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Is The Queensland Property Market Overcooked? · The Follio Property Podcast

• 0:05
  Welcome to I Call Bullshit Property Podcast, where we separate real estate fact from fiction. I'm Rhys Bettle, and in every episode, we uncover the truth behind the property market's biggest claims and trends. Joining me is our resident expert, Lachlan Delhunte. He's seen it all and isn't afraid to call out the bullshit when he sees it. If you're enjoying the show, tap like, hit subscribe, and make sure you never miss an episode.
• 0:25
  All right, Lockie, let's jump into today's topic. The Queensland property market is overcooked. Pretty broad and aggressive statement. That's bold. That is bold. We did. We have been trying to fire you up today to get you to say some bold stuff today. But I thought it was really relevant. Previous podcasts, we've spoken briefly on sort of regional Queensland and Queensland in general, but we thought it'd be good to maybe unpack Queensland as a whole and some specific areas. So what's the current state of the Queensland property market in 2025?
• 0:54
  across the board, balanced. It's, for Queensland for me, it's just a story around migration. And I think if we look back and how we've got to where we are, sheer population growth and interstate migration's been driving that. So post-COVID or what happened throughout COVID,
• 1:12
  we saw Melbourne pretty royally fuck up COVID and everyone exiting that state and specifically Melbourne itself. We saw the sheer exodus from Sydney just from an affordability point of view. And the big winner, the market that's benefited most from COVID has been Queensland as a whole. And you've probably got friends, family. You've seen a huge wave of migration head north. Yeah.
• 1:40
  When we're looking at Queensland, which are the key markets in Queensland from a property perspective should we be looking at? Or are we looking at? Broadly speaking, I think you can break it down into three clear subcategories. Brisbane as a whole and treated in isolation as the major capital city. Then you've got the lifestyle markets.
• 2:01
  Gold Coast, Sunshine Coast, and they've seen huge upside. And again, that's that migration story. And regional Queensland. And that's when we're talking to a lot of these investment groups and a lot of the upsides being huge amounts of investment into these markets which have driven prices over the last 18 months in particular. Yeah. It'd be interesting to see that migration data in those three segments, because you've mentioned there
• 2:32
  the lifestyle locations like your Gold Coast and your Sunshine Coast. And we've had a conversation about this previously where I mentioned, I've got a lot of friends in Melbourne who have moved to those locations, probably not the regional Queensland. So I think it would be important to distinguish between each location and it would be great to understand the migration data. I'm assuming the migration data is only from a state level. So let's start with Brisbane. How's the property growth been in that location?
• 3:00
  So Brisbane's been on a run now essentially since 2014. So we're in our 11th year of growth, which is pretty significant for any market.
• 3:10
  What Brisbane looked like prior to that was a pretty large stagnation period. So from 2008, essentially GFC, right through to 2014, we pretty well saw little to no growth, so a six year stagnation. And then from 2014 to 2020, prices increased from circa 450 up to 600,000.
• 3:31
  And then COVID's hit, we've seen that mass migration into Queensland, but specifically Brisbane. So when you look at migration into Queensland, yes, the lifestyle markets have also benefited significantly, but Brisbane, just due to the large employment centre, and it's quite a diverse range of sectors, Brisbane's gone on a serious run, and prices now have increased over that period since 2014. They're up about 105% across the board.
• 4:00
  So, you know, in isolation and when we took a position in Brisbane, it was back in 2016, 17. So certainly not at the bottom of the market, but, you know, certainly before that COVID period. Our clients have taken a position and certainly benefit from that migration story in Queensland.
• 4:19
  Yeah, and you're talking through interstate migration, which we've spoken about previously, about a lot of Melbourne, people from Melbourne post COVID sort of migrating there. Also, I'd say New Zealand as well. I know it's obviously not interstate, there are- Yeah, overstate migration has been huge, but most capital cities have benefited from that. The difference between say a Brisbane and a Melbourne has solely been that interstate migration, so yeah.
