Queensland has been touted as the State to watch for the greatest residential capital growth by many reputable groups. BIS Shrapnel, for example, forecast it to have faster capital grow than Sydney or Melbourne over the next three years in 2015.
They didn’t get it right in 2016. Will they do better this year?
Sydney and Melbourne broke the ten percent capital growth barrier in 2016. This makes them internationally outstanding. Sydney dwelling prices grew by 15.46% and Melbourne by 13.68% on average. Sydney’s capital growth was in both houses and units while Melbourne was more skewed to houses. Brisbane dwellings, in comparison grew by 4.4% when the numbers included the Gold Coast and only by 3.6% without this area.
What do we need to hear about Brisbane for us to have the confidence that capital growth rates are going to meet the BIS Shrapnel forecast? CommSec’s the State of the States report suggests business confidence and employment; these are the next two steps in the economic cycle.
So how might we evaluate these factors?
Business confidence is usually measured by investment either in business equipment or people. The ABS has just released its job vacancy data which is an indicator of business needs for people. If it is trending up, then there is more business being done, if it is trending down less business being done.
This indicator also supports personal confidence through employment options. Personally we like to know there are lots of jobs available so we can change jobs if we are unhappy.
The ABS job vacancy data shows that the number of job adds vary over the year due to employment cycles. In November 2016 181,000 jobs were advertised compared to 167,200 in November 2015, an increase of 8.3%. Of these jobs private sector roles went up 7.3% and public sector by 17.3%.
In these three states, NSW, VIC and QLD job adds were up however by different degrees. NSW job adds were up 15% with most of these in the private sector, Victorian job adds were up 13% with strong public sector growth and more modest private sector growth. QLD job adds were up 5% with almost all the jobs in the private sector. While 5% is a great result for advertised job vacancies Queensland is not powering like the larger states of NSW and Victoria.
If we were going to benchmark this to understand how each state is performing, we need to know if jobs are increasing faster or slower than the rate of population growth.
Australia’s total population growth from June 2015 to June 2016 according to ABS was 337,821 people or 1.42% increase from the balance of births and deaths plus immigration.
Victoria stood out head and shoulders about the pack with 2.07% population growth followed by NSW with 1.39%, and QLD with 1.35% growth. The economies of Victoria and NSW are being fuelled much more strongly than that of Queensland’s by a programme of government infrastructure investment and private investment driving job vacancies. Job vacancy growth in these three states is currently well above population growth showing an expanding economy.
What else do we need to see in Queensland to know residential capital growth is going to be strong?
Queensland had increased revenue from its export of hard coking coal, that is used to make steel, and of coal seam gas (CSG) in 2016. It was up by 12.4%. This is good news after the end of the mining boom and is forecast to continue as CSG comes into full production.
Tourism is increasing with Asian tourists in particular. Actual figures for 2014-15 were 1.9M and are forecast to be 2.7M by 2019-20.
It has strong international student enrolment in its universities and this is growing as it is across Australia.
It still needs more jobs as those who can’t get jobs in WA any more can afford to move to Melbourne or Queensland but not necessarily Sydney. There are more options for employment in Melbourne suggesting it is attracting more than its share of new residents.
Queensland is showing promising signs, of passing the bottom of the market. This is the time to buy for counter cyclical investment and achieve the full rise of the market. However, the timing of this increase in prosperity has not been identified as yet.
Author Rosemary Johnston, Client Experience, Forrester Cohen. www.forrestercohen.com.au If you would like more information or to continue the social commentary, please email rosemary@forrestercohen.com.au