Is Queensland well placed to build the nation into economic recovery?
Editor: Olivier Björksäter-Bleylock
Data: Sandra Stuckey
Analysis: Nicola McDougall and Kieran Clair
At the time of writing, the Queensland Government had just issued an open declaration to Australia that the Sunshine State was “open for business and the place to invest and build as the nation looks to recover from the COVID-19 economic crisis.” That’s the message Treasurer and Planning Minister Cameron Dick wants investors who may be experiencing challenges in other jurisdictions to know.
“The State’s been working hand in hand with local government to ensure there are no roadblocks standing in the way of construction as they chart a pathway forward following this unprecedented global pandemic,” Mr Dick said. “We’ve been doing the heavy lifting to ensure private investment is unlocked to provide the critical jobs boost this State needs to emerge from this pandemic stronger. Whether it’s through direct stimulus into industry or through hardship support to impacted businesses we are laser focused on fast tracking economic activity and, importantly, jobs.
“Queensland has led the nation with its planning and development approval system, and we haven’t seen any failure to meet timelines during COVID-19,” the Treasurer continued. “We have also worked hard to make sure that our planning system evolves to respond to the challenges of COVID-19 with e lodgement and other legislative changes to expedite these processes. Our pipeline of activity is already flowing with more than 130 government projects, valued in excess of $3.8 billion, on track to commence construction over the next six months.”
One initiative specific to the property sector implemented in Queensland post reporting was the $680 million HomeBuilder scheme, a tax-free grant introduced by the Federal Government in a bid to support the residential building industry through the coronavirus pandemic. It provides eligible applicants with a $25,000 grant to help build a new home or renovate an existing home. All dwelling types are eligible for the scheme, including houses, apartments, house and land packages and off-the-plan purchases provided they are owner-occupied. Applicants must also meet the income eligibility test. For individuals, your annual income needs to be less than $125,000 or less than $200,000 for couples. Further, if renovating, the existing property needs to be valued at less than the national price cap of $1.5 million and you must be spending over $150,000 to qualify. And, if you’re building a new home, it needs to be worth less than the national price cap of $750,000. The scheme can’t be used for an investment property.
While many people say their homes desperately need renovation, they also say the spend threshold is way out of reach. This was backed by the Queensland Government’s Department of Public Housing Minister, Mick de Brenni, who said the scheme didn’t go far enough to help the industry. Furthermore, Federal Opposition Leader Anthony Albanese also questioned the high buy-in cost, which he said would put the grants out of reach for many. The Real Estate Institute of Queensland (REIQ) also queried how effective the scheme would be in supporting Queensland’s housing market. “Any additional measures that support Queensland’s housing market is always welcomed, particularly during the COVID-19 pandemic. However, we believe more can be done to support the established housing sector beyond the Federal Government’s HomeBuilder grant program,” said Antonia Mercorella, CEO of the REIQ. “What’s needed is broader support measures that will sustain the property sector which includes expanding the First Home Buyers Grant beyond new construction to stimulate economic activity through the introduction of increased numbers of first home buyers to the broader property market. A significant reduction in stamp duty will help lessen any perceived financial risks and act as a significant incentive to vendors who may otherwise be discouraged from listing their properties during this pandemic. And, removing barriers for new developments and reducing application costs will assist to boost construction levels, increase competition and importantly, reduce costs for the end purchaser.
