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MOSAIC PROPERTY
GROUPWHY SEQ?
2
CONTENTS
6 INTRODUCTION
8 SEQ & BRISBANE IS CYCLICALLY NEXT IN LINE
11 HISTORY HAS A HABIT OF REPEATING ITSELF
13 PEOPLE FOLLOW JOBS
14 DO NOT UNDER ESTIMATE THE APPEAL OF SEQ/BRISBANE TO OVERSEAS MARKETS
3
6 INTRODUCTION
8 SEQ & BRISBANE IS CYCLICALLY NEXT IN LINE
11 HISTORY HAS A HABIT OF REPEATING ITSELF
13 PEOPLE FOLLOW JOBS
14 DO NOT UNDER ESTIMATE THE APPEAL OF SEQ/BRISBANE TO OVERSEAS MARKETS
mosaic property group has a long term
strategy to invest sustainably in
south east queensland
brisbane
it is widely acknowledged that brisbane and south east queensland (seq) are best positioned to lead the next residential
property cycle in australia.
south east queensland
4
SOUTH EAST QUEENSLAND
[ brisbane ]
[ brisbane ]
[ moreton bay region ]
net internal migration to queensland, seq and brisbane is the strongest it has been over the past ten years
[ brisbane ]
5
[ sunshine coast ]
[ gold coast ]
6
INTRODUCTIONBased on key market fundamentals, indicators and dynamics, it is widely acknowledged that Brisbane and South East Queensland (SEQ) are best positioned to lead the next residential property cycle in Australia.
This favourable outlook has recently gathered further momentum, with Australia’s largest residential data provider, CoreLogic RP Data, publishing in February 2018 that Brisbane is well placed to take over as the best performing capital city housing market over the next five years.
Research Director Tim Lawless stated that there are a variety of economic and demographic factors that are likely to support improving market conditions across South East Queensland.
Market expert JLL knows the new Brisbane Inner Apartment Market intimately, also concluded in January 2018 that supply had peaked, with the number of new apartments entering the market to reduce considerably over the next 18 to 24 months.
somerset
toowoomba (urban extent)
lockyer valley
noosa
sunshine coast
ipswich
scenic rim
gold coast
brisbane
redland
logan
moreton bay
7
To provide further context, please note:
Queensland is continuing to transition to a post-mining economy and employment prospects have turned around, predominately driven by major infrastructure projects either underway or about to kick off in Brisbane and the broader SEQ region.
These major projects are generational pieces of infrastructure, of scale and importance that will materially change the city of Brisbane and the SEQ region, especially with regards to the stimulation of construction, employment and tourism activity.
The majority of direct/indirect growth to flow from the delivery of this $18.2 billion major infrastructure project pipeline will be evident before the year 2022.
Improved employment conditions are also currently evident in Queensland. An upswing recorded in December 2016 has already created 18,695 new jobs over a short five-month period; close to 670,000 new jobs are also forecast for Brisbane, Sunshine and the Gold Coast by 2020.
Further sustained employment growth in Queensland and more particularly SEQ is anticipated to place downward pressure on the unemployment rate and subsequent upward pressure on wage growth.
Net internal migration to Queensland, SEQ and Brisbane is the strongest it has been over the past ten years which will eventually transition into increased demand and ultimately put pressure on existing housing supply and values.
The outlook for continued overseas migration growth to Queensland, SEQ and Brisbane is also very strong as a result of improved tourism conditions, increased international student numbers, impressive natural lifestyle appeal and major projects like Queens Wharf; especially given this project will be a large scale integrated resort development that contains significant gaming and entertainment facilities.
Supply is now quickly self-regulating in the Inner Brisbane apartment market with factors emerging that will tip the supply balance back towards demand from 2019 onwards.
The market will be crying out for new Inner Brisbane apartment product from 2019 as supply has become heavily constrained, which will consequently expedite the absorption of existing new stock in the current market place.
Strong demand still exists in Brisbane for larger, well finished / designed apartments, in infill locations that are well serviced with existing amenity and infrastructure. The right product in these locations still remains undersupplied relative to demand.
SEQ, and Brisbane as the focal point, is going to be the strongest residential market in Australia over the next five years, as it is undervalued relative to its fundamental appeal when compared with the other big east coast cities.
Sydney home owners have a strong opportunity right now to free the significant equity that likely exists in their dwellings and buy into a much more affordable, and often more appealing market like SEQ.
An example used in the Financial Review recently to exemplify the situation described how a Western Sydney home owner could sell their house on which they have a $200,000 mortgage for $800,000, buy a property in SEQ for $400,000, buy a Jim’s Mowing franchise for $80,000 and still have $100,000 in the bank. This scenario further reiterates the appeal for Sydney buyers to move to SEQ, as the affordability proposition coupled with improved quality of life magnifies.
