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South East Queensland Market 2016-17: This Is Your Life

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South East Queensland Market 2016-17 This Is Your Life

With the year almost at an end, it’s that time when we all stop to reflect on what has passed, before we move on into the future. This most certainly applies to the development and property industry, where we take the time to reflect on the market and where it may be heading in 2017.

Experts from Colliers International in Brisbane and the Gold Coast have take the time to provide commentary on the South East Queensland capital market and metro markets to review the year-that-was and to provide a forecast for the coming new year.

Capital Markets

By Tom Barr, National Director of Capital Markets

2016 Overview

In 2016 we have seen an increasing buy-side capital demand, particularly from offshore capital, fuelled largely by the substantial yield arbitrage available between Brisbane, Sydney and Melbourne. Domestic asset managers have been increasingly active in the market representing offshore capital mandates, as the listed A-REIT’s have found it difficult to compete due to their required hurdle rates of return.

In 2016, our team has received over 85 per cent of bids from offshore parties for the sale campaigns of 41 George Street and Green Square, with the origin of offshore capital on these campaigns emanating from Singapore, USA, Korea and Germany.

Only three major office investments have traded thus far in the core CBD in 2016. The lack of on market core CBD office opportunities has seen investors turn their attention to quality large scale assets outside the traditional CBD grid.

We have seen that with the sales of 100 Skyring Terrace Newstead (50% interest), ATO Upper Mount Gravatt, and the pending sale of Green Square Fortitude Valley.

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Record high vacancy rates in Brisbane have resulted in a two-tiered leasing and capital market, as tenants and buyers continue to be focused on the prime-grade end of the market. However with forecasts showing an improving leasing market over the next couple of years, we anticipate an increasing number of buyers willing to go up the risk curve and make counter cyclical plays in the secondary-grade CBD market.  We have seen this beginning to emerge, with the transactions of 333 Adelaide Street and 444 Queen Street (66% interest) in 2016.

2017 Forecast

Given the backdrop of limited supply and unprecedented buy-side capital demand, in 2017 we anticipate market yields will continue to tighten and are expected to breach 5.5 per cent in the core CBD market. Buy-side capital demand will continue to be dominated by offshore groups

We anticipate an increase in the number of owners wanting to capitalise on the unprecedented strength of buy-side capital demand from offshore, and divest out of their investments. The demand from offshore groups will strengthen further in 2017.

Given the heightened geo-political and macro-economic situation globally, and a surprising outcome in the US presidential election, we foresee an increasing number of transactions will be driven by a motivation to repatriate offshore capital back to select origins.

We have already seen this begin to emerge with a number of transactions being driven by repatriation of Malaysian capital.

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Metro Markets

By Hunter Higgins, Director of Investment Services

2016 Overview

In the Brisbane metro market there has been a noticeable change in the demand shift from residential development sites to quality investment stock. With this change in direction, we have also experienced a significant lift in student accommodation and aged care facility developments.

Developers are focusing on investment grade stock with value add potential, and investors are very active in the market due to low interest rates and volatile stock market.

Distinct lack of quality stock has created competitive tension between prospective purchasers, which has ultimately reflected in sharper yields and increased end sale prices. We have also had a significant increase in auction success with 87.5% of properties transacted via auction.

2017 Forecast

In 2017 we are likely to see a noticeable change in site values due to supply, and the yields for quality stock will continue to remain robust. We are already experiencing significant inbound capital from offshore, investors are now starting to focus on Queensland, due to excessive yields in Sydney and Melbourne.

Demand will remain strong for the CBD and immediate fringe quality blue chip and premium assets such as fast food, service stations, neighbourhood retail and shopping centres. Any value add opportunities with quality national and multinational tenants are favoured.

In Brisbane we are also seeing Asian buyers channeling capital into quality assets. According to CityScope, 43 out of the 137 strata-titled ground floor retail units in the Brisbane City are under Asian ownership.

Originally Published: https://www.theurbandeveloper.com/

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Opinion

Experts warn of ‘debt bomb’ as housing downturn worsens

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debt bomb
AUSTRALIA is facing a “debt crisis” — and the property market and our entire economy are at risk as a result.

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.

“There’s $1.7 trillion held by the banks in mortgages for owner-occupies and investors. And that’s about 65 per cent of their total lending.

“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.”

debt bomb

Melbourne homeowner Mohammed Souid told 60 Minutes his family was experiencing mortgage stress. Picture: 60 MinutesSource:Supplied

It’s a sentiment shared by Laing and Simmons real estate agent Peter Younan, who said the median house price in his patch in Granville in Sydney’s west had dropped from $1.2 million to $1 million in just one year — a shocking $200,000 plummet.

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.

What does a million dollars buy in Aussie capital cities?

debt bomb

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.

debt bomb

Property investor Bushy Martin says homeowners are to blame for the crisis. Picture: 60 MinutesSource:Supplied

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

Source: news.com.au

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Opinion

Queensland is the next property hotspot, experts say

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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.

Source: brisbaneinvestor.com.au

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Opinion

Gold Coast house values record the biggest growth in Queensland

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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.

Gold Coast house values record the biggest growth in Queensland
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.

Gold Coast house values record the biggest growth in Queensland
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.

Gold Coast house values record the biggest growth in Queensland
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.

Gold Coast house values record the biggest growth in Queensland
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.”

Source: brisbaneinvestor.com.au

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