The REIQ has proactively developed a set of recommendations and proposed initiatives designed to minimise the potential economic impacts of coronavirus on the real estate sector. In order to maintain stability and optimism in the Queensland property market during the coronavirus pandemic, the REIQ continue with their urgent calls for the Queensland State Government to:
- Extend the First Home Owners Grant to established housing: Expanding the First Home Owners Grant beyond new construction will stimulate economic activity through the introduction of increased numbers of first home buyers to the broader property market;
- Implement a 50% reduction in development application costs across all Local Governments and introduce streamlined application processes: Removing barriers to development and reducing costs will assist to boost construction levels, increase competition and importantly, reduce cost for the end purchaser; and, c. Deliver a 75% reduction in stamp duty for the period of the coronavirus pandemic: A short-term, but significant, reduction in stamp duty payable on property transactions will have a positive effect on confidence within the property market. This, in turn, will offset the predicted drop in real estate transactions expected during the immediate crisis period. Additionally, in the 18 months following the end of the COVID-19 pandemic, the REIQ urgently seek the following further stamp duty related reforms to continue to support and stimulate the property market, which include: a. Removal of stamp duty for persons aged 65+ years: This will encourage older Queenslanders to move into ageappropriate accommodation by reducing the financial burden of such a move. A likely consequence of this would be greater access to housing stock for younger Queenslanders; b. A 50% reduction in stamp duty where residential investment property purchases are committed to the permanent rental market in Queensland for 3 years or more: A significant reduction in stamp duty for residential investment properties will have the effect of stimulating property investment in Queensland; and,
- A 40% reduction in stamp duty for all other residential property purchases: A significant reduction in stamp duty payable on non-investment residential property purchases will have the effect of instilling confidence into the property market and provide incentive to individuals Australia-wide to consider migration to Queensland.
“Queensland’s residential real estate sector is worth over $1 trillion and employs over 50,000 Queenslanders directly with many more employed in associated industries,” continued Ms. Mercorella. “Activity within the real estate sector contributes in excess of $30 billion every year to the Queensland Government. Protecting and sustaining the Queensland real estate sector is critical to safeguarding our property market and supporting our local economy. That’s why broader action needs to be taken to further support established housing as well.” Importantly, another key measure announced by Prime Minister Scott Morrison, via the newly-assembled National Cabinet, on the final day of this Market Monitor’s reporting period was a six-month moratorium on residential and commercial evictions, preventing landlords from evicting tenants if they are unable to pay rent due to financial distress as a result of COVID-19. The Prime Minister said communication between landlords, tenants and banks was key, with all parties needing to work cooperatively. “We will be working on measures that will be encouraging you to do just that and to support you to do just that, but also to ensure that if you aren’t going to engage in that sort of cooperative activity between banks, between tenants and between landlords, then the sort of support that you might otherwise expect to receive, you will not receive,” Mr Morrison said. “This is part of the hibernation approach where we want people bespoke, customised to their own circumstances to sit down and work these things out. There is no rulebook for this. We are in uncharted territory, but the goal should be shared.”
The REIQ supported a no eviction policy however had concerns that the lack of detail was creating anxiety amongst landlords and tenants alike. “What we need is urgent action with clear directives right now for both commercial and residential tenants because there are far too many unanswered questions both businesses and people are still anxiously awaiting clarity on,” Ms Mercorella explained. “The REIQ supports protective measures on evictions provided it is limited to cases where the full amount of rent is not able to be paid due to a result of the coronavirus.”
Ms Mercorella said for property owners, it’s not just a matter of pressing pause on mortgage repayments for six months either. "Many mum and dad investors can barely cover the various costs associated with owning an investment property even with rent coming in so may not have any other choice but to sell their properties. It puts many at risk of bankruptcy,” she added. “Consideration also needs to be given to those self-funded retirees whose only source of income is derived from an investment property.”
The REIQ immediately launched a highly successful grassroots campaign, Everyone Matters in Real Estate, in which the fight for more fair and balanced COVID-19 special protections for both tenants and landlords under the Prime Minister’s no evictions moratorium ended after only three days. This included almost 400,000 letters of protest downloaded and delivered to Premier Palaszczuk’s office as well as all 93 local MPs around the State.
“At its core, our Everyone Matters in Real Estate campaign really resonated with every investment property owner’s right for protection too during the COVID-19 pandemic. The response was incredible, their voices have clearly been heard and the Palaszczuk Government has listened,” said Ms. Mercorella. “We have always supported special protections for tenants during COVID-19. That has never been in question. However, what was essential were special protections that supported the safety and stability of housing for all Australians meaning any relief in hardship conditions for tenants was also required for landlords.”
