Any words will just get in the way!
As promised a few weeks back, here is the what is happening with rents across regional Queensland.
|Regional Qld: median detached house weekly rents|
|Hervey Bay (4655)||$375||$380||$400|
|Matusik + Queensland Residential Tenancies Authority. * Four bedroom houses.|
This week’s table outlines the recent and current median weekly detached housing rents across select regional Queensland areas.
Things have improved, and in some locations, substantially, rent wise in almost all of Queensland’s major regional markets.
Well not really, this is just the usual property cycle if you ask me.
The regions where oversupplied in the mid-2010s. Since then little new investment housing stock has been built and the regions have also attracted fewer investors than normally would be the case.
Yet population growth still trudged along, and in time, the amount of vacant rental properties declined. Hence rental growth. It is really just about supply versus demand.
It does help if a few mines and construction projects start too.
Of course, there has been some Covid impact, but I reckon there will be a fair bit of snapback too.
‘Poverty is nicer in a more remote location’ is maybe overkill but it does have a certain truth to it, and it isn’t a great promotional slogan. It doesn’t win many hearts and minds.
Yet some of these regions do need to look at their future housing supplies, as their forward book looks very light.
For mine, if the major Queensland regions are going to keep up this type of housing momentum and capitalise on any potential population flight from the major capitals then they need more permanent and sustainable jobs. This means a different approach to infrastructure provision and decentralisation of state government operations.
Time will tell. Yet I won’t be holding my breath.
And as I have said here, Working From Home, for most, isn’t a trend, it is a current forced fashion. Fashions come and go. Anything forced also usually doesn’t last that long.
About a year ago I posted this chart.
I have updated it to include the most recent and reliable annual house price growth – (being for fiscal 2020) – and the recent drops in the cash rate, including today’s drop to effectively 0%.
It is worth remembering that since 1990 the official cash rate has dropped 48 times.
In April 1990 the cash rate was 15.5%. In early November 2020 it is just 0.10%.
Even before all things Covid, I wrote in late September last year, that I expected the cash rate to keep falling – and at least two more times or by 0.5% in total over the next six months – in order to try and keep the Australian economy growing.
And of course, to help address the slide in housing prices at that time.
The RBA dropped the cash rate by 0.25% in October 2019 and three times during 2020, twice during March.
The chart shows that falling interest rates do – eventually – help instigate house price growth.
I believe that the Australian housing market has now entered a ‘sweet spot’, helped by lower interest rates, easier access to credit and government stimulus.
I also think this will last for about a year, maybe a bit longer, after which the longer term, and larger, trends will start to exert their influence.
So, enough the bump. Most housing prices should increase. By how much is a fool’s errand. But beware that harder economic times are coming once the stimulus stops and inflation starts to raise its head.
More on inflation soon and next week it is regional Queensland rental markets as promised last week.
I don’t know about you, but I have had enough of 2020. It’s not only Covid – where I have had to endure six weeks of home lockdown since July – but local and US politics are weighting in big time too.
Plus, my recent missive posts have been somewhat wordy affairs.
So, this week (and next) I have limited my inner self and have posted a simple table with a few comments.
|SEQld median weekly rents|
|2 bedroom apartments|
|Inner city (0km-2km, GPO)||$490||$500||$470|
|Inner ring (2km-5km)||$385||$395||$390|
|Middle ring (5km-20km)||$355||$370||$375|
|Outer ring (20km-40km)||$290||$290||$295|
|3 bedroom townhouses|
|3 + 4 bedroom houses|
|Matusik + Queensland Residential Tenancies Authority. * Four bedroom houses.|
This week’s table outlines the recent and current median weekly rents across select south east Queensland areas.
In contrast to what you often read, or hear, about the rental market, most areas in SEQld, and across most housing types, have seen an increase in weekly rents over the last couple of years, including 2020.
The few exceptions have been highlighted in the table.
So, the headlines shouting ‘capital city rents are shite’ or words to that affect don’t ring true.
Next week I will look at Qld’s regional rental market. Let’s see if it really is all ‘boom’.
We were recently commissioned to undertake a detailed investigation into the residential land supply situation in Toowoomba.
We have undertaken several such studies in recent years across many parts of urban Australia and our Toowoomba work this year follows up on a similar document written, and presented, in Toowoomba in late 2017.
Our 2017 document concluded that “the Toowoomba housing market experienced a hard downturn in 2011. Up until a year or two ago, the market was recovering strongly. Since late 2015, sales volumes have fallen, yet in most instances, prices continue to rise. This is especially the case when it comes to vacant land. A shortage of new development approvals; and in particular for new land estates; is already starting to bite.”
Fast forward to today and our work illustrates that the Toowoomba land market remains undersupplied and despite recent turbulent economic times – bushfires and COVID19 – the Toowoomba land market is in the recovery phase of the property cycle.