• 4:45
  And you mentioned a bit there on job opportunities and industries. What does that look like from an employment basis there in Brisbane particularly? What do the jobs look like? What's driving people there? Extremely diverse, right? So you look at most capital cities, there's typically 15% to 20% of an industry is dominated by a sector.
• 5:05
  in Brisbane specifically there's no sector that dominates more than 10% so financial services is 9.8 I think constructions you know 10% so there's a diverse industry which accommodates people trying to get out of Melbourne and look for job opportunities and that's why Brisbane's been a huge benefit of that the problem of it of the Brisbane market and where I see it now is there's still this conversation around the Olympics and that's going to create all these jobs and
• 5:33
  that's that that growth sort of already been factored into brisbane um that anticipation once essentially i got when i got appointed people have been investing in brisbane on that basis so i certainly as an investor now wouldn't be holding on to that although there is potential you know jobs for the preparation and and sites and facilities i don't think um you know it's going to carry as much weight as probably think people think it will
• 6:01
  So almost the hype and the sediments got people into the market before the infrastructure's been built around that. Is that what you're... Exactly. It's like with interest rates. The anticipation of a rate cut is almost more powerful than the rate cut itself. The anticipation of the Olympics is more powerful.
• 6:20
  you know understanding brisbane's gone or queensland's gone through a little bit in the last few years as well 2022 they brought in the land tax reform which essentially penalized anyone that owned properties in other states in queensland right so if you owned a property in perth one in melbourne and one in brisbane they would punish you on a state-based tax whereas you know they reverted back on that very very quickly because of the uproar
• 6:44
  Did that do anything to the property market? Absolutely. Yeah, we saw a massive dip in investment activity. We see prices decline. In a very short period, this policy was only played for no longer than six months. But in that six months, you've seen how quickly the market can cool. And that's why policy can be so fickle to a market. Yeah. And when you're saying that, are you saying the Brisbane market cooled?
• 7:05
  Absolutely. Yep. Queensland as a whole, because all the investors essentially, you know, all of a sudden go, okay, well, you're going to tax me. A lot of people, a lot of these property investors may own four, five, six properties. I need to get out of Queensland. I don't want to be penalised because your land tax bill is going to be astronomical. So I've sort of pulled out all the investors. The problem was, from a state government's point of view, yes, they were going to get it.
• 7:26
  a ton of cash that they weren't going to get but they're going to have a huge crisis of shortage of rental properties there's already a shortage of rental properties in australia post-covert overlay that with no investors in the market all of a sudden you would see massive inflation in rent rises and that's that's where the uproar come from so not often do you see a policy that gets passed through government and pulled so quickly i haven't seen it before so it was um it's interesting people forget that
• 7:52
  And just going back to that policy, so were they getting taxed if they owned properties outside the state and inside the state as an investment? Or was it purely investment properties outside the state? So if they had an investment property within Queensland, they- No, you had to buy or own a property in Queensland, but they would land tax you, portion your land tax to all your entire portfolio outside. So land tax typically, prior to that, is a state-based tax.
• 8:16
  I can only be taxed on what I own in Victoria if I own a property in Victoria. They were going to tax you for your entire portfolio. Interesting. So it just shows what policy can do to a market. So that got nipped in the bud very quickly, which was great because it was problematic because we have a lot of clients who have invested in Brisbane and Queensland as a whole. But now the problem with the Brisbane market is affordability. And the affordability index is up around 54%.
• 8:46
  Just explain what the affordability index is for those listeners or viewers at home. The average wage consumed by the average mortgage. So essentially, people in Brisbane, 54% of their wage is consumed by their mortgage, which sounds extremely unaffordable. But historically, Brisbane can get to 56% back in 2008, the last boom, the last growth period.
• 9:11
  58% was sort of the ceiling where that market got to before we saw price contraction and significant price contraction. Obviously, GFC didn't help that. So now at 54%, we're getting to that historical ceiling. So that can be used as a runway. There's different metrics you can monitor markets, but if you can see that a runway is getting to its historical ceiling, it may indicate that the market...