The REIQ worked with the Palaszczuk Government and other industry stakeholders as part of a new COVID-19 Housing Security Sub-Committee to oversee the implementation of COVID-19 response measures. Temporary amendments to the Residential Tenancies & Rooming Accommodation Act were introduced and passed in Parliament via the COVID-19 Emergency Response Bill 2020.
“As our campaign message highlighted, everyone really does matter when it comes to real estate because we all need shelter. What’s more, a stable real estate sector is also critical for our economy, for consumer confidence and shifts in sentiment, for government revenue – meaning real estate needs to continue to transact, and for employment, with real estate the second largest employer in Queensland,” further explained Ms. Mercorella. “For the Palaszczuk Government’s COVID-19 Emergency Response Bill 2020 to be successful, it was critical that the special amendments provided protections for all parties, including landlords. As the industry peak body, had we not campaigned for the changes necessary to achieve more fair and balanced protections for all parties, the Queensland Government’s original proposals would have placed countless families into financial hardship, at risk of bankruptcy and forced to sell their properties.”
When it comes to consumer confidence and shifts in sentiments, the Melbourne Institute and Westpac Bank Consumer Sentiment Index for Australia during this issue of the Market Monitor’s reporting months of January – March 2020 saw the index open in January at 95.5 (up 2.1 from prior month) then dip slightly in February to 91.9 followed by a significant fall when the news of the coronavirus first broke in March to 75.6. It’s pleasing to report that the index has since risen week-on-week for the last consecutive 10 weeks (at the time of writing), rising by 6.3% month-on-month to 93.7 in June 2020, after a 16.4% surge in May. The index is now only 2% below the average in the preceding September to February period, highlighting Australia’s continued success in bringing the COVID-19 under control.
Furthermore, economic conditions for the next 12 months jumped +8.4% to 77.2 on the prospects of reopening the economy, and conditions for the next five years rose +6.4% to an 18-month high of 102.4 as households were confident that the economy will cope with the pandemic. Time to buy a major item increased +10.1% to 106.3, due to easing concerns around health risks and more certainty around income. Also, the ‘finances vs a year ago’ sub-index went up +3.6% to 77.0, supported by the JobKeeper plan as well as temporary relief for mortgage and rental payments. Finances for the next 12 months sub-index advanced +3.3% to a 105.3. So, let’s look at the performance highlights regarding the Queensland property and they currently stack up in this issue of the Market Monitor:
House Market (<2400m2)
The median house price rose +0.7% in March Quarter 2020 to
record a result of $695,000. On an annual basis, the detached
house median price rose +1.5% to reach $690,000. In the time
since these metrics were collected the crisis shutdown slowed
momentum, but recent easing of restrictions has brought renewed
interest to the house sector.
Unit prices rose +0.6% over the March 2020 quarter to reach a
median of $415,000. Over the past year, the annual median unit
price rose +1.2% to $420,000. Listing numbers over the year to
March 2020 were 11,393 which was a -6.2% fall on the 2019 figure.
Stock On Market also fell, coming in at 6.3% for the year to March
2020 as compared to 6.9% in 2019.
Brisbane’s overall rental vacancy rate sits at 2.1% for the March
2020 quarter. The figure has remained below 3% for the past five
quarters. The Brisbane LGA median rent for a three-bedroom house
held steady at $450 per week for the year to March 2020. The
three-bedroom townhouse median was $430 per week for the year
to March 2020 which reflects a rise of $10 per week compared to
the 2019 result. Meanwhile, two-bedroom units saw a $5-per-week
increase in the median during the year to come in at $430 per week.
Economic conditions for the next 12 months jumped 8.4% to 77.2 on the prospects of reopening the economy, and conditions for the next 5 years rose 6.4% to an 18-month high of 102.4 as households were confident that the economy will cope with the pandemic.