In fact, the extent of the undersupply is worse than it was in late 2017.
Yet land sales volumes are again starting to rise, as are land prices.
In addition, the HomeBuilder government package has lifted buyer interest and post COVID19 the appeal of large, well-serviced regional towns and cities such as Toowoomba, within easy travelling distance of a capital city, is likely to grow.
The established housing market, as a result, is also set to improve.
Yet the region faces several challenges including keeping its younger residents and importantly attracting new young people to work and live in the region.
One of the key factors influencing a younger market is affordable housing and appropriate local work. Toowoomba does not have enough subdivisional land.
This lack is negatively affecting housing affordability.
A lack of new development, in turn, adversely impacts on local jobs.
The construction industry accounts for 16% or 2,565 of Toowoomba’s 16,100 local registered businesses. The construction industry in Toowoomba also employs 13,350 people on a full-time basis or 18% of Toowoomba’s 73,750 full time employees.
Full time local construction employment has fallen by 870 jobs, or by 6%, over the last two years.
Moreover, the local construction industry is worth $14,350 per annum to every Toowoomba resident or $36,000 to each Toowoomba household. It is an important economic driver and one which adversely affects the local commerce when new housing starts (and land sales) decline.
In fiscal 2019, construction accounted for 23% of the Toowoomba economy.
In addition, the rental market is also now very tight, and more investment stock is needed.
About 170,000 people live in Toowoomba. It has been growing, and is expected to continue to grow, by some 1,650 new residents per annum.
Our work suggests that there is need to build 600 and 625 new detached houses in Toowoomba each year. These new detached houses will each require a new residential allotment.
Using this annual housing demand as our base, the state of new subdivision land supply in the Toowoomba Regional Council area is as follows:
In summary, Toowoomba has just two (2) two years of subdivisional approvals which is below the four (4) years minimum SEQ Growth Monitoring recommendations and the area has less that 6 months’ supply for sale.
In addition, Toowoomba doesn’t have enough broad hectare land available for future residential development over the next five years.
The Toowoomba Regional Council should be fast tracking new subdivision development applications. They also should be considering expanding their residential zoning to correspond to help facilitate more residential development.
Both tasks need to be done with haste.
Whilst most of the housing industry applauds another 10,000 new federal government first home loan deposit scheme placements, some of us continue to shake our heads.
How did it come to this, when it seems okay to place the top loan threshold for a first home buyer at $950,000!
As my chart shows there are less first home buyers per relevant demographic cohort these days despite all of the first home buyer handouts.
Good politics. Crappy policy.
The recent $25,000 Home Builder scheme has also hurt as many new builds, and with that, construction-related businesses as it has assisted.
Pity if you didn’t qualify for Home Builder. Most of your potential buyers have lost interest in your project. Many buyers, right now, are simply chasing the $25,000. The trail of damage here could be wide.
Yet it will most likely be extended and maybe several times.
The new housing industry is now like a junkie. It needs a sugar hit. It lobbies to get it and at higher dosages each time.
Covid-19 was a missed chance to make some serious structural changes in this space plus a chance to send new builds to rehab.
Yes it would have been a shakier six months but home building in Australia would have come out stronger for it.
All our capital cities, and their outer conurbations, have a younger age distribution than the rest of their respective states or territories. This reflects the pattern of young adults moving to capital cities for education and work purposes.
In addition, Tasmania has a lower proportion of people aged 20 to 44 years (30%) than Australia (35%) as a whole. This, in part, reflects young adults pursuing education and employment opportunities interstate.
Tasmania also has higher proportion of people aged 45 years and over (47%) than Australia (40%). This reflects a trend of older adults, moving into, or staying in the state.
These are long established trends.
Yet there have been plenty of claims in recent months that millennials (generally anyone born between 1981 and 1996 or aged 24 to 39 year of age) have been moving from our capital cities to regions.
Such assertions are influenced by the inclusion of a capital city’s outer conurbation as a ‘region’ – think the Gold Coast or Sunshine Coast for example. When you exclude those ‘regions’ within a daily commuting distance from a capital, true regional locations, are losing millennials – and big time – to our larger urban places.
Now there has been some Covid-related demographic flight from our capitals to regional locations. And there is little doubt that there is more to come.
However, here downsizers outweigh the other demographic segments – our recent work suggests – by a factor of ten to one.
In addition, the work from home trend has been more hype than delivery. The fact that it now has its own acronym – WFH – speaks volumes.
Over the past four censuses the proportion of the workforce who said they worked from home has been under 5%. That was despite the digital revolution in kit and internet pipes, such as the National Broadband Network.
Yet, some are now claiming that the proportion of people who work from home on a permanent basis will rise to 10%. Several talking heads are stating it could be even higher.
