Now that interest rates are at historically low levels, many people are looking seriously at entering the property market, in an attempt to gain higher rates of return than cash. People are also making use of the relatively low borrowing costs also associated with the lower interest rates. However, the table below highlights the need for investor caution in this area, particularly in QLD regions:

 


Annual change in home values across regional Queensland areas

                             Houses                                                             Units

Region                   Qtr       12 mth       5 yr        10 yr                     Qtr       12 mth       5 yr       10 yr

Brisbane

                              0.6%    7.2%          0.0%      3.5%                      1.4%     5.4%          0.5%     4.1%

Gold Coast 0.8%    6.1%    -0.3%         2.4%     -1.2%                      0.2%    -2.0%         1.4%


Sunshine Coast    -0.3%     3.3%          0.0%      2.8%                    -0.6%      1.4%        -1.3%     0.6%


West Morton         -3.2%   -2.7%         -2.3%      3.4%                     na           na             na          na


Wide Bay-Burnett -0.7%    1.0%         -1.8%      3.2%                     0.8%      1.5%        -0.1%      3.7%


Darling Downs       0.5%     3.2%          1.7%      5.3%                     1.8%      5.5%        -2.5%      2.7%


South West            0.4%     4.7%          1.2%      4.6%                      na          na             na          na


Fitzroy                  -2.9%    -3.8%          1.5%      7.9%                      na          na             na          na


Central West         0.4%      4.7%          1.2%     4.6%                       na          na             na          na


Mackay                -0.4%       0.0%          2.8%     9.8%                       na         na              na          na


Northern             -1.3%      -3.5%        -1.6%      5.0%                    -0.1%     -4.9%        -3.6%      5.0%


Far North             0.7%       5.8%          1.2%      5.9%                    -0.3%     -0.5%        -2.4%      2.3%


North West          0.4%       4.7%          1.2%      4.6%                     na          na              na          na

Note: Table has been supplied by RP Data. Capital city values are up to June 2014 whereas all other markets are to May 2014. 5 yr figure is the 5 yr compound annual change and 10 yr compound annual change.


From the above data, it's clear that capital growth in QLD properties has been relatively low. This means that for a residential property investment to be successful, an investor must be sure of extremely strong income returns from tenants. The figures above are contrary to our usual assumption that "property always goes up," as we can see there are many occasions when the growth rate is less than the rate of inflation of 3%. 

If you're considering buying a residential property for the purpose of investment, and you would like a second opinion on the soundness of the investment, please contact either Cos or Dominique Schuh on 07 5482 2855.