Sunshine State benefiting from internal migration for lifestyle
12 Feb 2021

The Sunshine State continues to shine - strong demand for detached houses and outstanding demand for lifestyle areas Is projected to deliver 6-10 per cent capital growth over the next 12 months for the south-east QLD market.

The QLD housing market, and particularly houses in the popular areas of Brisbane, the Sunshine Coast, and the Gold Coast, enjoy strong demand, with the coastal areas enjoying strong demand due to the increased ability to work from home and internal migration. 

Houses

Strong consumer sentiment, ultra-low interest rate and internal migration, combined with relative affordability of houses in comparison to the prices in Sydney and Melbourne, boosted demand for houses in the Sunshine State. 

During recent months, houses in the broader south-east QLD area enjoy very strong demand with high quality properties are sold at a premium very quickly. 

In addition, it is highly likely that investor activity, and particularly their demand for free standing houses will increase significantly in south-east QLD.

As previously projected, areas attracting these lifestyle buyers include the Gold Coast and the Sunshine Coast. Beachside suburbs especially are outperforming the market. The demand for free-standing houses in coastal areas is very sustainable and is likely to continue, at a lower growth rate, over the medium and long term. 

Overall, houses in south-east QLD are projected to deliver 6-10 per cent capital growth over the next 12 months. 

However, it should also be noted that there are a variety of markets within QLD, with the mining towns experiencing lower demand and presenting a higher risk due to a large proportion of investors with negative equity and insufficient growth drivers, particularly over the medium and long term. 

Units

Rental properties in high supply areas remain high risk. In QLD houses are substantially preferred properties over units. Investors who buy rental apartments in high supply areas are still taking a high risk with both equity and cashflow risk materially increasing. 

As previously reported, in recent years, overall, units across QLD carry a higher level of risk than houses, particularly due to high supply of apartments that are unsuitable for families and owner-occupiers. 

As mentioned in our previous reports, some areas with oversupply have been labelled 'danger zones' and have low sales volumes. Furthermore, some of these areas present a major financing barrier with a high deposit required. COVID-19 has further increased the risk particularly in inner Brisbane. Moreover, off-the-plan units in high supply areas carry an extreme level of risk. 

There have been large increases in rental listings and large drops in rent in some areas, such as in inner-city Brisbane, increasing the serviceability risk, particularly for highly leveraged inventors relying on rental income and taxation planning to service their mortgage payments. Mortgage arrears in high-supply areas should be closely monitored. 

It should be noted, however, that family-suitable properties in beachside suburbs carry a lower level of risk and often enjoy good demand from downsizers and, consequently, are subject to only modest price reductions.