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Regional Queensland Residential Insight Summary (Q4 2023)

Core Content

Knight Frank's Q4 2023 report provides an analysis of the residential real estate market in Regional Queensland, focusing on price growth, rental performance, economic indicators, and the lending environment. The report highlights a shift in market dynamics, with price growth outpacing rental growth in the past quarter, despite continued rental market challenges.

Main Market Trends

Price Growth

• Average house value: $558,000 at the end of September 2023.
• Annual price growth: 5.0% over the year to September 2023.
• Quarterly price growth: 10.0% over the last quarter.
• Forecast: Prices are expected to rise by 8% in 2023, 4% in 2024, and 3% in 2025.

Rental Market

• Total residential rental vacancy: 0.9% in September 2023, up 40 bps over the past year.
• Annual rental growth: 10.0% in September 2023, with rents standing at $495 per week.
• Gross rental yields: Increased by 18 bps over the past year, averaging 5.69% in September 2023.
• Forecast: Rents are projected to rise by 8% in 2023, 6% in 2024, and 4% in 2025.

Economic and Lending Environment

Queensland Economy

• Growth in 2022: 3.3%.
• Forecast for 2025: 3.2%.
• Unemployment rate in September 2023: 3.3% in Regional Queensland.

Lending Commitments

• New household loan commitments in Queensland: Down by 20.1% in the year to September 2023, compared to a 10.5% decline the previous year.
• Owner occupier first home buyer loans: Fell by 17.3% in September 2023, representing 20.1% of all owner occupier loans in the region.

Interest Rates

• Official cash rate (December 2023): 4.35%.
• Forecast for 2025: 3.85% (Oxford Economics).

New Builds and Population

Building Approvals

• Annual building approvals in September 2023: 33,279 additional dwellings, down 9.8% from the previous year.

Population Growth

• Total population in Regional Queensland: Grew by 1.9% to 2.7 million in the year to June 2022.
• Projected population growth to 2032: 1.2% per annum.
• Inner regional areas: Annual population change of 2.1% in 2022.
• Outer regional areas: Annual population change of 1.5% in 2022.

Market Outlook

Forecasted Growth

Key Drivers

• QLD Economic Growth: Forecasted to decline from 3.3% in 2022 to 2.9% on average between 2023 and 2025.
• Unemployment Rate: Expected to remain stable at 3.7% to 4.3% over the forecast period.
• Cash Rate Target: Projected to rise to 3.9% in 2023, then fluctuate to 4.6% in 2024 before settling at 3.9% in 2025.

Key Contacts

• Michelle Ciesielski – Residential Research
  Email: michelle.ciesielski@au.knightfrank.com
  Phone: +612 9036 6659

• Blake Goddard – Residential Site Sales
  Email: blake.goddard@au.knightfrank.com
  Phone: +614 0760 4307

• Sally Edvardsen – Franchise Partnerships
  Email: sally.edvardsen@au.knightfrank.com
  Phone: +612 9036 6845

• Alison Hedge – Residential Project Sales
  Email: alison.hedger@au.knightfrank.com
  Phone: +614 2078 8471

• Erin van Tuil – Residential
  Email: erin.vantuil@au.knightfrank.com
  Phone: +614 0932 5700

• Chris Hill – Valuations
  Email: chris.hill@au.knightfrank.com
  Phone: +614 3880 7249

Summary

Regional Queensland's residential market shows signs of strengthening, with price growth outpacing rental growth in the past quarter. Despite a slight increase in total residential vacancy, the market remains undersupplied in rental homes. Economic growth is expected to moderate, while unemployment remains stable. Lending commitments have declined significantly, particularly for first home buyers. Building approvals also show a downward trend. Overall, the market is anticipated to continue its growth trajectory, albeit at a slower pace, with prices and rents projected to rise in the coming years.