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to investing in Australia's foremost investment opportunity

A COMPREHENSIVE GUIDE

Positive Real Estate

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SUMMARY

With many investors priced out of the Sydney and Melbourne

property markets, the appeal of purchasing in a capital city at

a meat-and-potatoes price point, while also promising capital

growth, is becoming a mission not dissimilar to the quest for

the holy grail.

However, it’s not all doom and gloom for property investors

just yet. Brisbane is offering punters the opportunity to

invest in the next capital city forecast to boom, offering blue

chip property just minutes from the CBD at an incredible

entry price point. With high infrastructure spending in

the local area, premium rental returns and promising

forecasts of capital growth, this up-and-coming world city

is finally getting some well-deserved time in the spotlight after

almost a decade living in the shadows of Australia’s former

heavyweights.

This research report has collected data from RP Data, URBIS,

Australian Bureau of Statistics, and the Queensland

Government Statistician’s Office, as well as relying on our

own analysis to provide you with a comprehensive report to

complement your own investment due diligence.


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WHY BRISBANE IS THE “NEXT BIG THING”

Queensland is Australia’s growth factory. Natural beauty,

economic strength and the unbeatable lifestyle continue to

attract more interstate migrants to Queensland than to any

other state.

Over the past century, Australia’s third most populace state

has evolved into a mature, robust economy built on agriculture,

natural resources, construction and tourism. Today, services and

tertiary industries are increasingly driving Queensland’s growth.

The thriving services sector is primarily metropolitan based and

is the driving force behind a cosmopolitan renaissance across

Queensland’s major urban centres.

Southeast Queensland has consistently been the

fastest growing region within the fastest growing state

in Australia. At the epicentre of this growth has been

Queensland’s flourishing capital, Brisbane. Brisbane’s lush

greenery is in stark contrast to its industrial heart. Complete with

a large seaport and one of Australia’s fastest growing airports,

Brisbane is the gateway to the State’s mining, agricultural and

gas industries. Brisbane hosted the prestigious G20 Summit

in November 2014, completing the city’s emergence as a

true world city.

Nowhere are the rewards from Brisbane’s enormous public

transport and cultural investment programs more evident

than the inner city. The five-kilometre radius surrounding

Brisbane’s buzzing CBD boasts numerous residential suburbs,

hallowed sporting grounds and award winning outdoor spaces.

The following is our review of the current market drivers and how they are impacting Brisbane’s investment property potential.


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MACRO PERFORMANCE DRIVERS

Population growth is the largest driver of real estate.

Residential property relies on population trends for capital

growth, as people need shelter, and with greater population

comes greater demand. Sustainable population growth

is essential for residential real estate markets to

prosper. Queensland’s lifestyle and career opportunities have

consistently ensured the state is one of the fastest growing

in the nation. Brisbane is one of Australia’s fastest growing

capital cities, forecast to grow by 247,537 people in the CBD

alone within less than 20 years.

POPULATION GROWTH

POPULATION OF GREATER BRISBANE

2,238,394(Source: ABS 3218.0, Regional Population Growth,

Australia, 2012-13)


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(Source: URBIS & ABS 2013)

The Australian Bureau of Statistics (ABS) predicts that within 40 years, Brisbane will reach Melbourne’s current

population size of 4.3 million people.

(Source: Commonwealth of Australia 2015)


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Employment growth is necessary to attract and maintain

population and housing demand. Low unemployment and

high-wages mean more disposable income and the capacity

for tenants to endure rent increases and owner-occupiers

to pay more for their homes. Where there is a wage growth,

you will often find property price growth. Variety of industry is

necessary, as you don’t want to be on the tipping point of a

transient workforce departing the area or a major industry or

employer shutting down.

EMPLOYMENT GROWTH

(Source: NIEIR, 2009)

By 2031, Brisbane has a vision to be

regarded as a top ten-lifestyle city

and global hub for resource and

related service industry businesses, with

strong business and cultural links with

Asia. The Brisbane CBD has the highest

level of employment growth with inner

city suburbs following close behind.

Employment is an important driver as

people want to be close to jobs.

CURRENT JOBS

331,228JOBS IN 2031

532,736GROWTH

2.8%NEW JOBS

201,508(Source: URBIS 2013)


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More jobs equates to higher rental demand and increased accommodation requirements. The large and growing working population creates a substantial captured rental market.

