The pre-stamp duty surge

We’ve just updated our month to month models for transaction volumes and the results for Queensland are certainly interesting.  Most Queenslanders would be aware of the stamp duty changes that were brought in with the latest Budget announcement earlier in the year:  from the first of August owner occupiers would no longer benefit from stamp duty concessions, resulting in an additional purchase cost of around $6,575 in stamp duty payments (see our blog that outlined changes around the country here).

We estimate that Queensland sales volumes jumped by 33% over the month of July as owner occupier buyers surged into the market to avoid the additional stamp duty expense.

The surge in buyer numbers suggests that buyer confidence may not be as low as many thought.  A saving of around $6,500 is a substantial incentive particularly when coupled with the First Home Owners Grant of $7,000.  However the surge came at a time when the threat of higher interest rates was still quite real; it was only mid July when Bill Evans broke ranks and predicted rates were set for a fall (and at the time his comments weren’t widely accepted!).

Other factors are providing a better outlook for the Brisbane housing market.

The magnitude of declines across the Brisbane housing market has eased.  In fact, the latest RP Data-Rismark Home Value Indices for Brisbane showed the quarterly change over the three months to August was the second highest of any capital city.  The result was still negative, at -1.3%, however it was a substantial improvement from the falls being recorded earlier in the year, the worst of which was seen over the March quarter when values were down 3.0%.

We have also been seeing the ‘value gap’ between Brisbane and the other major capitals expanding.   Brisbane house prices are now 21.2% more affordable than Sydney’s and 11.2% more affordable than Melbourne prices.   The gap hasn’t been that wide between Brisbane and Sydney since mid 2007 and the current price gap between Brisbane and Melbourne hasn’t been this wide since late 2003.  This renewed affordability proposition may be attractive enough to entice more interstate migrants across the border (interstate migration into Queensland over the March quarter of 2011 was at the lowest level since 1981).

While Brisbane home values have been falling (dwelling values are down 7.4% from the March 2010 peak), rental rates have been showing modest improvements.  The result is now that rental yields are well above the combined capital city average at 4.7% and 5.3% respectively for houses and units (the highest yields of any capital city outside of Darwin and Canberra).  The higher yields and low vacancy rates (2.2% across the inner city and 2.6% across the remainder of Brisbane according to the OESR rental vacancy report ).

While capital gains are likely to be a long way off, the foundations of the Brisbane property market are looking quite firm.  In all likelihood we will see transaction volumes fall away in August when the updated figures are available early next month, however with interest rates potentially on their way down as early as Melbourne Cup day, the potential for a more sustained improvement in buyer numbers across the Queensland market may be close to hand.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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7 Responses to The pre-stamp duty surge

  1. Gavin R. Putland October 9, 2011 at 11:56 am #

    If you’re a home owner under Queensland’s new stamp-duty rules, you can still avoid a dutiable transaction when you move house.

  2. abner October 9, 2011 at 6:40 pm #

    “A saving of around $6,500 is a substantial incentive particularly when coupled with the First Home Owners Grant of $7,000.”

    Tim, I’m failing to understand how this incentive really differs from that facing the FHB before the change. Before Aug 1, they were entitled to FHOG, and to stamp duty discounting or remission (on properties under $550K); after Aug 1, their situation remained the same.

    Or to put it another way, what do FHBs have to do with the surge described in the story? Isn’t this a case of *non*-FHB OOs pulling demand forward by a few months, in anticipation of a swingeing transaction tax increase? And wouldn’t one anticipate that this group’s demand would fall again, after the July window of opportunity, in the face of this unwelcome taxation increase?

    The construction boost will mask some of the fall-off, for its 6-month life. And that may avoid a stink for QLD Labor in the runup to the next state election–the HIA will certainly have to keep its mouth shut, in the hope of an extension…

    But the next longterm result is a substantial increase in land transfer tax, for the largest single segment of buyers. And that just can’t be good for ongoing demand.

  3. abner October 9, 2011 at 6:49 pm #

    Er, “net longterm result”.

    (An edit function shure wuold come in hnady)

  4. abner October 12, 2011 at 4:55 pm #

    Tim?

    • Tim Lawless October 12, 2011 at 5:40 pm #

      Thanks for following up, and you raise a valid point. There are some changes that have affected first home buyers, but the vast majority of difference is likely to be seen across the non first home buyer segment. Like I posted in the summary of the blog, transaction volumes are likely not to be as high in August as they were in July, however I wouldn’t be surprised if the number of purchases remains higher than what has been recorded over the first half of the year, thanks to a more stable/falling interest rate environment and some stimulation from the builders boost.

  5. Matthew October 13, 2011 at 12:29 pm #

    Great article. Higher yield returns are certainly presenting themselves especially the Brisbane CBD. With house prices adjusting significantly over the past 18months, it feels as if the rental market has sustained and increases with demand of large mining corporations seeking fully furnished accommodation. If feels as though investment yields have not been any higher, and may continue to fuel interest above current interest rates, days on market and buyer sentiment.

  6. StampDutyonLand October 21, 2011 at 12:41 am #

    the analysis is resourceful,it’s not easy to make this kind of report so guys,,,,thumbs-up

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