Open & closed: The Impact of border closures on Qld's property market
Many have said there‚'s no medical justifications for any Australian State or Territory to keep borders shut‚...how times quickly change both for and against the argument.
Last week, the Queensland Government announced a further and faster easing of restrictions across Queensland which included a clear plan to manage our borders going forward. Following on, Premier Annastacia Palaszczuk also announced that the State‚'s borders would be opened to visitors from other States from this Friday, July 10 at noon.
However, the Premier further noted that anyone who travels from Victoria - including Queenslanders - will be prevented from entering Queensland unless they quarantined at a hotel at their own expense for two weeks (which came into effect last Friday).
Ms Palaszczuk said Queenslanders‚' continued efforts in uniting against COVID-19 had also paved the way for a further easing of restrictions, allowing more people in more places and more events, a week earlier than expected.
"We have seen more than 250 cases of COVID-19 in Victoria over the past week and there is sustained community transmission there," the Premier said. "We cannot risk removing our border restrictions for those people coming from areas in Victoria right now. To do so would jeopardise everything we have all sacrificed so much to achieve and could be catastrophic to our entire economy.
"The risk to Queensland from travellers from New South Wales, Western Australia, South Australia, Tasmania, Northern Territory and the Australian Capital Territory will be limited, given the low levels of community transmission in these places.
"We committed to open the borders on 10 July. We are doing that - but in a responsible way. We have said all along that we would take sensible, measured steps to ease restrictions for Queenslanders and that‚'s exactly what we‚'re doing.
"If there is an outbreak in any state, we reserve the right to review the border again. We have come such a long way together, but now is not the time to become complacent. We must all keep up the efforts to protect ourselves, our families and our community."
Despite the result, a re-closure of our borders isn‚'t off the table either. With a new COVID-19 case testing positive in the last 24 hours in Queensland (and the first case since 26 June) along with the unprecedented daily tally currently being recorded in Melbourne as Victoria goes back into lockdown for a minimum of 6 weeks (at an estimated cost of $1 billion per week), what would be the impact on Queensland‚'s property market and the broader economy if our borders remain off-limits to domestic travellers?
It doesn‚'t take an economist to calculate why Queensland‚'s tourism industry is ordinarily a bustling trade. Great weather, gorgeous beaches and a relaxed lifestyle all make for a popular holiday destination with domestic and international tourists alike. The Sunshine State‚'s tourism industry injects a staggering $25 billion into the economy, accounting for 7.8% of Queensland's Gross State Product (GSP).1
For Queenslanders that have the means, cashing in on this seemingly foolproof business model makes a lot of sense. With the introduction of Airbnb five years ago, many saw it as an opportunity to use their investment property for short-term holiday letting and have their share of Queensland‚'s tourism cookie jar.
In late March 2020, the Palaszczuk Government made the executive decision to close Queensland‚'s borders to help stop the spread of COVID-19, with the exception of freight and essential travel. With no end in sight at the time for a reopening of our borders (or when Queenslanders themselves can travel intrastate), many investors were forced to leave their property vacant for an indefinite period of time, or scramble to have it rented out in a traditional long-term residential tenancy agreement - thus, lessening the holiday letting pool.
With many naysayers purporting that vacancy rates across the state would weaken dramatically due to Queensland‚'s halted tourism industry, Propertyology‚'s Simon Pressley says, unlike other tourist hotspots, Queensland‚'s short-term holiday letting market is not as abundant.
"Airbnb [and short-term holiday rentals] are very important, but their impact on vacancy rates have been overstated," explains Pressley. "It‚'s not like Queensland is dominated with these locations that have thousands of dwellings in the Airbnb space that are now all of a sudden competing with regular investment properties."
For now, it‚'s difficult to measure how much of an influence COVID-19, border closures and a halted tourism industry have had on the residential rental market. The REIQ‚'s vacancy rates for the first quarter of 2020 show a relatively stable market for both major metropolitan and regional cities. Tourism hubs across Queensland saw some movement, but the real effects won‚'t be fully known until the next quarter‚'s results are released according to REIQ CEO Antonia Mercorella.
"There has been movement within those regions more dependent on tourism letting such as the Gold Coast, Noosa and Cairns where vacancy rates have seen more definitive increases," she explains. "This comes as no surprise with short-term and holiday rentals making a sudden shift onto the long-term rental market.
Any further surges in vacant properties across Queensland‚'s tourism regions are likely to be addressed by future tourism-focused initiatives to boost domestic holidaymakers."
Last month saw restrictions ease on intrastate travel (1 June), resulting in some positive movement within the holiday letting space as Queenslanders were quick to travel around the State. Queensland Treasury estimates predicted a local economy injection of $1 billion per month as a result of intrastate travel restrictions being lifted.