• 9:36
  maybe potentially on the horizon of a cooling or a stagnation period. Yeah. I mean, we've had two rate cuts this year already. We've predicted at least another two, potentially a percent over the next 12 months. Do you think that's going to speed up, I guess, the growth there again, even though you're mentioning the affordability index is 4% off its peak?
• 9:59
  Will that, with those price drops from the cash trade announcements, will they give it another boost, do you think? Or do you think we're still kind of on that trajectory that we're tapping out at a max? I still think we'll see growth in Queensland this year.
• 10:11
  My concern is we're getting very close to the cycle. My concern is we are getting very close to the top of the cycle if we're not already there. So the tailwinds of Brisbane specifically, we're talking. Yeah. Brisbane specifically tailwinds are, you know, potentially another one to two cash rates, you know, a diverse economy and employment.
• 10:34
  But the headwinds, you've got a migration, a falling migration rate. So interstate migration is now on the decline. You've got a falling population growth and you've got a market that's now deemed almost a ceiling of affordability. So that's when I come in with the view that I think Brisbane is a balanced market, albeit I think we'll see some growth in 2025. I think we're getting close to the top of the cycle.
• 11:03
  So from an investor standpoint, it's probably, it's overdone it or it's coming towards the end. But, you know, if you're a homeowner there, potentially you're still going to have some upside over the next 12 months. When we invest in a market, we will want to invest with the anticipation that the market's got more than 50% growth.
• 11:20
  Because the transaction costs and stamp duty and the fact that you want to get into a market that's got the most upside. So for Brisbane at this point in time, it's certainly significantly below that. And it's starting to look like, based on the new data that's been released in this past week from affordability, that that runway is closing.
• 11:42
  Okay, let's talk through the lifestyle areas in Queensland, Gold Coast and Sunshine Coast to be precise. We've spoken earlier, a lot of that activity has probably come from interstate, from Melbourne people post-COVID sort of driving areas
• 11:58
  driving there or even Sydney to a certain extent as well, people sort of driving up the coast from an affordability standpoint too. I think people in Sydney have been priced out quite significantly over the last few years. How does, what's the demand look like versus the supply in those lifestyle areas?
• 12:15
  Yep, so Sunshine Coast and Gold Coast, much of the same but very different as well. So Sunshine Coast, probably more owner-occupier driven. Versus Gold Coast, there is still a lot of investment, lots of off-the-plan sales. It's probably the most pronounced lifestyle market. But they've seen significant upside. Like if you look at the median house price of Gold Coast, pre-COVID, about $700,000. It's now at $1.2. So you look at that, it's...
• 12:44
  Has that always been the case? I've got memories, I've got memories, I've got plenty of memories. I was under the impression eight, 10 years ago that was a really bad place to invest. Property prices weren't, were actually going backwards. Is that correct or has it always had a pretty consistent level of growth? Gold Coast I'm talking about, not two. Not Brisbane. It's, it probably followed a similar
• 13:15
  a period of growth that almost echoed what we saw in Perth with a peaking event circa 2011 followed by a long drawn out stagnation circa 2018 and a bit of a downturn. If you look at prices, it actually fell quite aggressively in 2011, 2012 because the market was significantly oversupplied. You go to Gold Coast, there's a lot of high rises in comparison to established housing
• 13:42
  So there was a lot of that off the plan type product, but that was absorbed, you know, when they stopped building in about 2017 to 2020, a lot of that stock got absorbed to the point when it went into a serious undersupply. And that growth's been off the back of COVID, post COVID, everyone wanted a lifestyle asset. So there was a lot of migration to Queensland, specifically to Gold Coast.
• 14:04
  but the inability to bring on supply quickly through apartment projects because obviously the cost of construction went up and labour restrictions has seen that market go on a serious run. Again, what is Gold Coast, I suppose, known for? Similar to Perth when the market's going well, there's a lot of developers up there all try to cash in at the same time.
