With the biggest question at the moment being how the recent floods and Cyclone Yasi will further affect the Queensland market, it is correct to assume that immediately following such events, property values will drop significantly because they will not be fit for use. However, housing is not a readily saleable commodity, and very few of the properties unfit for use will be sold or even be entering the market.
Floods and Cyclone to boost Queensland Market
Last year was not a bad year for our housing markets considering the heavy-handed action by the Reserve Bank of Australia, and while it has just been announced that interest rates have been put on hold for the time being, we are likely to see a small rise later this year.
Looking at the table below, there should be little doubt that the action of our Banks and the RBA in increasing home loan interest rates in 2010 has taken its toll on the housing market.
| Houses |
| Area | Median Value | Growth |
| 10 Years % p.a. | Year Ending Dec 2009 | Year Ending Dec 2010 | Last Quarter |
| ACT | $537,500 | 10.70% | 8.15% | 8.93% | -0.05% |
| Adelaide | $408,500 | 9.85% | 7.14% | 3.13% | 0.69% |
| Brisbane | $458,000 | 11.12% | 5.31% | -2.90% | 0.23% |
| Darwin | $516,500 | 11.36% | 14.92% | 2.15% | -0.91% |
| Hobart | $387,500 | 12.17% | 5.22% | 4.99% | -1.00% |
| Melbourne | $593,500 | 10.36% | 14.25% | 9.21% | 0.13% |
| Perth | $487,500 | 11.23% | 0.80% | 0.41% | -1.78% |
| Sydney | $673,500 | 6.86% | 12.82% | 6.51% | 1.56% |
| Australia | $444,000 | 9.85% | 6.77% | 5.51% | 0.53% |
| Area |
| Rent |
| |
| Yield Month Ending Dec 2010 | Amount Month Ending Dec 2010 | Amount Month Ending Dec 2009 | Year Change |
| ACT |
| 4.51% | $465 | $440 | 5.68% |
| Adelaide |
| 4.21% | $330 | $320 | 3.13% |
| Brisbane |
| 4.39% | $385 | $365 | 5.48% |
| Darwin |
| 5.26% | $520 | $530 | -1.89% |
| Hobart |
| 4.58% | $340 | $350 | -2.86% |
| Melbourne |
| 3.30% | $375 | $370 | 1.35% |
| Perth |
| 4.07% | $380 | $360 | 5.56% |
| Sydney |
| 4.03% | $520 | $460 | 13.04% |
| Australia |
| 4.35% | $370 | $355 | 4.23% |
| Area |
| Sales | Prediction |
| |
| Year Ending Dec 2010 | Year Ending Dec 2009 | Year Change | Expected Value 5 Years |
| ACT |
| 4943 | 5006 | -1.26% | $567,790 |
| Adelaide |
| 20278 | 20338 | -0.30% | $398,742 |
| Brisbane |
| 36742 | 40827 | -10.01% | $560,988 |
| Darwin |
| 1308 | 1975 | -33.77% | $660,223 |
| Hobart |
| 2002 | 2405 | -16.76% | $460,959 |
| Melbourne |
| 54078 | 41376 | 30.70% | $699,390 |
| Perth |
| 23198 | 27294 | -15.01% | $635,904 |
| Sydney |
| 40838 | 44799 | -8.84% | $810,686 |
| Australia |
| 319293 | 329098 | -2.98% | $528,179 |
Growth rates have declined (with the exception of Canberra), with rates in some cities reducing by more than half.
Residex CEO, John Edwards said, “The real estate market across Australia is slowing with all capital cities recording lower rates of growth for the year”.
Brisbane was by far the poorest performer in terms of growth, with the biggest question at the moment being how the recent floods and Cyclone Yasi will further affect the Queensland market.
It is correct to assume that immediately following such events, property values will drop significantly because they will not be fit for use. However, housing is not a readily saleable commodity, and very few of the properties unfit for use will be sold or even be entering the market.
Mr. Edwards believes “the market will not be dramatically impacted in growth terms by the floods or cyclone as it will result in property improvements, fewer properties for sale and a general shortage of rental properties as there will be an influx of people from southern states coming to help out in the reconstruction process.”
The aftermath of the floods and Cyclone Yasi will generate employment as towns and communities need to be restored. Once the clean-up process is complete agricultural activity will pick up and generate wealth in regional towns, in the long term, we should see house values increase as they are rebuilt and rejuvenated into livable dwellings once again, and property investors are likely to reap the benefits as they provide accommodation for the shortage in housing
“The negative of the floods and cyclone will be a positive for investors as rentals rise with property shortages putting pressure on weekly rentals”, Mr. Edwards said.
Looking at the trend graph below, while in recent months the Brisbane market looks as though it has bottomed out, we should be a seeing gradual movement to a growth phase from hereon out. We do not believe the floods or cycle will have more than a transitory impact on the property market, and non-affected flood areas should see growth that may not have occurred had the floods not eventuated.
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Image source: Flickr.com
February 2011
