Are the worst price declines in Brisbane now behind us?

Despite more rate rises expected in the coming months, it is widely accepted that we are much closer to the peak in this cycle. So, perhaps buyers are now pricing in their worst-case scenario and moving ahead with their purchasing decision regardless of what further rises might lie ahead.

With the Queensland state government as well as the federal government striking a $7 billion deal for the Brisbane 2032 Olympic and Paralympic Games in February, this is a huge injection of funds into a new infrastructure for Brisbane.

This is set to have a long-term and transformational impact within Brisbane. The city will become a global city, thus boosting economic activity, employment opportunities and long-term prosperity.

Listing Volumes

Throughout all of Greater Brisbane, CoreLogic data confirms that listings are down -29 per cent compared to the five-year average. Over the last 12 months, the number of new listings has plummeted by -22.4 per cent.

It is evident that, in general, sellers are holding back from listing their property for sale and this is constraining supply. It also suggests that there is little evidence of panicked or forced selling. 

Despite the broader trend, there are still markets within markets. According to PropTrack, suburbs including Greenbank, Park Ridge and Burpengary East have seen a surge in new properties available for sale over the last 12 months. Whereas suburbs such as Thornlands, Eagleby and Calamvale have seen listing volumes plummet. 

Buyer Activity

There is an increased level of buyer activity that has built upon the number of buyers who were out and about throughout January.

It is not just the volume of people at open homes and auctions that has been increasing, but also the average number of registered bidders at auctions and the percentage of active bidders who are participating in auctions through Brisbane.  Clearance rates have also been improving month-on-month throughout the city.

According to Apollo auctions data, Brisbane auctions were attracting crowds an average of 33.8 people (January was 28) with an average of 4.9 registered bidders (2.5 in January) and 60.35 per cent of those registered, actually putting up their paddle (compared to 58.6 per cent in January). These numbers were all elevated compared to the latter months of 2022 as well.

Clearance rates in Brisbane for February were an average of 58.5 per cent according to CoreLogic. Apollo auctions have their auction clearance rate for Brisbane throughout February at 71.2 per cent. Both values are much higher than in the latter months of 2022.

There are also more potential buyers per listing since the Spring selling season of 2022, confirming our on-the-ground observations over recent weeks.

The low listing environment is most likely compounding this effect across Brisbane. Because of this, quality listings are more popular and sales agents are again starting to reduce the time frame between listing and selling when the buyer depth allows for this. This has also led to a pick-up in competition among potential buyers, with some properties attracting multiple offers.

Dwelling Values Brisbane

The slowdown in the rate of price falls in Brisbane is reflected in dwelling values falling -0.4 per cent throughout February, compared to -1.4 per cent in January. The quarterly change is rapidly slowing as well. At the end of January, the quarterly change in Brisbane Dwelling values was -4.8 per cent, whereas by the end of February, this had decelerated to -3.2 per cent. From the start of COVID-19 through to the end of February 2023, Brisbane dwelling values are still 31.7 per cent higher despite the recent falls.

The median value of a dwelling in Greater Brisbane according to CoreLogic is now $694,495.

Source: CoreLogic

PropTrack data tells a story that is even more positive. This shows Brisbane dwellings grew 0.12 per cent throughout February off the back of a -0.07 per cent change in values throughout January. Based on PropTrack data, the median value for a dwelling in Greater Brisbane is now $716,000. Regardless of which data set is relied upon, the downward trend for dwelling values in Brisbane has definitely lost its momentum.

Source: PropTrack

Brisbane House Values

House price changes continue to lag behind the performance of the unit market in Brisbane. During February 2023, house price values retracted -0.4 per cent across Greater Brisbane, compared to a -1.6 per cent change in January. Clearly, a marked slowdown in the rate of decline over a short period of time. 

The quarterly change in house values is -3.7 per cent this month compared to -5.5 per cent last month. Again this indicates a strong change in the downtrend. The median value of a house in Greater Brisbane is now $767,781 according to CoreLogic data.

Source: CoreLogic

The alternative view by PropTrack is that Brisbane house values increased 0.09 per cent throughout February off the back of -0.13 per cent house price changes in January. PropTrack data placed the median value for a house in Greater Brisbane at $798.000.

