Brisbane & Gold Coast home loan/housing bubble unlikely to burst
14/02/2012 
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House prices in Brisbane and the Gold Coast are still rising and the question that many people are asking is when will the house price and home loan finance bubble actually burst in Queensland.
The quick answer to Queensland’s housing and home loan bubble bursting, is not any time soon.
The other answers you might like to consider are:
- When Queensland’s lifestyle stops being a people magnet.
- When Queensland stops being the job generator of Australia.
- When people with lots of money stop coming to Queensland.
- When banks stop giving strong income earners bigger home loans.
- When they build more new homes than the market wants.
- When Brisbane and Gold Coast house prices are equal to Sydney house prices.
- When Queensland’s birthrate slows down.
In other words, as I said, not any time soon.
Whilst you may feel homes in Brisbane and the Gold Coast may be over priced, home values will continue to rise, till home supply meets housing demand. And that may take 10 years to catch up, for reasons that I explain blow.
As the saying goes real estate is only worth that someone else is prepared to pay for it. That has been extended to how big a home loan the banks are prepared to advance. That get back to how much deposit and how much mortgage you can afford to repay.
About 2,000 people a week are making their way to South East Queensland from other states, and as long as people can cash in on their home in Sydney and buy a better home for less in Queensland often with no mortgage at all.
Successful people from other states want their families to enjoy a great lifestyle, and Queensland ticks all the boxes there. These people can afford and get offered bigger home loans, and often at lower mortgage interest rates.
And other migrants are coming from overseas. Many of these people are cashed up business people wanting a great lifestyle. Bingo, another match for Brisbane and the Gold coast.
On top of that Queensland has one of the highest birth rates in Australia, and all these people need a place to live.
Yes home loans are becoming harder to get if yo don’t have a decent saving history and deposit saved.
Yes home loan interest rates will rise and cause mortgage stress.
Yes housing prices are becoming unaffordable to many, and a third of people under 30 believe that they are going to rent for the rest of their lives.
And that is great news to those with are thinking about taking out a buy to rent home loan. With equity in the their existing homes, many people here are using that equity as a deposit on an investment property.
Australia never felt the Global Financial Crisis, but hearing about it stopped many from taking action on getting a home loan and buying a home. Now they are playing catch up and that means homes being snapped up as soon as they go on the market.
People are reluctant to sell. My home’s value for instance has gone up about $45,000 every year on a home mortgage of about $13,000. That is less than what people pay rent and gives me a return of $32,000 a year tax free. Why would I sell? I know that the prices will be another $45,000 higher next year.
The only solution to rising house prices is more houses, more quickly. That means that the Queensland State Government will have to release for land for development for homes and industries. That will mean more infrastructure and roads. I think that that will take at least 10 years to happen and by then homes in brisbane and the Gold Coast will top $1,000,000 each, and that is the average homes, not the mansions.
Rick Adlam,
Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers.
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