In our previous article, we described the current window of opportunity for investors, particularly within markets like Brisbane.
Among other things, our theory of continued momentum is built upon the ongoing supply-demand imbalance, coupled with the apparent market resilience displayed during the current rate hike cycle. With expectations that interest rates will soften by late 2024, the market seems poised for an imminent bump in prices – making now a seemingly excellent time to buy.
But, looking closely at Brisbane, what indicators are there of growth beyond the next few years?
From an extremely long-term perspective – what effect might the 2032 Olympics have upon Brisbane property?
The Potential Upside
The 2032 Olympics are expected to bring a significant economic windfall to Brisbane and Australia as a whole. Estimates suggest that the Queensland and Federal Government will invest around $5 billion to host the event, which is predicted to deliver $8.1 billion in social and economic benefits for Queensland and $17.6 billion for Australia. This investment will likely spur infrastructure development, job creation, and tourism, all of which can contribute to property market growth.
Moreover, the Olympics often serve as a catalyst for accelerated infrastructure projects. In Brisbane’s case, these include a new $1 billion stadium at Gabba, athlete accommodation in Northshore Hamilton, and various other projects like the Cross River Rail and Brisbane Metro. Such developments usually have a positive impact on surrounding property values.
From our case study of Perth’s HMAS Stirling naval base, you’ll remember that these are all generally good signs for long-term sustainable growth.
The influx of employment opportunities, particularly in construction and related sectors, can lead to increased demand for housing. This, in turn, puts additional upward pressure on property values. The 2032 Olympic Games alone expected to support almost 100,000 full-time jobs in Queensland, with the cross-river rail alone expected to create almost 8000 jobs.
Furthermore, improved transport links make properties more attractive to potential buyers and tenants, often resulting in capital growth in these areas. For example, the new 10.2-kilometre rail line from Dutton Park to Bowen Hills is expected to benefit several stations with significant upgrades. Research shows us that city suburbs with rail services experience better capital growth on average than those without.
The Risks and Lessons from History
As always, it’s crucial to temper optimism with caution, and the experiences of London post the 2012 Olympics serves as a cautionary tale. While property prices did increase by 26% following the announcement of London as the host city, the economic stimulus surrounding the event also led to a “crowding-out” effect. This phenomenon saw residents and smaller businesses pushed out due to rising costs, which could feasibly be a concern for Brisbane as well.
From our prior article:
Leading up to the 2012 Olympics in London, the UK government invested heavily in the regeneration of East London, an area that had been somewhat overlooked in terms of development. The goal was not only to prepare the city for the prestigious event but also to rejuvenate this part of London and foster long-term growth.
Initially, the spending and anticipation of the event led to a significant boost in the property market. Prices in areas near the Olympic site soared as investors and homeowners alike were eager to capitalise on the buzz surrounding the event. There was a surge in demand for housing, and new developments sprouted up to accommodate this.
However, the euphoria didn’t last!
While the government’s investments did uplift the region, it inadvertently led to a crowding out effect in the surrounding areas. The government’s massive investment in infrastructure had lifted prices such that it created an affordability crisis. Furthermore, private investors found themselves competing with government projects for resources, including land and labour. This not only escalated the costs but also diverted potential investments from other fruitful projects. The rise in interest rates due to government borrowing also meant that borrowing costs for private property developers increased, making it more difficult for them to secure the necessary funds to initiate new projects or sustain ongoing ones.
In the period following the Olympics, the property market in areas surrounding the Olympic site showed some signs of stagnation. While the infrastructural upgrades were indeed state-of-the-art, the escalated property prices created a barrier for many potential buyers, thereby reducing the number of transactions. Additionally, the supply of new properties exceeded the actual demand, particularly in the case of premium accommodations which weren’t in sync with the needs of a broader segment of the population seeking more affordable options.
This led to a period where the property market had to undergo a correction phase, wherein prices stabilised and the market adapted to the new norm. Furthermore, the excess of high-end properties led to a renewed focus on developing more affordable housing options to balance the market dynamics.
As Brisbane gears up for the 2032 Olympics, the property market is undoubtedly one of the sectors expected to feel the ripple effects. While overall expectations lean towards optimism, it’s always crucial for investors to adopt a balanced perspective and always conduct a sober, measured analysis of the data itself and any comparable cases.
The Olympics are likely to serve as a catalyst for Brisbane, propelling it into the league of ‘global cities’ with enhanced infrastructure and international appeal, but hosting the Olympics is not a guaranteed ticket to property market success.
For those looking to invest in specific areas, locations like Hamilton, Tennyson, and Chandler are likely to be worth considering given their direct involvement in the Olympic events. Additionally, suburbs like Redbank Plains are emerging as attractive prospects due to significant public and private investments in the region.
So, in the run up to the games, investors would do well to keep an eye on broader economic indicators, engage in thorough due diligence, and consult with property investment professionals. After all, the best investment decisions tend to be well-informed ones.
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