With the significant median house price gap that now exists with Sydney housing, currently circa $585,000 more expensive, moving forward, it is likely that this gap will reduce quickly as the SEQ and Brisbane market moves through the next growth phase of its property cycle.
Wise investors are already aware that quality, residential property located in Brisbane and SEQ can currently deliver higher yields, contain lower entry prices and are positioned at the earlier stage of the growth cycle, so ultimately have greater potential for future upside.
These combined market fundamentals, indicators and dynamics clearly demonstrate why Brisbane and SEQ are widely anticipated to be the best performing Australian residential property market over the coming five-year period.
wise investors are already aware that quality, residential
property located in brisbane and seq can currently deliver higher
yields.
sunshine coast
moreton bay
8
SEQ & BRISBANE IS CYCLICALLY NEXT IN LINE
The charts below help contextualise:
SEQ, and Brisbane as the focal point, is going to be the strongest market in Australia for the next five years, as it is undervalued relative to its fundamental appeal and has had a long / extended period of under-performance when compared with the other big east coast cities.
Whilst it is important to establish that different drivers exist for the Sydney and Brisbane markets, it is interesting to reflect on the recent growth that has occurred in Sydney post a long/extended period of under-performance in context of Brisbane’s current cyclical position.
SOURCE: CORELOGIC, RP DATA
60%
50%
40%
30%
20%
10%
0%
JUN 01
-10%
-20%
JUN 05 JUN 09 JUN 13 JUN 17
EXTENDED PERIOD OF STRONG
OUT-PERFORMANCE
EXTENDED PERIOD OF UNDER-PERFORMANCE
SYDNEYCOMBINED CAPITALS
sydney
seq, and brisbane as the focal point, is widely tipped to be the strongest market
in australia for the next five years.
SYDNEY - AVERAGE
ANNUAL CHANGE IN DWELLING
VALUES
FIGURE 1
9
SOURCE: CORELOGIC, RP DATA
60%
50%
40%
30%
20%
10%
0%
JUN 01
-10%
-20%
JUN 05 JUN 09 JUN 13 JUN 17
SHORT / INTENSE OUT-PERFORMANCES
PERIOD OF UNDER-PERFORMANCE
MELBOURNECOMBINED CAPITALS
melbourne
PERIOD OF SLIGHT OUT-PERFORMANCE
SOURCE: CORELOGIC, RP DATA
60%
50%
40%
30%
20%
10%
0%
JUN 01
-10%
-20%
JUN 05 JUN 09 JUN 13 JUN 17
LONG EXTENDED PERIOD OF UNDER-PERFORMANCE
BRISBANECOMBINED CAPITALS
brisbane
SHORT / INTENSE OUT-PERFORMANCES
CYCLICALLY READY
SEQ & BRISBANE IS CYCLICALLY NEXT IN LINE (cont.)
MELBOURNE - AVERAGE
ANNUAL CHANGE IN DWELLING
VALUES
BRISBANE - AVERAGE
ANNUAL CHANGE IN DWELLING
VALUES
FIGURE 2
FIGURE 3
10
SEQ & BRISBANE IS CYCLICALLY NEXT IN LINE (cont.)
CUMULATIVE CHANGE IN DWELLING
VALUES POST GFC
JAN 2009 - JAN 2018
FIGURE 4
SYDNEYMELBOURNEBRISBANEADELAIDEPERTHHOBART
95%2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
75%
55%
35%
15%
-5%
-0%
NATIONAL
COMBINED REGIONALS
COMBINED CAPITALS
CANBERRA
DARWIN
HOBART
PERTH
ADELAIDE
BRISBANE
MELBOURNE
SYDNEY
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
53.6%
21.9%
63.7%
31.3%
-1.8%
36.4%
4.4%
21.2%
89.9%
92.9%
FIGURE 5
SOURCE: CORELOGIC, RP DATA
19.3%
SOURCE: CORELOGIC, RP DATA
11
HISTORY HAS A HABIT OF REPEATING ITSELF
The charts below help contextualise:
Previously when the price differential between Brisbane and Sydney housing became favourably weighted to Brisbane from an affordability perspective, it led to significant increases in net interstate migration to Queensland and an associated boost to the economy / residential real estate market.
In 1999 net interstate migration to Queensland was below 17,000 persons per year, but as house prices in Brisbane hit a differential of 59% relative to Sydney, net interstate migration began to increase.
However, a more critical observation is that as house prices in Brisbane hit a differential of 55% relative to Sydney, net interstate migration to Queensland went into overdrive, topping out at just under 38,000 in 2003.
With Brisbane house prices now equivalent to 48% of those in Sydney, affordability has moved well below the critical 55% threshold at which net interstate migration skyrocketed in 2001.
