Queensland Real Estate & Construction sector update - August 2018

01 August 2018

Overall, the outlook for the property sector is a bit of a mix bag with some sectors likely to do better than others over the next 12 month period. In the residential market it's no secret that there's been an oversupply of units, particularly here in Brisbane. This is placing a considerable downwards pressure on prices, which is great if you're a buyer, but certainly challenging if you're a developer.

The key risks to watch out for in the housing sector include, a further tightening in lending standards, which might be an outcome of the Banking Royal Commission, and an increase in your interest rates, although some economists think this is a little less likely now that the Sydney and Melbourne property markets have started to cool down.

This unit market is currently going through a bit of a correction, primarily due to a reduction in new developments, and an increase in interstate migration, which is helping to soak up some of the oversupply. However, it's probably going to be quite a while before we see any significant growth in prices in this market.

The outlook for detached houses in Brisbane is certainly more positive than it is for units, although we are unlikely to experience the sort of growth that we've seen recently in Sydney and Melbourne, particularly as those markets have started to cool off.

In the commercial sector there are a few key trends that we will continue to watch with interest over the next 12 months. Perhaps the biggest trend is the continued rise of online shopping and the impact that this is having on the retail and industrial property sectors. The retail sector is continuing to find conditions increasingly difficult as retailers rationalize their physical store footprints, and focus on competing more and more online. In contrast, however, the industrial sector is well placed to take advantage of the increase demand for warehouses and distribution centres from retailers.

Other key trends to watch out for are the re-emergence of the office market here in Brisbane, and the increasing investor interested in health care related property assets. So, the office market has been a bit of a laggard in recent times here in Brisbane, primarily due to high vacancy rates. However, the demand for good quality office space is expected to tighten significantly over the new term. This is giving rise to new opportunities for developments with a number of major players including, QYC and Dexus announcing plans for new office towers here in the Brisbane CBD.

Health care related property assets are also attracting a lot of investor interest, primarily because they are well placed to take advantage of Australia's aging population. A number of well capitalized institutional funds are actively looking to invest in this sector, which should underpin our growth in values over the new term.

If you have any questions about the Real Estate & Construction sector, please contact your local specialist.