• 14:27
  And it's always been prone to oversupply in the market, saturate in the market with high density infill. Yes, there is restrictions around that now because it's, you know, we're not back in the mid 2000s where it was easy to bring on labour and construction prices were certainly more balanced. But I think that's where the market could be heading over the next few years.
• 14:49
  Yeah. And those, we've spoken about this on previous episodes, off the plan apartment purchases carry a high level of risk with the amount of supply and stock that there are there. It does feel like that market is heavily based on those off the plan apartments. And I've got a friend based over there who's kind of reaching out to me on a few properties that he was looking at. A lot of those apartments, the strata fees involved with
• 15:15
  with some of those apartments were astronomical, I'd say, in terms of a lot of old fit-outs that are going to need a lot of maintenance as well. So I think from the off-the-plan purchase standpoint, it does feel like there's a high level of risk involved with Gold Coast.
• 15:30
  Yeah, there is. Like I said, you're buying off the plan for something that's going to be completed in two and two and a half years. When you've got a population rate that's gone from 3% growth per year down to now 2, 2.2%, so you've got a falling population growth percentage, then I'd have concerns of where that market's going to be in two to three years' time when that product's complete.
• 15:54
  That's the beauty or the burden of buying off the plan. If the fundamentals are strong and you're buying early in the cycle, you may buy something for $700,000 and when it's completed, it might be worth a million dollars. We saw that in Perth and we have seen that in Gold Coast.
• 16:10
  developers are pretty clued on and they've got clauses in contracts which essentially means you've got to be really careful because if they do see growth they can they can forfeit your contract and resell it at a higher price point but the problem is when it when it goes wrong and that's typically what we see more of in this space is
• 16:29
  A lot of hype. There's no stock in the market at the moment. There's very low stock on market in these lifestyle areas. So we are seeing people gravitate again. And we saw in the 2000s, people gravitate to this stock because it doesn't exist. So pretty renders and really good social media marketing gets people excited about these new developments.
• 16:50
  But my concern is come 2028, when they're completed, 2027, 2028, are they still going to carry the same weight and value as what people are paying today? Beautiful. What about affordability index in somewhere like Gold Coast? You've obviously talked through Brisbane nearing its ceiling historically from an affordability standpoint. How's Gold Coast looking at the moment? 70%.
• 17:18
  Yeah, it's concerning. Yeah. So is that why no one's going to do it? It's a different market, yeah. It's a different market, and this is where you gotta be careful. It's similar to that as Sydney. The affordability index is a great metric when you're looking at local markets and own-occupied driven markets. Gold Coast isn't predominantly an own-occupied driven market.
• 17:39
  you do get east coast international investment, but you also get migration for those lifestyle assets. So you're getting Sydney money buying in Gold Coast, where you typically may not get that as commonly in Brisbane for lifestyle purposes. So that's why that affordability index can be skewed 70%.
• 18:00
  of average punter in gold coast their wage going to their mortgage it's almost impossible right once you pay school fees and have a holiday and a couple of pints or whatever they drink in the gold coast what is it 4x gold then it doesn't leave much for anything else so i don't i don't think um that stats as reflective in those lifestyle markets
• 18:18
  Well, you say that, but then you look at the Gold Coast Rugby League and AFL teams, no one seems to go to those games. So there must be a, you know, max affordability out with their mortgages that it's limited. That's true. There's nothing, there's no surplus spend. And you know they're having a good year this year as well, so it'd be interesting to see. The correlation. The correlation to the demand with the success of the Gold Coast Suns.
• 18:39
  Okay, let's go to regional Queensland, which, look, I think Brisbane and those lifestyle locations, for a lot of the right reasons, have driven a lot of migration as well. But I thought what would be interesting to talk about would be from that regional standpoint, because the growth we've seen over some of those regional towns we've discussed on previous podcasts as well, like Gladstones, your Townsville's.
