual population growth is now over 91,000 per annum; almost double that of just two and a bit years ago.
- Capital expenditure is yet to peak – expected to take place this quarter – as the new LNG construction of recent years is taking some time to kick-in, economically speaking.
- The recent coal price rises are positive, but volumes traded are not expected to lift in coming years. Any ‘hole’ in this resource income is forecast to be filled by an increase in LNG exports from the mid-decade.
- New housing starts continue to slide sideways, but growth – albeit slow – is expected in the new housing construction over the next 12 months. More starts are expected in fiscal 2015 & 2016. Fingers crossed again.
My comments are as follows:
Queensland must return to a budget surplus & fast. It looks like this will be the case. Higher unemployment is the short-term fallout, but a higher credit rating will see even more business & construction investment in the state.
Whilst population growth is increasing, little is coming (yet) from interstate. Most is from natural increase (more babies compared to deaths – due largely to the baby bonus of recent years) & from overseas migration; many are from nations with large family households or from areas less fortunate than Australia. Hence they migrate. Sharing rental accommodation is the norm.
The end result is less new housing starts than at this stage of the cycle when compared to past upturns. It will take some time before Qld’s current population growth translates to new housing demand. It will happen, as migrant prosperity grows & as young families upgrade, but not for a few years yet.
Higher net interstate migration will also return to Qld, especially from NSW & especially from western Sydney. Available work in Queensland & low housing affordability in Sydney are the two main drivers.
They will start working, in tandem, in Qld’s favour in coming years. Interstate migrants – in the past anyway – equate to more new housing demand. A new interstate start often means a new house.
So this is good news. The B- grade should turn into an B+ to A- by this time next year. If things go to plan, Qld should get back its AAA rating within the next 24 months. For the third time this Missive…fingers crossed.
Article originally published Matusikmissive.com.au on 30/4/2013
Experts warn of ‘debt bomb’ as housing downturn worsens
That’s according to the sobering 60 Minutes segment Bricks and Slaughter which aired last night, revealing the country’s property downturn was just the tip of the iceberg.
According to reporter Tom Steinfort, the current slump is actually “more like falling off a cliff”, with a number of real estate and finance experts claiming houses could plummet in value by up to 40 per cent in the next 12 months.
If that happens, it would also cause an economic “catastrophe”.
Mr Steinfort spoke with data scientist Martin North from Digital Finance Analytics, who said Australia was uniquely vulnerable when it came to an economic crash tied to a property downturn.
“At the worst end of the spectrum, if everything turns against us we could see property prices 40-45 per cent down from their peaks, which is a huge deal,” he said.
“That’s higher than any other country in the Western world by a long way.
“There’s probably no country in the world more susceptible to the ramifications of a housing crash than Australia. We are uniquely exposed at the moment.”
Mr North said Australia was now in the same position as the US was back in 2006 and 2007 — a position which triggered an economic collapse.
“As a society, and as a government, and as a regulatory system, we’re all banking on the home price engine that just goes on giving and giving and giving. It’s not going to,” he said.
“We’ve got a debt bomb, we’ve got a debt crisis and at some point it’s going to explode in our face.”
He said foreclosures had also risen by 600 per cent in the region.
“The mortgage stress is definitely being felt especially in this area,” he said.
60 Minutes also spoke with several Aussie homeowners who gave harrowing details of the stress they faced trying to pay off their mortgages, including having their power turned off and being “hounded’ by their banks.
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Market analyst Louis Christopher of SQM Research said the market had been “clearly overvalued”, labelling the downturn as the “correction we had to have” — at least in Sydney and Melbourne.
“On our numbers, Sydney was effectively over 40 per cent overvalued. And Melbourne was overvalued by about the same amount,” he said.
But property investor Bushy Martin said the blame lay squarely at the feet of buyers who “mortgaged themselves up to their eyeballs” in a bid to snap up dream homes before being able to afford them.
However, the segment has also sparked backlash online, with some claiming the situation had been exaggerated.
One Reddit user branded the report as an example of “alarmist journalism and scare tactics”, while another said it was “dramatic and cringe-worthy”.
Others also criticised the segment for making it seem like all homeowners would be affected, when the downturn was actually mainly focused in the NSW and Victorian capitals.
And some said it was unfair to blame the banks for the situation, and that homeowners needed to take responsibility for their own decisions.