True that many public servants and private professionals, who work for our larger service companies, are currently working remotely. Many have been instructed to do so until early next year. There seems to be a general consensus – maybe more like hope – that next year, things will be become more like normal again.
In the meantime, our CBDs and other professional based work locations are ghost towns. The knock-on effect is substantial.
To paraphrase Tom Dusevic from The Australian “many employers are worried about the sustainability of pyjama decision making; rising cost of vacant office space; a slide in productivity; lack of mentoring for disengaged staff and potential for sub-par work in the hermit land of Zoom”.
I couldn’t have said it better Tom!
Also, across many industries, working from home doesn’t work. And in those industries which have seen some folks working from home, it takes a certain personality type, plus the right domestic situation, to produce an acceptable level of productivity.
There is also the issue of insurance. Employers have to cover workers for any mishaps regardless of where they work. Either this changes to include the home and with that all matter of impracticable contingencies or many WFH folk will have to become contract workers. This in turn changes their employment status and tenure, opening up their labour to competition.
I reckon it is a safe bet to say that many who have been sent home to work this year really don’t understand how competitive the private contract business is. I get daily emails and LinkedIn messages promoting a cheaper service; faster turnarounds and even free trial periods. Plus, I have been a private contractor for over 20 years. It isn’t for the faint hearted!
So, beware WFH aspirants. To quote Joni Mitchell, “You don’t know what you’ve got. Till it’s gone”.
If we are truly going to embrace the WFH movement and with that population growth – and importantly millennial movement – to our regional centres, then we need substantial government action to make sure it happens.
This will need to include state and federal government department and service decentralisation; appropriate ‘carrot’ incentives like regional infrastructure expenditure as a priority over the current inner city largesse and ‘stick’ regulations like population caps on our capitals.
It doesn’t help when the capital cities get higher price thresholds when it comes to the Federal First Home Loan Deposit scheme. Ships in the dark when it comes to public policies these days.
And yet some parts of regional Australia, filling jobs is a persistent problem — COVID-19 or not. And despite high unemployment across the country, figures suggest in August there were more than 45,000 job vacancies posted in regional Australia.
Maybe some things just don’t change. Midnight Oil sang it best, way back, in 1982. “No one goes outback. That’s that”.
The Australian government has predicted that immigration would fall by 15% during fiscal 2020 and would fall further again by the end of June 2021. The 2021 financial fall could be as high as 85%.
This would represent a fall of almost 200,000 permanent overseas arrivals this financial year relative to fiscal 2019.
The decline will undoubtably result in a significant drop in household formation.
According to research commissioned by the National Housing Supply Council there are, on average, 3.3 people per immigrant household in Australia. Applying this ratio, the reduction in immigration between fiscal 2019 and 2021 would imply demand for around 60,000 fewer dwellings than would have otherwise been the case.
There have been recent reports of larger expected falls in new housing demand over the same time period, with some as high as 80,000. Most of these forecasts are based on the lower 2.6 average Australian household size rather than 3.3 which applies to immigrant households.
Yet despite then higher number of people per household, some 50% of immigrants reside in apartments (this obviously takes into account overseas students), with 30% living in detached housing and 20% in townhouses or similar type housing.
So, as many have been stating, any fall in immigration is felt the most in the apartment sector.
In summary, Australia’s near future population will be smaller – and older – than we previously assumed because of the sharp drop we are likely to see in net overseas migration.
Just how long this will be the case is anyone’s guess.
The average age of an adult Australian immigrant is 34 years of age. Fewer immigrants will see less first home consumers in the home buyer mix.
Also, in their absence – by default – the potential size of the downsizing buyer segment will be much larger in coming years. Yet what often stops this market from shifting from their large homes to smaller dwellings is stamp duty.
We should be reducing – better still, removing – stamp study transfers.
The introduction of the GST was supposed to eliminate such taxes. It is time action was taken. Such action will see more people sell and downsize into smaller digs, which in turn will generate more new housing construction, thereby helping to reduce the impact of lower immigration on new dwelling starts.
What would also help would be that any extension of the HomeBuilder incentive embraces attached dwelling construction.
There will also need to be changes in the current, overly restrictive, town planning mindset regarding infill development in many local councils.
Another thing getting in the way of downsizers buying property – and in this case investment stock – is the recent changes in the way loans are accessed for folks over 50 years of age. It is especially hard, given these changes, for those who are self-employed.
Since late July many lenders have demanded that older loan applicants nominate a date of for their retirement plus show evidence of their superannuation assets. There is also the assumption that their super assets will not grow in value.
These rules apply to anyone whose retirement age may occur during the life of the mortgage.
At present the property market is struggling with the absence of investors – as opposed to owner-occupiers — yet the new policy cuts straight into the age group that traditionally provides the market with property investors.