However, many pundits have been quick to suggest it‚'s simply not enough to support the broader economy in the longer term. Hence, reopening our borders is absolutely critical to the survival of our tourism industry.
The closure of Queensland‚'s border has brought challenges to interstate residents looking to buy and relocate within Queensland. "Border closures will definitely be impeding the [interstate] owner occupier space," says Pressley. "As an owner occupier, emotions are the most important thing - we‚'re buying it to live in and how we feel in a dwelling is arguably the most important factor."
However, Pressley also argues a closed border can actually provide advantages in the property market too - for investors and buyer's agents alike. "As soon as you see or smell an investment property, all these emotions start to come in and as an investor, you don't want emotions affecting a financial decision," he adds.
"I think the borders remaining closed probably helps buyers ‚'s agents because there‚'s now an extra barrier for buying interstate. If you live in Adelaide for example and you‚'re contemplating buying in Queensland, you don't just have the border closures to compete with but you‚'d have to quarantine on return for two weeks."
In ordinary circumstances, Queensland is Australia‚'s biggest beneficiary of interstate migration. For now, it‚'s difficult to determine whether COVID-19 and an extended closure on Queensland‚'s border will impede people‚'s decisions to relocate to the Sunshine State. While factors such as unemployment levels, a diminished job market, relocation costs and health concerns may force people to remain where they are, Pressley says the nation‚'s quick adaptation to working virtually may entice people to migrate to Queensland.
"I'm sure someone living in an expensive city like Sydney or Melbourne might be thinking that there‚'s beautiful weather in Queensland, the houses are more affordable compared to where I‚'m living at the moment which means the mortgage would be a lot more affordable to pay off, and I can do my job remotely from Queensland."
What‚'s more, Queensland‚'s status as Australia‚'s most decentralised state, coupled with its impressive 191 airports means interstate migrants can live just about anywhere but still be able to fly back for meetings or to visit family and friends.
There are really big opportunities for Queensland if we play our cards right, and reopening up our borders as quickly as possible is part of that, marketing Queensland‚'s tourism attractions on a national scale and reinforcing how affordable it is here also part of that (Source: Australian Bureau of Statistics 2020).
Beyond the borders, the State Government has listened to the pleas of hospitality and tourism operators and committed $50 million as part of the Queensland Economic Recovery Strategy:Unite and recover for Queensland Jobs. Additionally, the government launched a domestic marketing campaign in early June to align with the easing of restrictions to encourage Queenslanders to holiday at home.
Not only is this move integral to inject money into the State‚'s economy, but to preserve jobs - nearly one in three jobs lost due to COVID-19 were from people in the hospitality and tourism sectors.2
But is it enough? While most in these industries have welcomed the funding, tourism bodies Destination Gold Coast and Queensland Tourism Industry Council still called for the borders to be opened sooner rather than later. Pressley agrees, saying, "The longer it‚'s left closed, the less likely is that even when the border does open up, those tourism and hospitality jobs will come back on board."
Referencing Queensland‚'s unemployment figures, which have remained above the national average for 11 years, Pressley believes the mismanagement of Queensland‚'s tourism sector and economy through COVID-19 could spell disastrous for the property market. "We‚'ve got to be careful with this and tourism is very important," warns Pressley. "If not managed correctly, temporary payments [JobKeeper, JobSeeker] may become permanent."
At a state and federal level, several measures have been put in place to stimulate the economy, workforce and property market. The Federal Government‚'s most recent initiative the HomeBuilder grant in which eligible Australians can access $25,000 to build or substantially renovate their homes, in an effort to bolster demand in the construction sector and keep builders in jobs.
While it‚'s yet to be fully implemented, The Real Estate Institute of Queensland (REIQ) has also developed protective measures that are more immediate and easily accessible for all. What‚'s more, they would help safeguard the property market and boost transactions. The three fundamental recommendations include:
Extending the First Home Buyers Grant to established housing: Expanding the First Home Buyers Grant beyond new construction will stimulate economic activity through the introduction of increased numbers of first home buyers to the broader property market.
Implement a 50% reduction in development application costs across all Local Governments and introduce streamlined application processes: Removing barriers to development and reducing costs will assist to boost construction levels, increase competition and importantly, reduce cost for the end purchaser.
Deliver a 75% reduction in stamp duty for the period of the COVID-19 pandemic: A significant reduction in stamp duty payable on property transactions will have a positive effect on confidence within the property market. This, in turn, will stimulate real estate transactions expected during the immediate crisis period.
Ultimately, the decisions of both the State and Federal Governments over the coming weeks and months are crucial in determining how well Queensland‚'s economy and property market will fare. Out next step will be this week‚'s border reopening as a means of boosting the economy.
As Pressley says, "The property market is always connected to the economy - an economy that improves leads into an improved property market." Let‚'s hope a second wave does compromise the path we‚'re currently navigating.
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