That was in response to comments made by one homeowner on the program, who said the bank had “suddenly switched the mortgage to interest and principal”, raising his repayments by 57 per cent.
“The interest only part annoyed me the most. The bank didn’t ‘suddenly change’ your repayment from (interest only) to (Principal and interest) your IO term expired. You a) knew this would happen and b) assumed the bank would renew it when it expired. I hope this speculator gets burnt first,” one Reddit user said.
Related article: Experts warn of ‘debt bomb’ as housing downturn worsens
Queensland is the next property hotspot, experts say
As New South Wales and Victoria continue to experience weakness. Queensland is expected to take the lead, a National Australia Bank (NAB) poll of property professionals revealed.
According to the survey, industry experts project house prices in Queensland to increase by 0.7% next year and 1.3% in two years.
Some areas seen to perform strongly over the next year include Brisbane, Cairns, the Gold Coast, and the Sunshine Coast. Out of the suburbs, Coomera and New Farm are expected to realize robust gains.
Meanwhile, Queensland’s rental market is also poised to enjoy an upward boost, growing by 1.3% next year and 1.9% in two years. This is despite the stricter rules on housing investment.
The respondents of the survey also expect Queensland to retain foreign buyer interest. In fact, the share of foreign sales hit a four-year high of 22.8% over the previous quarter.
The results of the survey go against NAB’s own projection of the market. For instance, the bank expects house prices to remain flat in Brisbane over the next three years. Unit prices, on the other hand, is seen to fall by 4.5% over the next year.
NAB chief economist Alan Oster said Brisbane’s housing market seemed to be going sideways and its unit market still creates concern.
“It hasn’t peaked yet, so that’s good. We’re seeing quite strong economic activity in Queensland, so that always helps,” Oster said, as quoted by The Courier-Mail.
Gold Coast house values record the biggest growth in Queensland
The Gold Coast has recorded the strongest growth in house prices in Queensland over the past 12 months.
GOLD Coast house prices are leading the way in Queensland, up six per cent in the past 12 months to an average $620,000.
The latest figures by the Real Estate Institute of Queensland show homes on the Glitter Strip are $35,000 more on the same time last year.
Unit prices are up 1.9 per cent to $428,000.
REIQ data reveals houses on the Glitter Strip are worth $35,000 on the same time last year.
REIQ’s Queensland Market Monitor for March said the strong population growth came on the back of infrastructure projects such as the $550 million Gold Coast Health and Knowledge Precinct and M1 upgrades.
“The property market has been one of the big winners from the sporting event as the $1.5 billion infrastructure investment has boosted confidence and demand for housing in the region,” the report stated.
“We expect house prices will show an upward path in 2018. However, this growth will most likely be more moderate.”
A quiet real estate period leading up to, and during, the Commonwealth Games likely contributed to a slight drop (-0.3 per cent) in the March quarterly median sales price, the report reveals.
Andrew Henderson says a growing population and employment opportunities were contributing to a strong property market. Picture: Jerad Williams
REIQ Gold Coast zone chairman Andrew Henderson said he expected interstate migration to continue to benefit the city.
“I expect the market to remain strong,” he said.
“There is a heavy amount of interstate buyers moving here.
“I was at an auction recently where the winning bidder was from Sydney and the underbidder was from Melbourne.”
Mr Henderson said growing employment opportunities were also attracting homebuyers to the city.
The Gold Coast property market is expected to remain strong.
“We have some of the best health facilities in the country and our universities are world recognised.
“Those two things alone complement the tourism industry and the lifestyle aspects that the Coast offers.”
The report found the fastest-selling suburbs on the Coast included Worongary, Merrimac, Highland Park, Mudgeeraba and Carrara.
It also revealed the rental vacancy held tight throughout the first quarter of the year at 1.1 per cent.
Andrew Bell says the Coast had evolved from a tourist town into a vibrant city with an expanding economy. Picture Mike Batterham
Ray White Surfers Paradise Group CEO Andrew Bell said the Games heralded the next chapter for the Coast, as it evolved from a tourist town into a vibrant city with an expanding economy.
“The city’s property market is riding the irreversible momentum that has now come to the Gold Coast in terms of economic diversity and with more employment options we will need more housing options for people,” Mr Bell said.
“We are no longer going to be subject to tourism upsides and downsides as we were in the past because our economy has well and truly diversified beyond just tourism.”
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