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State of Markets - QLD January 2015

By Staff Reporter

Property values continue to grow in Brisbane, and south of the city, supply shortages could be set to drive up prices.

The RP Data CoreLogic October Hedonic Home Value Index results reveal that Brisbane was the nation's third best-performing capital city in terms of value growth, with values up 5.6 per cent, year-on-year.

Although Brisbane’s growth has been more moderate than Sydney’s, one of its suburbs managed to break into CoreLogic RP Data’s list of top 10 most expensive suburbs for units. 

The list is based on the median value for suburbs that have had at least 100 automated valuation model (AVM) observations and 10 sales over the past year.

The riverside suburb of Tennyson, south of the CBD, had a median unit price of $1,024,147. 

There are, however, still some relatively affordable units available closer to the city.

Scott McGeever, managing partner of Property Searches, points to New Farm as an area which could be set to come back to life, with quality stock in short supply and investors looking to capitalise on growing demand. 

He says while the area remains relatively affordable – with investors still able to pick up a two-bedroom, two-bathroom apartment for under $600,000 – prices look set to climb.

The lack of available development land in New Farm gives further strength to the argument that the area’s house values will increase in due course. It is well serviced with amenities, parks and transport, while also being a convenient distance to the Brisbane CBD, he says.

Areas south of the Queensland capital are also feeling the effects of a housing shortfall. 

Colliers International contends that the Gold Coast beachside apartment market is now in a “critical state of undersupply”. The company’s director of residential projects, Tony Holland, identifies Broadbeach as a particularly vulnerable location.

He says that today’s supply imbalance was largely caused by the downturn in construction activity that followed the global financial crisis.

Mr Holland says opportunities for investors to get into the market are diminishing, with lifestyle factors and increasing consumer confidence driving demand.

In focus: South Toowoomba

South Toowoomba’s golf club and its stock of new properties give the suburb a fresh atmosphere. Although the market has been quiet over the past few years, South Toowoomba recorded a high amount of buyer activity leading up to summer. Properties of a good standard have grown in value and do not last long on the market.

However, due to the limited quality stock in South Toowoomba, we are seeing this market activity slow down. This trend is common throughout much of the south-east Brisbane corridor as investors begin to focus on the Christmas holidays. Investor lending has been on the rise since last month, so investors may be biding their time.

Toowoomba’s rental market, much like Brisbane’s, is not performing as well as it could. Investors who spend between $300,000 and $400,000 on a property are likely to see a six per cent rental return.

Many first-time and second-time investors are buying here as an alternative to high-priced Brisbane. As a result, the area only has a slightly lower vacancy rate than the state capital. I am aware of landlords offering up to 10 per cent discounts on rental rates to get their property occupied.

I advise both buy-to-let investors and owner-occupiers to consider one of the suburb’s house and land properties. This type of property has recorded better value growth than townhouses and units, and I believe this trend will continue. In addition, high-quality properties are more likely to achieve value growth than properties that require renovation.

If investors choose to perform a renovation in a market like South Toowoomba, they must remember that the margin for error is greater than it would be in a capital city. While spending extra money to renovate a poor purchasing decision in a place like Brisbane might result in only slight damage to your returns, South Toowoomba just does not have the demand to safeguard your investment.

Alternatively, South Toowoomba has a good amount of land available for development, on which a duplex or even a triplex could be successful.

In the future, I believe expansions at Toowoomba’s university could create a surge in the rental market. Notwithstanding its underperforming rental sector, South Toowoomba’s outlook is very good. There are ongoing improvements on the road networks between Toowoomba and Brisbane, and I believe the new Wellcamp Airport is going to have a massive impact.

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