TOP TEN INDUSTRIES BY EMPLOYMENT

Health care and social assistance

Retail trade

Manufacturing

Professional, scientific and technical services

Construction

Education and training

Public administration and safety

Accommodation and food services

Transport, postal and warehousing

12%

10%

9%

8%

8%

8%

7%

6%

6%

(Source: ABS, Census of population and Housing, 2011)


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The greatest gauge for a market is the consumer habits of the

people that are in it. Multi-demographic pressures on inner city

suburbs are a huge growth driver.

Brisbane LGA is geographically constrained to see greater

urban sprawl and as such will see much of this resident growth

accommodated into infill and higher density dwellings. Brisbane

now accounts for approximately half of Queensland’s

population. At the current growth rate of 43,300 persons per

annum, 16,000 new dwellings are required each year just

to maintain equilibrium.

DEMOGRAPHICS

Over the past decade Brisbane

has recorded excellent population

growth of 3.6% (CoreLogic 2015).

AVERAGE BRISBANE LGA RESIDENT

34

(Source: Census 2011)

AUSTRALIAN AVERAGEVS

37

$1547 $1234

$350 $285

8% 4%

29% 19%

5.3% 5.6%

28.3% 27.7%

Age

Weekly household

income

Medianweekly rent

University attendance

Bachelor or higher degree

Unemployment

Born overseas


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While overall immigration to Brisbane

has slowed in the past few years,

natural increase (birth and prolonged

life expectancy) has been the largest

contributor to population growth.

Between 2013 to 2014, natural increase

boosted Queensland’s population

by 34,510 people (62,350 births minus

27,840 deaths).

NUMBER OF RESIDENTS (MOVING ANNUAL AVERAGE)

(Source: URBIS 2013)

According to the Australian Bureau of Statistics

(ABS) in 2014, natural increase accounts for

48.9% of Brisbane’s population growth, ahead

of overseas migration (42.9%) and interstate

migration (8.2%). While natural increase promotes

an aging society, Brisbane’s large percentage of

overseas migration keeps the overall population

median age low. Close to 78% of overseas

migrants in 2014 were aged between 0 and 29

years. Without this net migration, the median age

of Queensland would be much older.


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Another key driver is the number of occupants

living in each dwelling. This frequently forgotten

statistic can contribute significantly to housing

demand. With a change in living trends, single-

person households are expected to increase by

2.2% per year across Australia. This will result in

single-person households becoming a bulk 28%

of households by 2031. The average number of

people per household is expected to decrease

from 2.6 in 2006 to 2.4 in 2031. This means that

the number of dwellings needs to exceed population

growth to keep up with demand.

OVERSEAS MIGRATION ARRIVALS BY AGE

(Source: URBIS 2013)

BRISBANE CITY LGA (2013)


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Buyer demand is showing consistent growth, which is fuelling competition amongst buyers and driving

price growth.

u Brisbane home values increased by 4.8% over the twelve months to March 2014

u Home values increased by 2.9% in March 2014 and they are 1.5% higher over the

past three months

u Over the past twelve months, house values have increased by 5.1% compared

to a 1.7% increase in unit values

u 66% of Brisbane homes are owner-occupied versus 34% that are rented

DEMAND

PERCENTAGE CHANGE IN TOTAL HOUSE AND UNIT SALES

(Source: RP DATA 2014)

The largest improvements in buyer demand can be found in Brisbane, with sales jumping 24.2% in 2014.

VENDOR DISCOUNTING


As of April 2014, vendor discounts sat at 5.4%

in Brisbane compared with 5.6% across the

combined capitals benchmark. Average selling

time remains higher than average but has been

consistently trending lower.


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COMBINED CAPITALS BENCHMARK


Brisbane is experiencing a reduction in listings, which adds pressure to property prices. In April 2014, there were

just 19,000 homes for sale in Brisbane, 30% lower than the September 2012 peak.

BRISBANE EFFECTIVE SUPPLY LEVELS


MEDIAN HOUSE PRICE VARIATION (FEBRUARY 2015)

u Brisbane House $480K Unit $388K

u Perth House $540K Unit $433K

u Melbourne House $605K Unit $470K

u Sydney House $850K Unit $630K(Source: Corelogic)

The median house price shows that investors

will be turning to Brisbane as there is room

for capital growth, especially when compared to

other capitals.