• 19:05
  Rockhampton's. A lot of that's been driven by buyers agents, outside investors. So let's talk about the regionals as a bit of a whole and then you can kind of go deep into each specific place. But what's the growth been like from a regional perspective in Queensland?
• 19:24
  Regional Queensland has been the top performing market over the last 24 months. Factual. We've seen almost a doubling event in several of these areas since COVID, which is pretty extreme because the entry point is so low. And that has been driven not just predominantly, specifically by buyers agent investment groups in droves going to these markets and driving prices up.
• 19:52
  which has huge concerns, right? Because if a predominant segment of the market is buying a majority of the prices, a majority of the properties, the local market gets to the point where the local market can't afford to ascertain them at those price levels. So once the investors come out, as I said on our previous podcast, you really don't want to be left with that hot potato when the market cools. Once the music stops, mate, it becomes really, really difficult to sell these properties. And I think we're on the brink of that at the moment.
• 20:22
  What about from, you've obviously mentioned over the last two years, it's been the highest growth in the country. Is there specific areas in regional Queensland that have outperformed others? Yep, the movement, you can almost track the movement of these buyers agencies, right?
• 20:38
  So it starts in Brisbane. It was a really strong performer. But you look where a lot of investment groups, where they specialise in, they typically take on first-time investors or sometimes lower income. So they're targeting the lowest price points that they can find. So once Brisbane got to the point where it was very difficult to get in under a sort of $700,000, they then sort of gravitated Toowoomba. So Toowoomba's an hour and a half,
• 21:06
  west of Brisbane and that become a super popular market because all of a sudden you're priced out it'd be the equivalent of buying in Rockingham and Mandurah in Perth or Geelong in Melbourne so you got priced out of a capital city we'll go to the next largest regional but then Toowoomba prices went from an entry point of $400 up to $500 then $600 then $700 so then they almost have to gravitate and wrap a story around the next growth market and the next logical market
• 21:36
  market was the next largest population city which you got a map drive up north you hit rockhampton so then rockhampton went on a serious run and this is exactly how it's played out and that will appear there's a lot of methodology behind these markets but it's there's no methodology it's just what was easy for a lot of these buyers agent groups once they get priced out on one market what's the next story that we can we can sort of
• 22:00
  deliver to our clients to invest. And then after Rockhampton, you've seen the majority of these groups move to Townsville. So you look at over the last 12 months, Townsville's been the top performing market in the country. But again, it's getting to a price point where these investors can't continue to buy because it's now entry points north of 600,000. And once it gets past that, you're almost...
• 22:25
  It almost comes to like a standstill. We saw in Western Australia, we saw this happen in Rockingham and Mandurah. Prices run from $300 to $400 to $500. Then it gets to $600 and all of a sudden the music stops and all the buyer's agents can no longer play stock because their buying pool sort of cuts out about $6 to $6.50. And we've seen the same be true for...
• 22:49
  you know, Rockhampton and out Townsville. And Gladstone, Gladstone is a beast of its own, right? It's a large, I wouldn't even say it's a large regional. We're talking the greater population of 60,000, but Gladstone itself is a market of 30,000, 35,000 that is predominantly built around the ports and mining.
• 23:08
  So that is a boom and bust market. You look at the historical growth runs, you see huge upswings followed by. So in those markets, the stability isn't there. What about from the industry sectors as well? What's that sort of look like in those regional towns as a...
• 23:28
  I guess as a whole, maybe you don't have to go specifically into each regional town, but what is the industry? So for me, when I think regional Queensland, I actually lived a year in Townsville, so I kind of know what I did. Keep learning about yours. Just trying to tick all the places off. But yeah, I lived in Townsville, and we moved over there because my mum's partner was in the mining industry. There was a lot out of mine hours. There was a lot of military there as well, so there's a big air force. Yeah.
