RBA's Glenn Stevens pinpoints Queensland's imperfections

Reserve Bank governor Glenn Stevens has suggested it is no coincidence that the two state capitals that have had the clearest evidence of declining house prices over the past couple of years – Brisbane and Perth – were the two that previously had the highest rate of population growth and that have since had the biggest decline in population growth.

Stevens noted that significant changes in housing cost relativities between states had played an important role. He said that up to 2007, people were confident and finance was readily available in Queensland.

“Brisbane housing prices, which had been a bit over half of the average level of Sydney and Melbourne prices in 2002, had risen to be almost the same by 2008, which was unusually high.

“The rate of interstate migration to Queensland then slowed further, to be at its lowest in at least a decade,” he says.

“The effects of that on state population growth were compounded by a decline in international migration, something seen in all states. At the same time, finance became more difficult to obtain and lenders and borrowers alike became more risk-averse.

“This happened everywhere, but its effects in Queensland seem to have been more pronounced,” Stevens says.

“Since then, Brisbane housing prices have been declining relative to those in the southern capitals and the construction sector here has found it tough going.

“So a complex interaction of forces – the commodity price cycle, the financial cycle, population flows, endogenous responses of housing prices that then feed back to population flows and so on – has been occurring.

“The ebb and flow of these forces has made for differences in performance, first in one direction, then the other,” Stevens concluded.