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MEDIAN HOUSE AND UNIT PRICES


Cities that have experienced excellent

capital growth are becoming relatively

unaffordable to the average investor

and homebuyer. The typical Sydney

house price is now $850,000, which

is 14.8 times the Australian median

salary ($57,400). Affordability barriers

are likely to cause more buyers to

consider more affordable housing

markets, such as Brisbane.

Rental yields have been severely compressed

in Melbourne and Sydney as dwelling values

have outpaced rents. Across Australia,

investors are negative gearing as the

average rental yield is 3.8% for houses and

4.6% for units. Brisbane’s average rental

yield sits at a comfortable 4.6%, meaning

Brisbane investors will have more cash

flow and improved serviceability as a result.

GROSS RENTAL YIELDSHouses Units



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VACANCY RATES


Brisbane has lower vacancy rates than Melbourne and Perth, which puts more pressure on rents

and increases rental yields.

INNER BRISBANE IS ATTRACTING SUBSTANTIAL RENTAL PREMIUMS

CHANGE IN WEEKLY UNIT RENTS (past five years)

MEDIAN WEEKLY RENT

INNER BRISBANE MEDIAN WEEKLY UNIT RENTS

The majority rental demand is innercity

as people are willing to pay a

premium for apartment city living.



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The Australian economy and housing market are

broadly correlated Gross Domestic Product (GDP) is

the most widely quoted measure of economic health.

Whilst the relationship is far from perfect, in periods

of stable economic growth, the Australian housing

market generally outperforms. Australia has avoided

recession since the early 1990s, a miraculous economic

performance reflected in the housing market.

The Queensland economy has consistently

outperformed that of every other state including

Western Australia since the 1980s. Queensland’s

economic expansion has sustained above-

trend population growth and been highly

supportive of the residential property market.

ECONOMICS


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The construction industry accounts for approximately 15% of the Queensland economy. The favourable construction outlook is linked to population growth, the ongoing LNG boom, continued coal mining development and

inner Brisbane’s urban renewal and continued process of gentrification. With LNG projects dispersed through out southeast and central Queensland, many companies have chosen to place their head offices in Brisbane.

The resilience of Queensland’s economy is testament to its management and strong diversity.

It is built on four pillars of strength:

1. CONSTRUCTION


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2. TOURISMTourism pours $2.8 billion into the Queensland economy every year. Brisbane is the tourism hub of Queensland, with 992,000 international visitors in 2013. The city’s appeal to professional and leisure travellers alike is unquestionable, usurping that of both the Gold and Sunshine Coasts. Brisbane’s world-class facilities and international airport make the city an ideal staging point for travels within Queensland – especially as the destination is just one-hour from Gold Coast, Sunshine Coast, Moreton Bay Marine Park, five theme parks and two casinos.

Queensland’s economy was built on agriculture. The industry remains an important pillar to this day. Queensland excels in the

production of beef, sugar, cotton and wheat with the industry as a whole generating S14 billion per annum as of November 2014.

3. AGRICULTURE


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In line with Brisbane’s goals to be a leading world city, Queensland has committed to $134 billion to developing infrastructure projects to 2031.

This is the largest public infrastructure spending in Australian history. The following infrastructure projects are currently under construction.

4. INFRASTRUCTURE

ROAD & TRANSPORTBrisbane has the second lowest car usage of any Australian state capital. The city has an ongoing commitment to public transport, bikeways and effective urban planning. Brisbane has invested heavily in a highly efficient bus network to compliment the existing rail, CityCat and ferry infrastructure.

u MORETON BAY RAIL LINK $1.15 BILLIONEmployment during construction: 8000The Moreton Bay rail link will complete in 2017. The major project consists of six new stations along 13 km of track linking Redcliffe to the existing Brisbane rail network. The project will provide the substantial Redcliffe commuter base with an alternative method of highly efficient transport into Brisbane City.

u BRISBANE UNDERGROUND BUS AND TRAIN TUNNEL $5 BILLIONThe proposed Underground Bus and Rail project will provide Brisbane with a much-needed additional river crossing. This project includes a dual-purpose tunnel under the Brisbane CBD and Brisbane River. The new station on George St in the heart of the CBD will be the first underground station in the city. Construction is expected to commence in 2015 with completion scheduled for 2020.

