Queensland leading the housing spike, but unit glut hurts investors

The value of housing finance in Queensland jumped 40 per cent in the September quarter, the biggest increase nationally and the result of a renewed interest from owner-occupiers, according to Core Logic.

Nov 17, 2020, updated Nov 17, 2020
First-home buyers have lifted the market. (Photo: Queensland Treasury)

First-home buyers have lifted the market. (Photo: Queensland Treasury)

But investors remain on the sidelines and have been since 2017.

“The retreat of investors and the rise of first-home buyers has only been exacerbated by COVID-19, as risk in investor-grade stock became elevated, and government stimulus targeted the construction of new homes and grants for first-home buyers,’’  the Core Logic report said.

“FHB purchases may be limited late next year, as temporary grants and concessions wind down, and house prices rise off the back of low mortgage rate settings

“Inner Brisbane in particular has seen high levels of unit development, which has placed downward pressure on rents over time. Since the onset of Stage 2 pandemic restrictions in March, inner-Brisbane unit rents have declined a further 4.8 per cent,’’ Core Logic said.

The Commonwealth Bank said its data showed home loan spending intentions improved marginally in October, but have largely been tracking sideways since the sharp recovery from the Covid-19 lows in April.

“Home loan applications have risen meaningfully over recent months, but this has been partly offset by a reduction in Google searches related to home buying,” the CBA said.

“The November easing of monetary policy has led to a further reduction in a number of fixed mortgage rates.  We expect these (very) low interest rates to continue to provide support to home buying.”

Core Logic said that despite a long period of high supply and subdued investor participation in Queensland, gross rental yields across the state are far higher than NSW and Victoria, largely due to relatively low dwelling values.

“A typical dwelling value at September was around $505,000 across Brisbane, and $388,000 across regional Queensland. Gross rental yields across the state were 4.8 per cent in September, down from 5 per cent a year ago.’’

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The analysis follows a shift in thinking from the major banks which are now predicting strong growth in house prices in the capital cities. ANZ was the latest to change its view and it now has Brisbane house prices jumping 9 per cent next year after a rise of about 4 per cent this year.

Nationally, housing finance for the purchase of property totalled $62.7 billion in the September quarter. This is the highest level since the March 2018 quarter, and is just 6.6 per cent below the peak of the lending series in the three months to May 2017.

The renewed interest in housing has been sparked by record low interest rates, first home buyer grants and a strong recovery in the economy.

Core Logic said the easing of social distancing restrictions across the country had also helped.

It said it expected further increases in housing finance over October and November.

“The owner-occupier, first-home buyer cohort had the highest rate of growth in secured finance, at 24.4 per cent in the quarter. This compares with an uplift of 23.1 per cent for changeover owner-occupiers and an 11.3 per cent rise in investors.

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