The Olympics do not guarantee house price growth
In July 2021 the International Olympic Committee (IOC) officially declared Brisbane as the host for the 2032 Olympic Games, which is expected to provide a significant economic windfall for not only Brisbane and Queensland, but Australia as a whole. The direct benefit of the 2032 Olympic Games will vary considerably by location, underpinned by predominantly new infrastructure development projects and the subsequent downstream economic and lifestyle benefits that they provide. Whilst infrastructure investment will play a key role in the subsequent impact on property values, historic events such as the 2000 Sydney Olympics and the 2018 Gold Coast Commonwealth Games have demonstrated that external, macro and micro economic influences are likely to have an even greater impact on the property market. The question should then be; what is the legacy of the Olympic Games that SEQ wants, rather than what will the immediate impact on prices be?
Current estimates indicate that the Queensland and Federal Government will invest circa $5 billion to host the 2032 Olympics, which KPMG predict will deliver $8.1 billion in social and economic benefits for Queensland and $17.6 billion for Australia. The $8.1 billion windfall for Queensland will include a $4.6 billion economic boost to tourism and trade and $3.5 billion in social improvements such as health, volunteering and community benefits. The 2032 Games are also expected to support 91,600 full-time equivalent jobs in Queensland and 122,900 nationally. It is often the case that improved labour market conditions results in improved property market conditions, as more jobs leads to greater collective debt serviceability levels, though the broader economy will dictate this and it will undoubtedly be influenced by the global economy at the time.
However, it’s important to acknowledge that the infrastructure investment being proposed for the Brisbane 2032 Olympics is unique to many prior Olympic Games in that it will not be concentrated within a single city, but will instead be dispersed across a broader region. The Gold Coast and Sunshine Coast are poised to host 11 of the 32 total 2032 Olympics venues, whilst both are also set to host their own athlete’s village separate to the main village that is earmarked for development at Hamilton, circa 6 kilometres from the heart of Brisbane CBD as the crow flies. The author does have reservations about Hamilton given it is one of the last premium river front land holdings in Brisbane. Typically the accommodation provided for Athletes is minimalist and may be better located elsewhere. As an example, the Mill Site at Petrie sits on a train line, has great access to Brisbane and the north coast as well as needing student accommodation for the future growth of The University of the Sunshine Coast.
It’s also worth noting that 84% of venues for the 2032 Games will be existing, refurbished or temporary facilities. Group this with the fact that the Brisbane 2032 Olympics has been announced eleven years ahead of the event, which differs from the former historic norm of host cities being declared just seven years ahead of the event. This should provide many longer term advantages both in terms of timing, delivery and scale.
A longer lead in time, combined with the event being held across a larger geographical area, should mean a slower-burn, rather than a boom in infrastructure development and the subsequent downstream economic and property market benefits. To surmise the differing impact in visual terms, the economic ripple effect of hosting an Olympic Games in a single city with a seven year build up could be compared to dropping a marble into a glass of water, whilst the ripple effect of hosting the Olympic Games across a region as large as SEQ and with a longer eleven year build up is arguably better visualised by dropping the same marble into a bath of water.
When attempting to quantify the resulting impact of the Olympic or Commonwealth Games on relevant property market prices, the most commonly used timeframe of measurement is five years, including the four years leading up to the games (following the previous event) and the year following the event. Whilst most host cities have historically received confirmation of the news seven years before the event, it is not usually until the completion of the preceding event that infrastructure development activity increases rapidly, whilst the year following the event is typically a period where global recognition for the host city remains high.
The chart below compares growth in Sydney’s median house price leading up to and post the 2000 Olympic Games (1996 – 2001) with the Gold Coast’s median house price leading up to and post the 2018 Commonwealth Games. Whilst it’s acknowledged that the difference between the Commonwealth and Olympic Games is quite significant in terms of scale and global reach, the timing and location of the 2018 Commonwealth Games makes it most worthy of analysis for the purpose of this report.
