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Pandemic property boom: will it get too hot to handle?

Pandemic property boom

Here we go again – interest rates are at an all-time low and housing markets are running hot.

Property tropes missing from the city’s narrative for years are back in the news. Dumps are selling for squillions; big crowds are showing up at auctions; reserves are being smashed.

House prices in Australia jumped by 2.1 per cent in February, the biggest month-on-month gain in almost 18 years according to CoreLogic’s national home value index.

A year ago, as the coronavirus pandemic took hold, a swag of experts predicted a house price rout. But the unprecedented government stimulus unleashed to nurse the economy through the pandemic crisis has been very favourable for residential property.

The boom has been led by smaller cities and regions, which attracted many new buyers during the pandemic. CoreLogic’s figures show during the past year dwelling values have risen by 11 per cent in regional NSW and by 8.3 per cent in regional Victoria.

But big cities are catching up. The median price of a standalone house in Sydney rose by an eye-watering $4200 a week during the last three months of 2020 to hit a record $1.21 million, Domain Group figures show. Melbourne wasn’t far behind – its median house price added $3600 a week during the December quarter to reach $936,000, also a record.

The nation’s biggest mortgage lender, Commonwealth Bank, has forecast house prices in Sydney and Melbourne to rise by at least 12 per cent over the next two years.

Home lending – which is a reliable indicator of future property price gains – is at record levels. Australians borrowed $28.75 billion to purchase housing in January, 44 per cent more than a year earlier.

“The heat in the housing market is really intensifying,” says ANZ economist Felicity Emmett.

But the strength of the price rally has stoked worries.

“It’s a bit of a blast off in house prices,” says AMP Capital economist, Shane Oliver. “But obviously it will, at some point, raise questions about housing affordability.”

Back in 2003 – at the tail end of a previous housing boom – then prime minister John Howard dismissed concerns about high property prices, saying: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.” He claimed most people feel “more secure and feel better off” when the value of their home has gone up.

But opinion polls show the cost of housing has become a growing source of anxiety, especially in big cities.

When Gladys Berejiklian became NSW Premier in 2017 she famously cited housing affordability as one of her top priorities, saying at the time it was the “biggest concern people have across the state”.

The latest Ipsos Issues Monitor, which asks respondents to select the three most important issues facing the community, showed housing affordability is again worrying voters. Housing was the equal top concern in NSW in the December quarter, alongside health and unemployment. Concern about the cost of housing has also risen in Victoria.

During the past decade the housing market has also been cast as a demographic battleground where first-time buyers are pitted against cashed up investors who benefit from negative gearing and the capital gains discount. Meanwhile, an army of young renters is left wondering if they will ever own a home.

Grattan Institute economist Brendan Coates says the latest price surge continues a 25-year trend dividing housing haves-and-have-nots.

“Home ownership has been falling for all age groups under 65, particularly for younger lower-income households and what’s happening now will only exacerbate that trend,” he says.

“If house prices keep rising relative to incomes it’s going to become harder for young people, especially those on lower incomes, to purchase a home. So for them that great Australian dream will recede even further into the distance.”

While there has been an encouraging lift in borrowing by first time buyers in recent months, Coates does not expect that to have much effect on the overall level of home ownership.

“Some first home buyers have made gains recently but the reality is the bottom 40 per cent of income earners are priced out of most of our major cities,” he says. “I wouldn’t expect to see a big jump in home ownership rates among that lower income cohort which is the group we are more worried about.”

Falling home ownership has major long-term consequences for Australia, especially the distribution of wealth. It will also leave more people vulnerable to homelessness in old age, especially those with low incomes.

The experience of 67-year-old pensioner, Su Day, illustrates this challenge. She was recently made homeless following a dispute over her father’s estate and says high housing costs in Sydney make it “downright impossible” for people like her.

“I am locked out,” Day says. “It’s terrifying.”

A recent Human Rights Commission report found women aged over 55 were the fastest growing cohort of homeless Australians.

Day now lives at Mosman House, a project providing transitional accommodation for older women run by Link Housing. But she says her experience highlights the need for more social and affordable housing which offer permanent alternatives for low income earners.

Motivating forces

The main driver of the post-pandemic property boom has been record low interest rates. During the past 18 months the official cash rate has been cut from 1.25 per cent to just 0.1 per cent and the central bank has made it clear those settings will remain in place for an extended period to underpin the economic recovery.

Coates says “we shouldn’t be surprised” house prices have surged given interest rate reductions of that magnitude.