Source: PropTrack

Brisbane Unit Values

Brisbane’s unit market continues to outperform the housing market month-on-month. In February, according to CoreLogic data, Brisbane unit values held firm with a 0 per cent change. In January the value change was -0.2 per cent. Unit values in Greater Brisbane have increased over the last 12 months, which is in contrast to Brisbane house values where all of the price falls have been demonstrated.

Source: CoreLogic

PropTrack data has shown two consecutive months of unit price growth in Brisbane. February values were up 0.3 per cent off the back of 0.33 per cent in January. Whilst these gains are only very slight, they indicate more resilience in this segment of the market. This is also evidenced by the annual value changes for units in Brisbane which show a value growth of 4.73 per cent.

Source: PropTrack

Brisbane Rental Market

Brisbane’s rental market adjusted again in January with city-wide vacancy rates back to 0.8 per cent after a seasonal increase in December to 1.1 per cent. In short, there are still not enough properties available to rent compared to the number of prospective tenants looking for a place to call home.

There will be no short-term solution to the rental crisis in Brisbane. Like many other areas around Australia, this issue has been unfolding for many years as our population has continued to grow in the absence of any plan to provide housing for the number of people who need it.

For this reason, there may be an opportunity for property investors to capitalise on the growing yields which are being pushed up due to property values retracting in recent months at the same time that rents have been escalating.

CoreLogic data shows the gross rent for a house in Greater Brisbane has increased 11.9 per cent over the last 12 months. For units, the rent price growth has been even higher at 15.6 per cent.

At the peak of the market in July 2022, the gross yield for houses in Greater Brisbane was just 3.2 per cent. The unit market in Brisbane demonstrated a gross yield of 4.6 per cent in June 2022. Since then, yields have recovered rapidly across the city.

Gross rental yields for houses are now sitting at 4.1 per cent across Greater Brisbane. For units, the gross rental yield is currently at 5.3 per cent. These numbers certainly become more attractive for investors, especially considering the long-term growth prospects for Brisbane are also very positive. 

Source: CoreLogic

Summary

We remain optimistic about the Brisbane Property market once interest rates reach a ceiling.  We believe this will give buyers the confidence to move forward with their purchasing plans knowing their costs will be more certain. Given the spike in buyer activity already in 2023, we believe this is a trend that is likely to continue.

In the absence of any significant increase in the number of properties that become available for sale, we also expect that prices will remain stable. We do not expect further rapid price falls in the coming months. There are simply too many buyers and not enough stock for this to occur.

We also do not expect to see a large increase in the number of properties that become available for sale in the months ahead. Even discussions around the fixed rate mortgage cliff are not a major concern for us. Property owners who have taken out loans two or three years ago on fixed rates that will be expiring would already be aware of this fact. They would have already been making plans to meet the additional mortgage repayments that they know will be coming. We do not expect people to wait until the fact, before deciding they can no longer afford to hold their property and then put themselves in a position to have to sell fast.

It has also been confirmed by APRA in a recent statement that the three percentage point serviceability buffer will remain in place for any new loans being assessed. This means that we do not expect access to money will become easier which may dampen demand for some buyers, especially those on lower incomes. It has been pointed out many times that increasing interest rates do not impact all people in the same way as they tend to affect lower-income earners more so than higher-income earners.

Whilst there are certainly still some headwinds that remain in place for the months ahead, it is also important to consider on-the-ground observations from attendance every weekend at auctions and open homes throughout Brisbane. There has been an undeniable shift from December 2022 through to now in buyer activity in Brisbane. This is especially evident within the Brisbane city council region in suburbs closer to the central business district and focused more towards quality properties that are ready to move into and not impacted by issues such as flood noise. This is also confirmed by the data presented in this report.

Despite this rise in activity, there are still a lot of nervous buyers in the market. There is uncertainty about the direction of the market, and therefore, where the property values might sit. Buyers are looking for bargains and yet sellers are holding firm on their prices. It is possible that we will look back at 2023 and remember it as a time when there were good buying opportunities throughout our city. 

If you understand value, have confidence in the long-term outlook and are willing to take action whilst others are nervous; there may not be a better time than now to get into the Brisbane market. As Warren Buffet says, “Be fearful when others are greedy and be greedy when others are fearful.” There is a lot to be excited about when we look at what Brisbane will be like 10 years from now. Our city will no longer be a country town. Brisbane will be all grown up and will have its place on the global map. The next 10 years will bring enormous change and with that is an enormous opportunity for those willing to buy their small piece of land in this fast-growing city.

Melinda Jennison, Streamline Property Buyers