BOQ sees brighter Queensland property market in 2013
The Queensland property market was showing early signs of improvement, the Bank of Queensland chairman Neil Summerson told the bank’s annual general meeting in Brisbane today.
Mr Summerson said economic conditions remained subdued but had stabilised.
“The bank is seeing some early indication that the downward movement in property values has started to reverse,” he said.
But he added over the last month there had been commentary from various market participants and commentators including Stockland, Mirvac and the Insolvency and Trustee Service Australia, which reiterated the difficulties of 2012 for the State of Queensland.
"With over 60% of our business is sourced in Queensland, I would like shareholders to appreciate that this bank is unique in that no other listed bank in Australia has the same concentration of business as we have in this State.
"Notwithstanding the above, the Queensland State Government is predicting 4% growth over the next year.
"In addition, tourism numbers on the Gold Coast and the Sunshine Coast in the period from September to November were up substantially on the previous year and the current State Government has initiated various programs (the boost in first home owners grant for new homes, as an example) to stimulate the economy.
"Indeed, the Premier stated only last Friday that he thought that Queensland should see some positive economic signs within 12 months.
"In addition, the bank is seeing some early indication that the downward movement in property values has started to reverse.
“With borrowers better able to meet their mortgage commitments as a result of successive interest rate reductions, including that of last week, we have reason to be optimistic about recovery in the important housing market.”
"Unemployment is expected to rise modestly over the next two years.
"Combined with a shift in Australians saving more than ever, credit growth for the banking sector is expected to remain subdued.
"Nevertheless, we are expecting to deliver growth in top and bottom line and after the first three months of this financial year we are comfortably meeting our internal targets.," Mr Summerson said.
BoQ reported a $17.1 million loss in the 2012 financial year as it felt weakened economic conditions in Queensland.
With property prices especially on the Gold Coast and the Sunshine Coast falling, BoQ’s impaired loans doubled to $401 million over the year.
"Prior to 2008 the bank did not have a history of having large write offs for bad debts.
"The onset of the Global Financial Crisis saw this all change," he said.
Until 2011 thebBank only made specific provisions against its outstanding debts, but in February of 2011, with the full impact of the economic slowdown, Cyclone Yasi, and the Brisbane floods, the board considered it prudent to take an "economic overlay" in our provisioning of $32.5m.
"In early this year the board and management became aware of a continuing fall in property values particularly in Queensland.
"As over 60% of our business is in this State, the board decided to take an additional economic overlay of $175 million during the year to provide a buffer against falling property values," he said.
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