He points to Reserve Bank modelling published in 2019 which found a sustained reduction in interest rates of 1 percentage point would lift housing prices by 30 per cent over a period of three years.

In addition, pent up demand, government incentives, an improving post-pandemic economy and even a fear of missing out have helped stoke the boom.

Detached house prices have been especially strong, far outstripping unit prices during this upswing. The median house price in Sydney was 66 per cent higher than the median unit price in the December quarter, Domain Group data shows, the biggest difference since it began tracking prices in 1993. Melbourne’s median house price is now 64 per cent higher than the median unit price compares well above the average price gap of 52 per cent over the past decade.

So far, owner-occupier demand has been the main driver of price gains but the latest lending data shows investor interest in housing is now on the rise.

But the strength of the rally poses another question familiar to Australians: will the housing market overheat? Might the unique policy responses to the pandemic inadvertently inflate a dangerous housing bubble?

Reserve Bank Governor, Philip Lowe, told a parliamentary committee last month the recent strength of the house prices has been helpful for the economy as it recovers from recession.

Pandemic property boom

RBA governor Philip Lowe said it would not lift interest rates in a bid to curb property price growth. “The RBA does not – and should not – target housing prices.” CREDIT:BLOOMBERG 

“The past year would have been even more complicated if there had been large and widespread falls in housing prices,” he said.

But authorities are “watching closely.”

Dr Lowe will not lift interest rates in a bid to curb property price growth.

“The RBA does not – and should not – target housing prices,” he said last month.

But financial authorities can take other steps known as “macroprudential” regulations to ensure financial stability.

That might include caps on bank lending or a requirement for bigger deposits from home borrowers.

On Wednesday the Council of Financial Regulators (which co-ordinates the nation’s main financial regulatory agencies) issued a pointed statement saying it put a “high emphasis on lending standards remaining sound, particularly in an environment of rising housing prices and low interest rates”.

The council will also “closely monitor developments and consider possible responses should lending standards deteriorate and financial risks increase”.

ANZ’s Felicity Emmett expects regulators to intervene later this year.

“That’s when we think they will step in to slow things down a little bit,” she says.

But in the meantime it seems Australia’s post-pandemic housing boom has a way to run.

 

Article Source: www.brisbanetimes.com.au

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Brisbane

The Gabba Games – State’s $1b plan to turn stadium into sporting Mecca for 2032

Gabba

The Palaszczuk government will push ahead with a redevelopment of The Gabba as the centrepiece of its 2032 Olympic Games bid, but it still needs support and a whole lot of money.

The government has rejected lacklustre greenfield sites near Bowen Hills and instead gone across the river to Queensland’s major AFL and cricket venue at Woolloongabba. If the plan goes ahead, and Queensland secures the games, The Gabba will become a building site for five years while an Olympic-class stadium is built.

The Gabba is normally used around 40 weeks in every year. Taking it out of action will require negotiation with a neighbouring school, the Brisbane Lions and Queensland Bulls, along with the Queensland Cricketers’ Club, which has previously been a stumbling block to work on the stadium. It is yet to be seen whether losing a home ground, and maximum revenue for five years, is worth having a larger, modern venue to return to.

While the International Olympic Committee favours using existing venues, thereby reducing the cost to host cities, Palaszczuk is intent on asking the Commonwealth to help fund a complete rebuild. There is no funding agreement yet, let alone architectural plans, but Palaszczuk suggested the new stadium could cost $1 billion.

Palaszczuk said another 8,000 seats could be added to The Gabba, taking its capacity to 50,000, serviced by the nearby Cross River Rail station currently under construction. It would be higher than the existing stadium, to allow for pedestrian overpasses across nearby roads to funnel patrons directly into the new venue.

That would give The Gabba more seats than the old QE2 stadium, which currently has capacity of 48,500, but fewer seats than Suncorp Stadium (52,500). It would have better transport connections than the Nathan venue and in the circular format that suits athletic events and the Olympic opening and closing ceremonies.

“The Gabba has been home to our sport since 1895,” Palaszczuk said.

“A home for the 2032 Olympic Paralympic Games could be its crowning glory.”

“We’ve hosted the AFL here, we’ve hosted cricket here, but for the Olympics, this is front and centre – opening and closing ceremonies, athletics, you name it, it’s going to be the best,” she told Nine’s Today program.

