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Sunshine State is a safe haven in turbulent times

Sun, surf, sand and some outstanding yields on property have been unquestionable reasons for investing in Queensland in recent years - particularly in Brisbane City and around Surfers Paradise, and Southport on the Gold Coast.

After a year that has seen values stable at best and mostly in decline, coupled with some stark and discouraging data on affordability from the International Monetary Fund (IMF), it would seem that there is only one reason for Hong Kong residents to consider jumping into the Australian market - but it is a strong one: the 40 per cent-and-still-climbing rise in value of the United States dollar against the Australian dollar between July and October.

Despite big price drops countrywide, Peter McGrath, chairman of the Real Estate Institute of Queensland (REIQ), maintains that the Sunshine State remains resilient. 'Historically, Queensland property prices have held firm in much more trying economic conditions than those experienced this year due to our steady population growth and strong economy. With prices steady across the majority of the state, the June 2008 quarter median sale prices reflect the resilience of the Queensland market.

'These results fly in the face of some commentators who had predicted doom and gloom and substantial price drops for property markets across the country.'

Recent cuts in interest rates and stamp-duty measures to encourage first-time buyers have helped buoy the market, but affordability remains a major issue.

The recently published IMF World Economic Outlook analysed housing price increases from 1997 to the end of last year, and calculated the differential between the progression of real estate prices on the one hand and per capita disposable income (including other financial and demographic factors) on the other. Its data shows Australia as having developed a 25 per cent gap between the two, only 5 per cent behind the world's worst 'offender' - Ireland.

In bare terms, the implication is that Australian property is 25 per cent less affordable today than it was 10 years ago, creating huge pressure on first-time buyers and, in times of recession, risking an explosive impact on absolute property values.

Mr McGrath acknowledges that while the number of buyers - including investors - actively interested in the market has increased over the past months, buyer confidence is still low compared to last year.

'People are out there researching the market, biding their time perhaps until interest rates drop a bit more. The Queensland residential property market is changed from the robust results of last year - even though we have weathered this year's economic storm of high petrol prices and high interest rates better than most. However, the current global financial uncertainty will need to be resolved, and interest rates reduced further, before buyer confidence fully returns to the market.'

Over the years Queensland has performed well, especially at the high end. For those looking for a safe haven in turbulent times, having your name on a few thousand acres of the Sunshine State could prove an attractive alternative to base metals and bonds.

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