Population Growth No Longer Qld’s Saviour Says Midwood

Below I have copied in the contents of an email from Alan Midwood promoting his new Midwood Report. It is a great and very indepth analysis of the Qld economy and very valuable reading for any involved in Tourism or Property Sales in Qld. The content of the email alone is well worth a read alone and it is reproduced below.

Population Growth No Longer Queensland’s Saviour

With net interstate migration down to under 10,000 per annum in Queensland (it has been as high as 52,000 per annum historically), and the cut in overseas migration, the state’s population growth rate of 2.5% per annum over 2005-2010 is likely to fall below 2.0% per annum over 2010-15.

Some would say that this is a good thing (Treasurer Andrew Fraser already has) so as to give some breathing space for infrastructure to catch up. If the State Government privately believes that a slowdown in population growth will be good for us, then there needs to be another driver of the state economy in the major cities, which do not benefit from mining.

Employment in Queensland remains our weakness and what we need is incentives, not disincentives, to employ people. Payroll tax is an obvious target and should be abolished. It is an old chestnut that Labor has never addressed. All stamp duty on residential housing transactions should also be abolished. Construction is one of the largest employment sectors in Queensland, mines included, and has huge multiplier effects throughout the economy.

A tourism marketing levy should also be introduced (taxed on the users, not facilitators) to fund more promotion and marketing of our state. Fiscal policy can be used to stimulate certain sectors of the economy but it is virtually non-existent in Queensland these days. It should be a key policy target for Campbell Newman’s “Can do Queensland”.

For a full list of permanent resident growth figures in selected Queensland localities, and independent commentary, see the latest edition of the Midwood Report here.

Queensland New Apartment Sales Stagnant but Brisbane Shows Confidence

The latest Midwood Report confirms that unconditional sales of new apartments in Queensland remain stagnant. For the three month period ending 31 May 2011, total unconditional sales for new apartments in the state’s major growth regions totalled 405, compared to 464 in the same period a year ago. Sales of new high-rise apartments were particularly sluggish with Gold Coast recording 51 unconditional sales and Brisbane, 189 sales.

The majority of Gold Coast sales, albeit at a low volume, have been for discounted receiver stock, for example in Southport Central III, which recorded 50% of all sales on the Gold Coast during the quarter. The historical long-term average for the Gold Coast is 300 unconditional sales per quarter.

The Midwood Report’s quarterly survey confirmed that Gold Coast apartment stock levels also continue to decline. As at 31 May, just 695 new apartments remained for sale, representing approximately two years supply at current take-up rates. New apartment supply on the Gold Coast has tightened because virtually no new stock has been released to the market since early 2009.

The Brisbane market, however, is confidently producing new stock with a net gain of 578 new apartments added to the report’s survey in the May quarter. The Brisbane market has been characterised by a sustained level of sales over the past two years, averaging 200 sales per quarter and this has brought overall unsold high-rise stock levels to 1,683 apartments as at 31 May, equivalent to 2.5 years supply at average take-up rates.

According to the Midwood Report, 95% of new, unconditional high-rise apartment sales in Queensland were recorded either in Brisbane or the Gold Coast in the May quarter. In regional cities such as Cairns and Townsville, just 45 sales were recorded together in low or medium-rise projects in the May 2011 quarter.

The general low level of sales volumes for high-rise, medium and low-rise apartments is not likely to improve until interest rates fall to a level which results in attractive returns to investors.

The comprehensive Midwood Report New Apartment Sales survey (Gold Coast to Cairns) is available only by subscription via www.midwoodaustralia.com.

Dwelling Approvals Hit Lows

Dwelling approvals across Queensland’s major growth regions have generally fallen to 2000-01 levels which coincided with the introduction of the GST.

Gold Coast house approvals are the lowest since 1993 and have been declining over the past three half-year periods and unit approvals are particularly low in this region compared to past years.

Brisbane house approvals are not so low compared to the Gold Coast, and unit approvals have held their past levels.

Townsville, Cairns and the Whitsundays have had declining approvals over the last 18 months, however Mackay and Toowoomba have held up well, much better than what was recorded for these regions in 2000-01.

Queensland Hotel Performance Trends

Queensland hotel occupancies and room rates improved in calendar 2010 after a challenging 2009, but these are still down on average levels recorded over the last decade. Total visitation into Queensland increased by 5% in 2010 and this has helped the state return to levels seen in 2008.

The average hotel occupancy in Queensland was 64.8% in 2010 (for establishments with more than 15 rooms), on par with 64.2% recorded in 2009 but down on 2007 and 2008 figures (69.3% and 67.9% respectively).

Brisbane hotels recorded an average occupancy of 77.6%, Gold Coast hotels 71.6% and Cairns hotels 57.9%. Most regional centres within the state managed to return to 2008 levels.

Movements in gross average annual income per room also corrected in the year, up 7% to $54,949 in Brisbane, up 7% to $30,430 in Cairns and up 2% to $41,504 in Gold Coast.

Average nightly room rates performed well across the board despite the rising Australian dollar. Brisbane returned to $194.00 per night (+4% over 2009) and Gold Coast remained steady at $158.81 (+1.7% over 2009), but Cairns continued to fall resulting in $143.93 per night (-1.0%).

Room nights sold rose according to the 2% increase in total visitor nights spent in Queensland over the year.

Queensland Budget 2011

The centerpiece of the 2011 Queensland Budget was a direct stimulus to new housing construction, in a serious attempt to lift housing starts throughout the state, which are at an all time low (see the dwelling activity pages in each regional section of the May 2011 quarter Midwood Report).

The State Government has done this by introducing a $10,000 rebate for anyone building or buying a new home after 1 August 2011 until 28 February 2012, coincidentally when the next State Election is due. The rebate is available to any person or corporation building or buying a new home under the value of $600,000.

But buyers of used houses will not only miss out on the $10,000 rebate, they will pay additional stamp duty because the principal place of residence subsidy will be scrapped. For a $500,000 house, stamp duty will therefore increase from $8,750 to $15,525.

The focus on new home subsidies should improve the state’s unemployment in the housing industry, as well as other multipliers such as landscaping, fencing, pools, furniture suppliers etc.

At a macro level, the 2011 State Budget increases the annual deficit to $2bn and to $4bn in the next financial year, with a surplus not predicted until 2015-16. Total State debt is $50bn with an annual interest bill of $4bn, twice the deficit.

Tourism, the hardest hit industry by the high dollar, receives a miserly $83m over four years to help fund major events such as the Gold Coast and Townsville motor events. Tourism was one of the key industries identified for financial support under the GST legislation, but it receives a pittance out of the $3bn GST money from the Commonwealth each year.

For more independent commentary on hot topics that affect investment decisions in Queensland, see the latest edition of the Midwood Report here.

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