I am quoted extensively in John McCarthy’s Courier-Mail article this morning Brisbane house prices showing strong growth while regions are suffering (pay-walled), expressing similar views to those in my post from yesterday. In the Courier-Mail article, I sound more alarmist than I actually am, but nonetheless John has fairly reported my views. I am also quoted regarding the Real Estate Institute Queensland’s proposal to extend the First Home Owners’ Grant to existing dwellings in regional areas, which would be bad policy in my view:
Regional mayors have also petitioned the State Government to back a call from the Real Estate Institute to extend the First Home Owners Grant to all housing rather than new homes only.
But Mr Tunny said the grant was initiated to offset increased costs from the goods and services tax, “so this doesn’t make sense in terms of the original rationale for the grant’’.
We need to be concerned about the budgetary cost, noting Queensland is still running a fiscal deficit and accumulating debt.
“If the Government wants to stimulate regional areas, there may be better ways to do it,” Mr Tunny said.
Incidentally, yesterday CoreLogic published its latest Hedonic Home Value Index estimates, so below I have included an updated version of a chart using these data that I presented in yesterday morning’s post. The chart still shows a decline in Brisbane unit values over 2016 (-0.2%) compared with moderate house price growth of 4%, while the housing price bubble continues to expand in Sydney and Melbourne. Unit values are obviously growing strongly on the Gold Coast, as CoreLogic has estimated unit values in the Brisbane-Gold Coast region grew 2.3% over 2016, compared with a fall of 0.2% in Brisbane itself.
Queensland Economy Watch 
Gene I think the Mayors in these regional areas are focusing on the wrong end in regard to FHOG, whilst some young people are leaving to seek opportunities elsewhere I believe the largest shift is in retirees who are leaving the regions, this is a bit of a reversal from what has generally occurred in the past and now it is very common to be talking to people who advise their parents retired and moved south. Two of the primary reasons are access to quality health care, and access to quality low manintence dwellings near transport, shops etc. Most regional cities are still dominated by the suburban sprawl of houses with limited high density options and public transport is virtually non existent, both of these are a failure of local govt to adequately plan for these changes.
That’s very interesting, Glen. Thanks. I’ll have to look out for that trend when the new Census data is published (assuming the census data are reliable).
There are many suburbs on the north shore of Sydney where developed is effectively blocked by wealthy retirees. This makes it harder for young people to move closer to jobs in the job creating areas of Sydney. I suspect similar patterns are evident in some suburbs of Brisbane. But all this focus on supply side forgets the big elephant in the room – Debt fuelled by low interest rates and a high level of world savings searching for a stable asset class for investment. There is little a government or even central bank can do about this with an open economy. What 2016 shows me was despite the additional restrictions on investor finance for residential construction price growth continued at double digits in Sydney and Melbourne for houses (and almost for units in Sydney). Does this imply the property price bubble is now uncontrollable (without very strong restrictions)?
As a side note it’s curious Brisbane is lumped in with the Gold Coast. If so, doesn’t it make logical sense to include the Sunshine Coast? Also, should Sydney include Newcastle, and Wollongong? Lines and definitions can make a big difference as you observe for unit price growth on the Gold Coast.
Thanks for the comment, Alistair. I suspect it’s out of control, but will eventually burst. The recent growth in Sydney and Melbourne is wacky. Foreign investors are playing some part, but it’s mostly domestic factors that are behind it. See this Treasury working paper:
http://treasury.gov.au/PublicationsAndMedia/Publications/2016/Foreign-Investment-and-Residential-Property-Price-Growth
Yes, it’s very odd Brisbane is lumped in with Gold Coast but not Sunshine Coast.
I should have clarified worldwide savings was indirectly having an impact through lower bond yield rates (although seems to be ticking upwards after Trump won, but still much lower than before the GFC).
I often wonder how much control central banks really have on monetary conditions versus perceived (or hoped) control.