And despite what you read in the papers, rental vacancy rates are very tight across much of Australia, including in many parts of our capital cities. We need more investment housing.
Put simply, the odds have been raised against older investors entering the property market.
Hopefully this will be reassessed as part of Josh Frydenberg’s current lending leniency.
This week I have included two tables about the south east Queensland vacant land market.
Table 1: Residential land markets, select SEQ local authorities
|Vacant land sales||Median
|Median lot size (m2)||Average price $/m2|
|Matusik Ready Reckoner Reports, table 5. Financial 2020. * Excludes postcode 4184.|
Table 2: Residential land markets, change over past decade
|Median lot size (m2)||Average price $/m2|
|Matusik Ready Reckoner Reports, table 5. Total change between June 2010 and June 2020.
* Excludes postcode 4184.
Land sales are now increasing across south east Queensland. In some cases, this increase is rapid. Much of this momentum is due to the recent HomeBuilder incentive. Demand is being brought forward.
Prior to this covid induced builder incentive, land sales were falling across many south east Queensland LGAs. These falls were most marked in areas struggling with land supply. This lack of subdividable land supply is the most acute on the Gold Coast, in Brisbane, Redlands and in Moreton Bay.
When casting a wider net, Toowoomba too is facing a lack of new subdividable land.
In all instances the local authorities – in cahoots with the Queensland state government – argue that there are adequate broad hectare subdivision supplies, but ground truthing finds the opposite.
The lack of land supply is evidenced by the rapid increase in the price per square metre of land sold across south east Queensland over the last decade. Revisit table 2.
Land is becoming less affordable. This is part of the reason behind the fall in urban allotment sizes. Again, revisit table 2.
Table 1 shows just how small lot sizes are these days across south east Queensland.
It amazes me that local authorities – and especially their planning departments – weigh in on land supply, often making the development approval process difficult, if not impossible, on the basis that they think there is enough housing supply.
Managing land supply is really the developer’s realm. It involves substantial risk. And by the way more supply typically means more competition resulting in keener allotment, and house and land package, prices.
One would think that the Queensland authorities would be increasing land supply -and given the current economic environment – that this task would have a high priority.
To find out more about the local land markets get a Matusik Ready Reckoner Report – new, improved and just $55 per report or $330 if you buy all eight SEQld reports, saving you 25%.
This week I have included two tables about the south east Queensland rental market.
Table 1: Vacancy rate + Median weekly apartment rents, June 2020
|Vacancy rate||Two bed apartments||Four bed houses||Three bed townhouses|
|Brisbane||2.4% ↓||$415 ↓||$520 ↓||$420 →|
|Gold Coast||3.2% ↑||$430 ↓||$520 ↑||$450 →|
|Ipswich||1.2% ↓||$260 ↑||$375 ↑||$325 ↑|
|Logan||2.3% ↓||$290 →||$400 →||$330 →|
|Moreton Bay||1.2% ↓||$295 ↑||$430 ↑||$350 ↑|
|Noosa||2.0% ↓||$420 ↑||$620 ↑||$585 ↑|
|Redland||1.1% ↓||$365 ↑||$500 ↑||$410 ↑|
|Sunshine Coast||1.2% ↓||$380 ↑||$540 ↑||$440 ↑|
|Matusik Ready Reckoner Reports, table 6. Arrows indicate movement over the last 12 months.|
Table 2: Change in median weekly rents over the last ten years
|Two bed apartments||Four bed
|Three bed townhouses|
|Matusik Ready Reckoner Reports, table 6. Total change between June 2010 and June 2020.|
Our research has found that a vacancy rate under 2% suggests a significant shortfall of suitable rental accommodation. Typically, when the vacancy rate is under 2% weekly rents start to rise.
This is lower than the usually promoted 3% to 4%. This is because many tenants monitor vacancies proactively these days. Digital technology helps facilitate this. Gone are the days of a printed ‘for rent’ agency list being the main way renters found out about vacant accommodation. Many tenants have the ability to pounce on available space; hence the vacancy rate trigger point has dropped to under 2%.
The rental market is also a key driver behind the local property cycle.
For example, during the stagnation phase, the rental vacancy rate is steady. Yet a fall in rental stock availability is often the first trigger helping push a market into a recovery phase.
During the recovery phase, the rental vacancy rate starts to fall. Weekly rents may still be falling or stagnant, but typically start to rise once the vacancy rate shows consistent falls and/or falls below 2%.
When the local market is in the upswing phase, the rental vacancy rate is often tight and weekly rents show regular annual growth.
And more often than not, when the vacancy rate rises and remains high, weekly rents start to fall, helping downturn the local housing market.
To find out more about the local rental market and property clock positions get a Matusik Ready Reckoner Report – new, improved and just $55 per report or $330 if you buy all eight SEQld reports, saving you 25%.