u GATEWAY UPGRADE NORTH $1 BILLIONThe Gateway Upgrade North project includes the upgrade of Gateway North between Nudgee Road and Barrett Street northbound, and Depot Road southbound. The improvements will include widening from four to six lanes and the installation of managed motorway treatments and cycle facilities. The Gateway Motorway is Brisbane’s primary economic road corridor, providing direct linkage to the Port of Brisbane and the Australia Trade Coast, and to the Bruce Highway. The project will alleviate severe congestion, enabling faster


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and more reliable movement of freight between ports and connecting production and distribution centres and markets, resulting in improved economic growth and reduced input costs for industry and businesses.

u LEGACY WAY $2 BILLIONEmployment during construction: 5400Legacy Way is a 4.6 kilometre road tunnel that will connect the Western Freeway at Toowong with the Inner City Bypass at Kelvin Grove. Legacy Way will reduce travel time between Brisbane CBD and the Western Suburbs by approximately fourteen minutes, helping commuters to avoid seven sets of round abouts and other traffic delays.

u BRISBANE AIRPORT PARALLEL RUNWAY PROJECT $1.3 BILLIONEmployment during construction: 2700Employment once operational: 7800Brisbane Airport is predicted to be Australia’s fastest growing major airport over the coming 15 years. Passenger demand is currently growing at 11% per annum. A pipeline of major works is underway to prepare the facility for annual international and domestic passenger movements of over 50 million by 2030, double current capacity.

Construction on the duplicate runway commenced in May 2014. Scheduled for completion in 2020, the project should create 2,700 jobs at its peak. The additional passenger capacity at the airport will act as a catalyst, facilitating the creation of 7,800 jobs in the region over the coming decades. Brisbane Airport has emerged as a major FIFO hub servicing the coal, LNG and minerals industries. Doubling capacity will cement the airport’s position as the gateway to Queensland’s tourism and resources industries.

HEALTHCAREBrisbane offers a world-class range of healthcare services. The city boasts an extensive list of public and private hospitals. Investment in these facilities and in educating Queensland’s best and brightest to work within them is ongoing.

u LADY CILENTO CHILDREN’S HOSPITAL $1.5 BILLIONEmployment once operational: 1500Construction of the Lady Cilento Children’s Hospital is one of the biggest infrastructure projects underway in Australia.


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Located in South Brisbane, the Lady Cilento Children’s Hospital will provide specialist paediatric care for children from birth to 16 years of age (up to 18 years for established patients). The new hospital will be the single specialist children’s hospital for the state, owned and operated by Children’s Health Queensland.

CULTUREu 1 WILLIAM STREET $653 MILLIONEmployment during construction: 10001 William Street is a modern-style skyscraper office building located in the Brisbane CBD in close proximity to Parliament House. The building is part of the government’s plan for a renewed Government Administrative Precinct and to meet its accommodation demands.

u KELVIN GROVE URBAN VILLAGE $1 BILLIONThe Kelvin Grove Urban Village is a partnership between the State Government and Queensland’s largest university, the Queensland University of Technology (QUT). The award-winning development continues to set new benchmarks for integrated urban development. Kelvin Grove village is the place where those who enjoy new experiences in the arts, culture and technology flock.

u NEWSTEAD GASWORKS DEVELOPMENT $1 BILLIONNewstead’s Gasworks development is a 17-hectare industrial rejuvenation project. The development includes 100,000 square metres of office space and 20,000 square metres of retail space in addition to a limited number of new apartments. Stage Two of the community is currently under construction.

u NORTHSHORE HAMILTON $175 MILLIONEmployment once operational: 15000Northshore is Brisbane’s largest and most exciting urban renewal project, covering an area larger than the Brisbane CBD. Northshore has already blossomed into a fully inclusive, self-contained community featuring dedicated riverfront space, cruise ship facilities, CityCat terminals, expansive parkland and community areas are outstanding residential, retail and commercial developments.


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u BRISBANE SHOWGROUNDS REDEVELOPMENT $3 BILLIONEmployment during construction: 8650Employment once operational: 8650The Brisbane Showgrounds Master Plan will combine the site’s rich history with its future potential. The regeneration will ensure the site becomes a destination synonymous with events, fashion, design, lifestyle and culture, hosting world-class events and shows all year round.

CONCLUSION

Overall, Brisbane has all the strong characteristics

of a capital city market set to flourish. With strong

industry, population growth and infrastructure

investment, it’s a good time to get your money in the

Brisbane market.

While it hasn’t experienced the leaps and bounds

of Melbourne and Sydney, it won’t be long before

this marvelous city takes its rightful place on

the world stage as a leading capital.

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