A lot of the news headlines around Australia in relation to what is happening in the property market during the coronavirus pandemic tend to focus on the larger cities of Sydney and Melbourne, so the purpose of this article is to provide a summary of what we are seeing at this time in Brisbane.
As we often say, Australia is not “One Property Market” and therefore references made in relation to what might happen to “the property market” can sometimes be misleading when considering local drivers of supply and demand at a city, or even at a suburb, level.
Sales agents across Brisbane have consistently reported a significant decline in the number of buyers in the market at the moment, which is not a surprise to us. During the first 2 ½ months of 2020, we saw record buyer depth in Brisbane, with quality properties almost always selling with high numbers of registered bidders at auction or with a high number of written offers under a multiple offer scenario for a property for sale by private treaty.
More recently, since the coronavirus changed the way in which we live and work, and impacted so many industries, resulting in the closure of many business operations, the uncertainty around rising unemployment and the longer-term economic impacts have caused many buyers to simply pause their property search. Most of these buyers are taking a wait and see approach.
The majority of property investors who were looking to capitalise on the long-term opportunity that Brisbane may offer have backed off. Driven by fear and uncertainty, they have taken the safest option to wait.
But the market, to date, is still being strongly supported by owner-occupiers, and this is something that has been a consistent theme across the city, according to many sales agents.
Furthermore, the quality of the buyers who are inspecting properties has increased and, according to David Lazzarini of Ray White Lutwyche in Brisbane’s inner north, “the ratio of buyers who inspect a property to those who subsequently make an offer has increased – indicating there is a strong core of quality buyers still actively searching for property right now”.
Another consistent theme across the board is that buyers initially went into shock, and buyer activity immediately slowed down, but according to Craig Loudon from Tobin Real Estate in the Brisbane Eastern suburb of Carina: “I’m seeing and I’m hearing reports from colleagues around me in my local area that there has been a bit of an uplift over the last week or bit over a week of buyer activity. It’s much like people have decided that everything is settling down from a pandemic point of view… Let’s go out and start looking again.”
This is consistent with reports from realestate.com whereby week-on-week searches in the “Buy” site section are up 10 per cent in Queensland as at 23 April 2020 and searches in the “Rent” site section are up 12 per cent week-on-week.
The other obvious trend right now across Brisbane is that sales volumes are falling rapidly. Craig Lea from McGrath in the inner northern suburb of Wilston has said: “We are still selling properties, but the volume is not what it used to be. But the number of conversations we are having in order to list properties is about the same, so people are still wanting to talk to agents to get a feel for what’s going on, which I feel is quite encouraging.”
New listing volumes have already plummeted, according to Corelogic, as nervous sellers hold off listing their properties for sale until the uncertainty passes.
Speaking to Veronica Royal, who runs an online platform called Airlisting, which connects buyers and sellers directly without sales agents: “For existing properties, we are seeing less sellers selling without a real estate agent at the moment, and from the people I’ve been speaking to, the reason they’re delaying selling is because they have a financial buffer there, so they’re able to hold off and they’re going to wait until the uncertainty is gone.”
And the question most people want to understand the answer to right now is: “What’s happening to property prices?”
While Tammy Dale commented that “for some properties, we are seeing a 5-10 per cent softening in price, but other properties are staying fairly consistent”, other agents have not experienced any noticeable price softening to date.
Across the board, most agents we are communicating with have confirmed that prices remain relatively unchanged at this point in time. Craig Loudon said, “Prices are remaining stable.”
We also spoke to Von Barnes of Pinnacle Properties, who stated that “when properties are presented well, priced appropriately and look great, they are still selling above expectations”.
And finally, David Lazzarini summed it up nicely when he said “The gap has widened between buyers and sellers, whereby some buyers are making offers based on where they ‘think’ the market might be headed. But with good information, both buyers and sellers are able to make a better decision.”
From a rental perspective, we obtained some great insights from Jonathan Bell, managing director of Bell Estate Agents, which is a boutique property management firm operating across many parts of Greater Brisbane.
Jonathan said, “From a property management perspective, we’ve been pleasantly surprised as we were expecting a much greater impact than what we’ve seen. While we have seen a reduction in the enquiry levels on a property, the people who are enquiring are definitely interested, and they are ready to move. But in saying that, we are having to be more aggressive with our pricing, and if properties are priced well, they are definitely renting, and they are renting quickly.”
In terms of vacancy risk, it seems the location of properties has the greatest impact. According to Jonathan “Every day, if you are looking online, the market in the city (CBD) has been flooded with apartments for rent. I know that the short-term letting agents are not offering rental guarantees at the moment, and those investors are definitely getting hit at the moment.” Whereas properties that we purchased for clients 30 to 60 days ago, that have been settling throughout the peak of the COVID-19 crisis, have all secured quality tenants in a short space of time.
And what about the risk of tenant defaults? According to Jonathan, “There’s been so much noise about this and, ultimately, if you look at the hard facts… in our rent roll, we’ve only had 2 per cent of our rent roll say they are in hardship and only 1 per cent are actually in arrears. It is very minimal, and the tenants are being reasonable, only asking for some small reductions for a short period of time.”
So, most buyers who have been looking to buy in Brisbane recently have not actually left the market. There is definitely going to be some pent-up demand as the pandemic outcome becomes more certain, and this will be fuelled by record-low interest rates, strong gross yields that are achievable in Brisbane, as well as huge government stimulus to get the economy moving again.
The weeks and months ahead will uncover exactly where we are heading, but for now, based on our “on-the-ground” research, the property market in Brisbane seems to be relatively stable.