On face value, the chart above highlights stark differences between local house prices surrounding each of these two historic sporting events. Sydney’s median house price is shown to have increased by 53% across the relevant timeframe for the 2000 Olympics, whilst the Gold Coast’s median house price is shown to have grown by a lesser 25% across the relevant timeframe for the 2018 Commonwealth Games. Notably, growth in Sydney’s median house price clearly outpaced the national trend (30%), whilst capital growth in the Gold Coast did little more than equal the Australian norm (25%). These figures alone highlight the potential pitfalls related with making assumptions that significant growth in the local housing market will be a formality as part of the fallout from the 2032 Brisbane Olympics.
Whilst the Olympics and Commonwealth Games events certainly has a notable impact on property prices in Sydney and the Gold Coast, the table below provides a summary of other key economic factors that were also influential on changes in local property values.
Notably, the relevant timeframe for the Sydney Olympics was a successful time for the Australian economy and one that was characterised by a long period of political stability, strong wage price growth, a favourable lending environment, a global tech boom (the dotcom boom) and the introduction of the GST in Australia. Comparatively, the 2018 Gold Coast Commonwealth Games coincided with a tumultuous political environment that saw 5 changes in Prime Minister between June 2010 and August 2018, low wage price growth, low Consumer Price Index Growth and a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (December 2017 – February 2019) which heavily restrained the flow of capital.
Overall, whilst infrastructure investment leading into both the Sydney Olympics and the Gold Coast Commonwealth Games are certain to have had a positive impact on local property markets, the full extent of such impact is heavily reliant on other external macro and micro economic trends. Accordingly, for those questioning whether the 2032 Brisbane Olympics will have a positive impact on local property markets, the author would answer that it’s likely that it will, though the upside potential of such benefits will be dependent on higher level, economic trends; both local and global.
One of the important things to consider regarding the Olympics and SEQ, Brisbane in particular; is that many major infrastructure projects were already underway, as the city re-imagined what it should be and how to cope with a growing population. Unfortunately land supply hasn’t kept pace, but perhaps the infrastructure projects will improve liveability in many suburbs allowing for improved densities.
As an example, the Cross River Rail project is often thought of only for the creation of a new, 10.2 kilometre underground rail network in inner city Brisbane, the scope of the project spans well beyond this and will also include three new train stations on the Gold Coast Line and upgrades to eight other stations on the existing rail network. Combined with the $1.2 Billion Brisbane Metro network and the ‘Second M1’, which will all be particularly beneficial for middle to outer ring suburbs, south of the Brisbane River. Whilst the impact that these projects may have on property values in these suburbs is likely to be inconsequential or immeasurable, there is no doubting that these projects will enhance the lifestyle offer of living in the middle ring, bringing it closer to the CBD and other key employment and recreation nodes south of Brisbane.
Because the region has a long lead time, it should allow for greater scrutiny over decisions that are being proposed. As an example, the upgrade to the Gabba for the opening and closing ceremonies makes sense, it could also host the football matches. However QSAC would arguably make a better athletics venue given it already has both a competition track, stadium and adjoining training with stadium. Upgrading this facility would also prove highly complimentary to the Nissan Netball Stadium as well as the beach volleyball which is also on site. These are already purpose built facilities designed for athletics, not a former greyhound track converted to an AFL Stadium. I’m sure there will be plenty of time to make these decisions, however does a new stadium inflate the price of property, or is it simply the growth in employment that lifts the capacity to pay?
There is no doubt that hosting an Olympics Games is wonderful for a city’s morale, improving infrastructure and putting a spotlight on the lifestyle of the broader community. The reader shouldn’t be drawn into the popular press that Olympic games automatically correlate to improved housing prices. If the current trend was to continue to 2032, there would be very few who could afford residential property. The simple reality is that SEQ will likely go into at least one full property cycle before the Olympics, which means slower sales, some property value declines and softening of rents. The Olympics don’t mitigate economic or property cycles, what they often do though is provide excellent amenity for the broader community to enjoy once the games are complete. That is the gold medal standard we should be training for.
Tasman Nealon | Property Economist
