Newsletter Articles

Property Market Update

Australians have always had a fascination with property and nothing could have highlighted this more than the ‘boom’ which we observed in 2002 to 2004. Contrary to what some media sectors would try to have us believe, there is (and always will be) still money to be made in property.

As highlighted in Herron Todd White’s (leading valuers) recent report, Queensland and Western Australia are predicted to have the strongest growth in Australia over the next three years given their higher population growth and the resources boom.

Activity in the mining industry continues to fuel retail sales growth, alongside more modest growth in other states. CBD retail rental expansion has been maintained by the vast increase in people choosing to reside in city precincts, while the limited CBD investment stock in prime areas continues to suppress yields.

Residential development in the suburbs remains as it has in previous years. This will most likely continue to support suburban retail centers. Strong residential development and growth in the past few years has been particularly kind to the bulky goods retail sector as the home base centers get a work out with Mum and Dad kitting out the new home.

Retail turnover in Queensland has progressively improved each year over the past 5 years in a similar fashion to the overall Australian figures.

The Queen Street Mall (Brisbane) is still the focal point of retail in South East Queensland. The Myer Centre, the new Queens Plaza, Wintergarden and others have shown steady rental growth over several years and prime yields have been firm, generally falling into 6% to 7% range.

Fortitude Valley, on Brisbane’s CBD Fringe, has also gained momentum in recent years and is centered along, Wickham, Ann, Brunswick and James Streets. Rents have shown steady growth over several years and prime yields have been generally around 6.5% to 7.5% range and secondary yields around 7.75% to 8.75%. Some of the keener yields are a reflection of high land value and/or potential to increase the rental rates by refurbishment.

On the Sunshine Coast, the primary driver for retail expansion has again been strong population growth. Notwithstanding some slowdown in this growth, there is continued expectation of significantly above State average growth, which is well above national growth.

The graph below plots the average property values in Brisbane from 1970 to 2006. We’ve used historical data for Kedron (northern suburbs) and Holland Park (on the south) as well as the inner-city to illustrate trends in each sector. As a means of highlighting how property values increase regardless of what decade you look at, the average price of property in Kedron has increased from $6k (1970), to $47k (1980), to $119k (1990), and $140k (2000). In 2006, the average price now is $360k.

What will properties be worth 10 years from now?

The next graphic illustrates the average property values across capital cities during the period 1999 to 2006. Values in all capital cities increased in 2004, at the height of the boom. Values have since ‘flattened off’.

If what has happened in previous decades is any indication to future trends, one could conclude that it is inevitable that property values will again increase at some stage.

Source: REIQ and PRD.