Consequently, the trend of people leaving NSW to move to Queensland is already evident, and if history repeats, which it often has a habit of doing in context of markets driven by cyclical considerations and human behaviour, growth in residential real estate in SEQ and Brisbane should follow.
BRISBANE HOUSE PRICE AS A % OF SYDNEY (LHS)
EASTERN SEABOARD CAPITAL CITIES - AVERAGE
ANNUAL CHANGE IN DWELLING
VALUES
QLD NET INTERSTATE MIGRATION (RHS)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
59%
55% 55%
48%
FIGURE 6
SOURCE: ABS
12
40,000
30,000
20,000
10,000
0
-10,000
-20,000
-30,000
-40,000
SOURCE: ABS,
QUEENSLAND
INTERSTATE MIGRATION
JUN 1999
JUN 2001
JUN 2003
JUN 2005
JUN 2007
JUN 2009
JUN 2011
JUN 2013
JUN 2015
JUN 2017
ROLLING ANNUAL
NEW SOUTH WALES
HISTORY HAS A HABIT OF REPEATING ITSELF (cont.)
with brisbane house prices now equivalent to 48% of those in sydney, affordability has moved well below the critical 55% threshold at which net
interstate migration skyrocketed to queensland in 2001.
the trend of people leaving nsw to move to qld is already
evident.
FIGURE 7
13
PEOPLE FOLLOW JOBS
The charts below help contextualise:
The outlook for Queensland’s economy, especially with regards to employment and the labour market, bodes well for further population growth and improved demand for residential real estate.
Further sustained employment growth in Queensland, with the majority in SEQ, is anticipated to place downward pressure on the unemployment rate and subsequent upward pressure on wage growth.
As the chart below demonstrates, employment projections from the QGSO indicate some 1 million additional jobs required in SEQ between 2016 and 2041. QUEENSLAND’S
LABOUR MARKET
8
6
4
2
0
-2
EMPLOYMENT GROWTH
PROJECTIONS
2011 2016 2021 2026 2031 2036 2041
SOURCE: QGSO
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
ANNUAL PER CENT CHANGE
PER CENT
12
10
8
6
4
2
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
EMPLOMENT GROWTH (LHS)
UNEMPLOMENT RATE (RHS)
LOND-TERM AVERAGE UNEMPLOYMENT RATE (RHS)
SEQ
REST OF QLD
FIGURE 8
FIGURE 9
SOURCE: ABS, QTC
EMPLOYMENT GROWTH FORECAST (LHS)
UNEMPLOYMENT RATE FORECAST (LHS)
14
DO NOT UNDER ESTIMATE THE APPEAL OF SEQ/BRISBANE TO OVERSEAS MARKETS
The charts below help contextualise:
The outlook for continued overseas migration growth to Queensland, SEQ and Brisbane is very strong due to improved tourism conditions, increased international student numbers, impressive natural lifestyle appeal and major projects like Queens Wharf.
The Queens Wharf project, amongst others, will be a game changer for Brisbane, with the large scale integrated resort development containing significant gaming and entertainment facilities will drive significant tourist demand, especially from Asian countries.
5
4
3
2
1
0
YEAR ENDING, MILLIONS
FIGURE 10
FIGURE 11
QLD’S INTERNATIONAL TOURIST NIGHTS BY COUNTRY OF
ORIGIN
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
NUMBER OF STUDENTS
2017
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
OTHER
ENGLISH LANGUAGE COURSE
VOCATIONAL EDUCATION
HIGHER EDUCATION
YEAR ENDING SEPTEMBER 2017YEAR ENDING SEPTEMBER 2016
YEAR ENDING SEPTEMBER 2015
UKCHINA
NEW
ZEALAND
JAPAN
TAIWAN
GERMANY
UNITED STATES
REPUBLIC
OF KOREA
FRANCE
CANADA
QLD’S SERVICES EXPORTS
(EDUCATION): OVERSEAS STUDENTS
COMMENCEMENTS
SOURCE: QTC, TOURISM RESEARCH AUSTRALIA
SOURCE:QTC, AUSTRADE
15
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This report has been compiled by Mosaic Property Group utilising the below data sources. There is to be no reproduction, distribution, or transmission of this report, whether in whole or in part, without prior written consent from Mosaic Property Group. In compiling this report, Mosaic Property Group has utilised information
supplied by external sources and all information is deemed reliable at the time of publication. Mosaic Property Group does not warrant the information’s accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by any person or entity arising from,
or in connection, with the supply or use of the whole or any part of the information in this report through any cause whatsoever.
Urban Economics, ABS, QLD Govt Statisticians Office, AUST Govt Dept of Jobs and Small Business, PriceFinder, Residential Tenancies Authority, SQM Research, Forecast ID, Core Logic RP Data, Cordell’s, Financial Review, Mosaic Internal Database, Project Websites.