All that sun makes everything sweeter
Whatever the drawbacks, Queensland remains hot for investment
WILL Australians ever fall out of love with Queensland? It seems no matter what she does or what mood she’s in, the passion lingers. Victoria is repeatedly jilted. Sydney is spurned by those who yearn for Queensland’s warm touch. Adelaide has her charms but can’t compete with the precocious beauty of bikini- clad Queensland.
Even when substance fails to match the image, Queensland continues to attract suitors. Suffering from clogged arteries, bad circulation and serious dehydration, well, none of it’s an issue. She’s just soooo hot.
There’s the very real prospect that the region could run out of water, which has led to feverish fast- tracking of a pipeline to bring treated effluent to a thirsty populace. A desalination plant costing more than $ 1 billion is being built, two unpopular dams will cost $ 2 billion- plus and a network of pipelines will link various water storages, also at hideous cost.
The region’s roads are choked and one small part of the attempted solution, the North- South Bypass Tunnel, alone is costing $ 3 billion.
The Ipswich corridor is one of the great growth areas of the nation but its motorway is clogged at key times of the day, while state and federal politicians make and break promises amid much finger- pointing.
The state’s southeast also has the most seriously underperforming health system in the land.
Queenslanders may soon be drinking their own effluent but no one seems to care — interstate refugees continue to pour into the region. If you have an accident on a southeast Queensland road, the hospital system probably won’t be able to treat you — yet property buyer enthusiasm is undiminished.
As one measure of this, the median price for Brisbane houses rose 17 per cent in the year to September while unit prices rose 10 per cent, according to researcher Australian Property Monitors.
Another measure is bad news for renters but positive for investors: a recent survey nominated Brisbane as the nation’s most expensive rental city.
In Brisbane, 28 per cent of average earnings is spent on rent, compared with 25 per cent in Sydney and 23 per cent in Melbourne.
Economic forecaster BIS Shrapnel, in its Residential Property Prospects 2007- 2010 report, predicts higher growth in house prices in Brisbane than in other capital cities over the next three years.
And the Property Investors Survey Report by financier Ashe Morgan Winthrop finds that property professionals have a particularly positive outlook for Queensland, which is the most favoured state or territory for property investment prospects over the next six months.
The key point is this: despite all the infrastructure problems, it makes absolute sense that buyers of real estate have such a focus on Queensland.
It’s a property hotspot that never seems to cool down. There’s always somewhere pumping in Queensland.
My method of identifying hotspots is to find locations with some of the 10
hotspot creator categories’’ which are instrumental in generating outperformers. Normally I apply them at a micro level, looking for towns or suburbs with three or more of the 10 key qualities. But it works on a macro level too and it explains why Queensland continues to deliver the goods for property investors.
Six out of 10 creator categories — lifestyle features, boom towns, transport infrastructure, sea change, government decisions and the stayers — are all big influences on the Queensland property market.
You can make arguments for some of the remaining categories as well, but we’ll focus on those six.
One of the biggest drivers of property values is lifestyle features — influences such as water, the beach, golf courses and cafes.
Water is the most potent generator of long- term real estate wealth and Queensland is awash, pun intended, with alluring water- based environments — not just the ocean but canalresidential enclaves and wealthcreating river settings. The warmth of the climate just makes it all the sweeter.
The fastest short- term capital growth lately has been found in the boom towns, those places boosted by the resources boom or major industrial developments.
Queensland is a boom economy driven by myriad boom towns — Gladstone, Townsville, Emerald, Dalby, Mount Isa, Moranbah, Mackay, Sarina and many more.
You can argue that southeast Queensland — that great mass of population encompassing the Gold Coast, Brisbane and the Sunshine Coast — is one big boom town, thanks in part to its infrastructure issues.
The region’s desperate efforts to play catch- up with the needs of water and road infrastructure are generating activity measured in the tens of billions of dollars — creating plenty of jobs and placing pressure on housing supply.
Transport infrastructure is a huge creator of capital gains. When a destination has been difficult to reach, a new motorway or bypass can lift its prospects. Right now, Queensland is embarking on a program of road, bridge and tunnel building made necessary by the hordes who have decided the grass is greener and the sand more golden up north.
The Tugun Bypass, now under construction, will have multiple effects both north and south of the NSW border. The much promised upgrade of the Ipswich motorway will cement the rich potential of the Ipswich corridor, where government spending and private sector development run to tens of billions of dollars. The Pacific Motorway, the Centenary Highway and the Mt Lindesay Highway are all targeted for upgrades, the Gateway Bridge is being duplicated at a cost of $ 2 billion, and a similar amount is being spent on creating new busways.
Sea change is not in the headlines so much any more but it remains a powerful force in real estate. We still have 65,000 to 70,000 Australians moving each year to a seaside location outside the capital cities.
Long before sea change became a buzzword, Australians were flocking to the Gold Coast, then the Sunshine Coast and then to places like Hervey Bay, aptly described as sea change for battlers’’. And now improved air links are encouraging people to seek their sea change further north, in Townsville and Cairns.
The Queensland Government spends much of its time pondering where to fit all the people. An extra million will have to be squeezed into southeast Queensland over the next two decades.
It has decreed that the Ipswich corridor will absorb a good slice of the new population action. Billions are being spent on new infrastructure and private developers are busy in the area, which has ample land for housing estates and industrial parks.
The Government has also decided that Beaudesert shire, a largely rural municipality south of Brisbane and west of the Gold Coast, is going to become a metropolis. Developers are swarming all over this region, buying farms to turn them into industrial precincts and residential communities.
Another government- designated growth area is Coomera, on the northern outskirts of the Gold Coast. This area has the M1 motorway, a station on the Brisbane- Gold Coast railway line, the Coomera River ( focus of affluent canal- residential enclaves) and plenty of undeveloped land. Major entities such as Westfield, Devine, Stockland and Austcorp are all developing there.
The most underrated of the creator categories is the one I call the stayers. These are the places at the opposite end of the risk- reward scale from the boom towns. While mining towns can provide spectacular short- term capital gains, they can also have troughs to match their peaks. The clever and the lucky can get rich quick, as long as they get in and out at the right time.
The stayers, on the other hand, are low- risk locations that provide steady growth and perform in good times and bad. Queensland is the quintessential stayer of Australian real estate. It keeps on delivering.
Brisbane has been the best longterm real estate performer among Australia’s eight capital cities. It averaged 11 per cent a year in house price growth between 1970 and 2005, which means Brisbane prices have doubled every six years or so over the 35 years.
And Brisbane has maintained its average more recently. Residex data indicates the city’s median house price has grown an average 11.5 per cent over the past 10 years, compared with 8.2 per cent in Sydney and 10.5 per cent in Melbourne.
Another measure comes from an RP Data survey to find the city suburbs showing the best results for investors. It identified Brisbane as the leading performer.
The research pinpointed suburbs which had shown price growth of 10 per cent or more and also rental returns above 4.5 per cent in the year to May. While only three Sydney suburbs made the grade, 38 Brisbane suburbs met the criteria.
With so many compelling hotspotcreating factors all happening at once, it justifies the unremitting faith displayed in Queensland by migrants and investors — even if they have to take their effluent with their affluence.
Rolled gold: The great mass of population encompassing the Gold Coast, above, Brisbane and the Sunshine Coast is one big boom town
Taking off: The Tugun bypass