Palaszczuk told parliament a key factor in deciding to use The Gabba was being able to utilise the adjacent Cross River Rail station. She noted the rail project was being delivered with “not one dollar from the Commonwealth” but her office was not in a position to clarify whether the $1 billion would include any rail station components.

The Gabba was built in 1895 and has undergone two substantial renovations and refurbishments since 1993.

The last major redevelopment was completed in 2005 when a 24-bay grandstand built for $128 million.

The Gabba’s public, corporate and media facilities also received a $35 million upgrade in 2020.

The Labor government will seek financial support from Brisbane City Council and the federal government for the project.

“We do need this, and it’s going to be utilised for the future, so they don’t want white elephants they want workhorses, and The Gabba is definitely a workhorse,” Palaszczuk said.

The International Olympics Committee named Brisbane as its preferred host city in February.

But a final decision rests on detailed discussions with Games chiefs and key commitments from the federal government.

Australian Olympics Committee president John Coates addressed cabinet on Monday, where MPs formally endorsed Brisbane’s candidacy.

“This is still contingent on guarantees that need to be received from the federal government,” Palaszczuk stressed on Monday.

She has had a discussion with Prime Minister Scott Morrison and more talks will occur in the coming weeks.

“We are basically doing years and months of work in a very short time frame to meet the deadlines the IOC has set us,” she said.

The state needed the boost the games would bring, including 130,000 jobs.

“It gives us hope, after going through the pandemic. It gives us hope for the future,” the premier said.

Morrison is expected to have more to say on Queensland’s Olympic plans on Tuesday.

Last month, he told the IOC the Australian government was firmly behind Brisbane to host the games.

But Brisbane is not without rivals.

Earlier this month, South Korea said Seoul had submitted a proposal to host the 2032 games, despite Brisbane’s frontrunner status.

 

Article Source: inqld.com.au

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Brisbane

Irongate Group Acquires Two Brisbane Industrial Properties

Irongate

Irongate Group (ASX: IAP; JSE: IAP) has entered into agreements to acquire:

  • an industrial facility located at 57 – 83 Mudgee Street, Kingston QLD (Kingston Property); and
  • an industrial facility to be constructed at Lot 24, Dunhill Crescent, Morningside QLD (Morningside Property).

Both properties are being acquired on a fund through basis. The purchase price of the Kingston Property is $14,320,000 representing an initial yield of 5.73%, and the purchase price of the Morningside Property is $5,932,000 representing an initial yield of 6.02%.

Commenting on the acquisitions, IAP CEO, Graeme Katz, said, “the Kingston Property will comprise two brand new, high quality generic warehouse and distribution facilities with 2,270m² leased to Construction Sciences for 10 years with fixed annual escalations of 2.5% and 3,250m² leased to Wako Kwikform for 8 years with fixed annual escalations of 3.0%. The Morningside Property comprises 1,016m² of space that will be leased to 3M Australia to be used as its Queensland head office and last mile distribution facility. The lease term is 10 years with fixed annual escalations of 3.0%.

“Both acquisitions are consistent with IAP’s strategy of acquiring good quality industrial properties with strong tenant covenants and long lease terms. IAP believes the Brisbane industrial market currently represents relative value, and the acquisitions complement IAP’s recent Brisbane industrial acquisitions in Brendale (completed in January 2021) and Pinkenba (completed in March 2021). The acquisitions will increase IAP’s exposure to industrial property to 34% by both income and value.”

Both acquisitions are due to complete in mid-May 2021.

 

Article Source: finance.yahoo.com

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Brisbane

Brisbane Housing Market Insights: April 2021

Brisbane

The Urban Developer’s Brisbane housing market insights for March reveals increased demand for houses has been underpinned by increasing consumer sentiment and a surge in interstate migration.

This resource, to be updated monthly, will collate and examine the economic levers pushing and pulling Brisbane’s housing market.

Combining market research, rolling indices and expert market opinion, this evolving hub will act as a pulse check for those wanting to take a closer look at the movements across the market.

Brisbane house prices have soared to record heights after a steady 12 months of growth and a rebound in listings and sales during recent months.

Brisbane’s housing market has remained particularly unaltered by the closure of international borders, where historically high demand from overseas migrants has been disrupted.

Brisbane advanced a further 2.4 per cent during March, pushing it up 4.8 per cent for the recent quarter and 6.8 per cent for the year to date.

The current median value for dwellings is $548,260, which is $12,642 higher than just a month ago.

