Parody accounts have already made memes on social media about how the price of Queensland properties has risen by $30,000 in the last 24 hours. Is it possible that the government is so stupid that they think demand-side incentives don’t drive demand, or are they just trying to protect the value of their portfolios and the property prices of their voter base while looking like they’re doing something? Like so many other things, I haven’t got a clue.
Either way, let’s have a quick look at the lowdown.
The expanded grant, which will also cover deposits on new units, townhouses, and granny flats valued up to $750,000 (including the land), will be funded by increased coal royalty revenue. In effect, they’re transferring coal profits into land prices. The additional $15,000 will be available to eligible buyers until mid-2025.
Declining homeownership rates among young Australians have been an issue for some time, and Queensland’s homeownership rates are the lowest in the country. The 2021 census shows Queensland’s overall homeownership rate rose from 62.2% to 63.5% between 2016 and 2021. However, homeownership rates among Queenslanders aged 25 to 29 were lower in 2021 (35%) than five decades earlier (53% in 1971).
This decline is largely due to three things. The rate of monetary debasement, a secular decline in interest rates since the late 1980s, and the fact that productivity improvements by corporations have largely been captured by the corporation itself rather than being passed onto workers. This is because labour continues to be replaced by capital (in econospeak this means machines). And the excess profits end up being transferred into land prices.
The Queensland government allocated $1.6 billion in new cost-of-living concessions in the 2023-24 budget. Over the past three years, $365 million has been paid in first-home buyer grants for 24,000 homes in Queensland.
The benefits of this policy will largely accrue to existing property owners in Queensland who will see a nice $30,000 boost to their bottom line. One other effect is that further down the track in the cycle this policy will likely assist in making some mothballed development sites feasible for developers again. Even so, this will only begin to have an effect on new supply in the mid to late stages of the bull market. Even after a stellar early run, we expect Queensland property to continue to do quite well this cycle.