• 23:53
  Barracks in Townsville. So a lot of the people I went to school with, I'm going back here 20, 25 years, a lot of the people I went to school with were mining industry, parents of mining industry or Air Force. That's just Townsville as an example. I know Cairns is probably a bit more hospitality, but they're probably not the areas we're talking about. What does it look like from, you know, generically the industry types in those areas for forestability? You've obviously said,
• 24:19
  A lot of the activity has been, growth's been driven by East Coast or interstate buyers agents. But for a stability for that market to continue to move, what does it look like from an industry sector?
• 24:32
  heavily reliant on mining like look at Mackay or Gladstone well over 20% in the market is reliant on mining and manufacturing for you know for instance for Gladstone an additional 16-17% is manufacturing so you've got almost 40% of one of that market made up of two industries and
• 24:52
  You only need a mine to shut down and or the port tariffs to be put in place for those volatilities to creep in and seeing an exodus of population. So that's where sticking to capital cities gives you that comfort of, A, population growth, but B, the diverse range of industry. And that is my concern in some of these regionals is,
• 25:18
  Once you get to that ceiling, which we've seen in other regional markets, 600 to 650 is sort of the sweet spot, the music stops. And local market, like I said, based on that affordability index, can't afford it. And once investors come out of the market, who's going to take up that stock? I think the big thing we haven't probably spoken about on those regionals is the cyclones,
• 25:45
  Those areas are prone. As I said, I've lived in Townsville for 12 months and I know we had a few cyclones when I was living there as well. How does that affect insurance premiums? And how does that, I guess from a cost perspective as well, how does that affect insurance premiums?
• 26:01
  Yeah, it's important to understand the net return on these investments because the gross figures look fantastic. If you go to any regional in Australia, your gross rental returns are going to be far more favourable than they are in the cap cities. But the net returns when you go the further north you go, essentially, the more it costs. We've had huge flood issues over the last couple of years, particularly in Queensland and some of New South Wales.
• 26:24
  cyclone events so the premiums are going up so your net returns will be the gross when we say gross versus net so your your gross returns on investment property typically is what you pay for it divided by the rental income that gives you a gross figure and in regionals it's probably somewhere between five to six and a half percent it can be that high six and a half percent but your net return in terms of after all your costs insurance land taxes property management fees
• 26:54
  But in these Queensland markets, it's sometimes 3%, 4% less because of the insurance that you have to pay. And I assume there's a lot of banks that probably don't even want to lend in those locations or will have a restriction on the amount of deposit you need to put into those properties to mitigate some of the risk as well.
• 27:10
  Absolutely. And that's problematic if they pull out of the market. And we had a period of time this year with the floods where insurers stop granting policies on any purchases in Townsville. That's obviously now relaxed, but...
• 27:27
  you know it's just it's not for the fainthearted and for sophisticated investors that are looking for a diversification play there's always a place to have a small portion of your portfolio in more volatile markets and i'm certainly okay with that i've had exposure i've got exposure in regional queensland but if it was my only investment or a large majority of my investment i've got concerns
• 27:51
  Beautiful. So we've spoken through Brisbane, talked through Olympics, land tax, affordability nearly at a ceiling. Those lifestyle locations like your Gold Coast and your Sunshine Coast where we're pushing well above a ceiling at 77% from an affordability index standpoint. Talked through the off-the-market stuff. Regional Queensland, the buyer's agents driving that price growth.
• 28:16
  I guess, and also the stability of those markets to grow with the current employment sectors there. So Lachlan, what's the verdict then? Queensland property market is overcooked. Fact or fiction, do you call bullshit?
• 28:29
  I think it is overcooked. If it's not overcooked yet, it will be within the next 12 months. And revert back to our initial conversation, the story of Queensland is driven by population growth. And now greater Queensland has seen a population growth fall from 2.7% now down to 1.3%. That trend continues with the amount of supply coming into the market. I've got concerns for Queensland and specifically those regional markets that have been driven predominantly by investment activity.
• 28:59
  Make sure to join us next episode. Stay informed, stay curious, and keep calling out the bullshit.