CFMG Capital Crystal Ball on the Money

CFMG Capital develop residential communities in Melbourne, Sydney and Brisbane via the CFMG Land & Opportunity Fund and just 3 short years ago – the weighting of the CFMG Capital land portfolio was heavily in favour of the southern states.  As the markets in both Sydney and Melbourne were experiencing unprecedented growth, we turned our attention to our home state of Brisbane.

 

As asset values (and therefore site acquisitions costs) sky rocketed in Melbourne and Sydney, speculation was becoming rife as competition for raw land sites saw pricing go well beyond the conservative benchmarks of the CFMG Capital investment criteria.  As a result, attention quietly turned to the home patch of Brisbane as the team began to secure sites in in strategic Brisbane locations at well below current market (2019) pricing ready to be well positioned for the expected strong performing South East Queensland property market.

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Some sites were acquired immediately, while others were secured on favourable long term options ready for settlement during 2019 at prices secured in the years prior.  During this period CFMG Capital via the Land & Opportunity Fund identified, purchased and completed the development of multiple projects inside 18 months, while also took long term positions on larger parcels of land.  Through this period, the Brisbane property market has been a solid, but unspectacular performer showing relatively flat (but linear) growth with very little volatility and thus allowing CFMG Capital and our investor base to secure strong returns.

 

Whilst the growth has been unspectacular, we have previously explained why the Land & Opportunity Fund does not rely on growth. However, it has been pleasing to read and listen to various reports across all media platforms of the expected strong growth in South East Queensland over the next 2-3 years – justifying the decision taken to shift the focus to South East Queensland on the acquisition front during the last 24-30 months.  BIS Oxford Economics property forecast recently predicted Brisbane will see the greatest national gains in house prices, with the Brisbane median expected to jump by 20% by 2022.  That percentage rise is the highest predicted for the capital cities nationally, well ahead of Sydney at 6 per cent and Melbourne at 7 per cent.


“A weak Queensland economy and high level of dwelling supply have dampened price growth in Brisbane in recent years,” the report notes.


“The result is that house prices in Brisbane are relatively affordable.


“With credit conditions easing and interest rates falling, improving affordability will be a catalyst for raising price growth as stronger economic growth returns and the market moves into a rising deficiency.”


Meanwhile, the question on many investors lips might be – where are CFMG Capital looking next?