The median house price of $607,969 continues to attract interstate migrants from the larger markets of Sydney, where the median is now $1.1m, and Melbourne at $859,097.

The premium end of the Brisbane’s housing market is still leading the acceleration in capital gains with upper-quartile property values rising by 3.1 per cent. Lower quartile property values were up 1.1 per cent throughout March.

Brisbane median house and unit price values

TypeMonthQuarterAnnualMedian
All2.4%▲4.8%▲6.8%▲$548,260▲
Houses2.6%▲5.3%▲7.9%▲$607,969▲
Units1.0%▶2.4%▲1.9%▲$400,866▲

^Source: Corelogic Hedonic Home Value Index – March

 Brisbane has clocked its highest auction clearance rate in six months.

CoreLogic’s weekly auction clearance rate across the combined capitals has been at or above 80 per cent just five times since 2008, and four of those were in March, 2021.

The week ending March 7, recorded Brisbane’s highest auction clearance rate on record—82.3 per cent—while also being the busiest week for auctions since late March, 2018.

Total listings across the country remain 26 per cent below the five-year average.

Brisbane auction clearance rates

WeekClearance rateTotal Auctions
Week ending 7 March 202182.3%107
Week ending 14 March 202165.2%110
Week ending 21 March 202173.0%151
Week ending 28 March 202168.8%191

^Source: Corelogic Auction Clearance Rates – March

Gross rental yields in Brisbane remains favourable compared to Sydney and Melbourne at 4.3 per cent.

According to the SQM, Brisbane’s gross rental yield for houses is currently 4 per cent and 5.2 per cent for units.

Vacancy rates are where your jaw may drop, with Brisbane at just 1.5 per cent, and other locations below 1 per cent.

Traditionally Brisbane’s vacancy rates have been tight, hovering well below the level of 2.5 per cent, which represents a balanced rental market.

Brisbane residential rental vacancy rate

CityMarch 2021 vacancy rateMonthly % change
Brisbane1.5%►0.0%►

Rental stock on market

CityMarch 2021 vacanciesVacancy net loss
Brisbane5407▲97▲

^Source: SQM Research – March

Brisbane rent prices

TypeRentMonthly % changeAnnual % change
Houses$483.70▲1.1%▲3.2%▲
Units$383.60▲0.2%▼1.4%▲

^Source: SQM Research – March

The seasonally adjusted estimate for total dwelling units approved in Queensland in February was 3,930, 40.5 per cent higher than recorded in January.

Loan data shows investors have started coming back into a housing market they had largely vacated and the boom is being driven overwhelmingly by established owner occupiers and first home buyers.

Queensland building approvals

^Australian Bureau of Statistics, (Suspension of trend series between May 2020 and Jul 2020 due to Covid-19)

DwellingApprovedMonthly % change
Houses2792▲25.4%▲
Units3930▲40.5%▲

^Source: Australian Bureau of Statistics; Reference period February

Queensland home loan lending indicators

RegionFirst home buyer loan commitmentsFirst home buyer ratio – dwellingsFirst home buyer ratio – housing
Queensland3078▲ ▼39.6%▼34.7% ▼

^Source: Australian Bureau of Statistics – February

Queensland interstate migration

RegionSeptember (quarter) 2020 arrivalsSeptember (quarter) 2020 departuresSeptember 2020 quarter net
Queensland22,317▼15,080▼7,237▲

^Source: Australian Bureau of Statistics – September quarter 2020

Brisbane’s housing market: policy updates

Australia’s central bank will maintain low interest rates to support the country’s ongoing economic recovery and surging housing market, buoyed by its busiest Easter auction market on record.

Strong tailwinds will bolster the Australian economy through the second half of the year, but macro-prudential measures are likely to be introduced to ease house price pressures in 2022.

Queensland faces a “hard road” during the next four years as the state recovers from the coronavirus pandemic, Treasurer Cameron Dick says.

Brisbane housing market forecasts

ANZ economists forecast Brisbane house prices will rise by 9.5 per cent next year, as low interest rates and government stimulus flow through the economy while Commonwealth Bank updated its forecasts, projecting a strong rebound in prices across the second half of 2021.

CBA now expects Brisbane house prices to increase by 16.6 per cent to December 2022 compared to 13.7 per cent in Sydney and 12.4 per cent in Melbourne.

Westpac has also updated its property forecasts, with Brisbane real estate prices tipped to surge 20 per cent between 2022 and 2023.

 

 

Article Source: theurbandeveloper.com

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