Brisbane’s resilient property market defies odds

With consumer sentiment close to the lows seen during the initial shock of COVID-19 and also during the global financial crisis, it is perhaps surprising that buyer numbers are still so strong.

Auction numbers remained relatively stable between May to June. Apollo Auctions reported an average clearance rate for June of 65.05 per cent, compared to 66 per cent in May. The average number of registered bidders dropped only slightly from 3.9 in May to 3.7 per auction in June. However, the percentage of registered bidders who actually made a bid increased across the two months from 60.3 per cent to 63.95 per cent.

Property listings in Brisbane

Supply remains the biggest issue across the Brisbane market. CoreLogic confirmed new listings coming to the market are 27.9 per cent lower than 12 months ago. Total listings in Brisbane are 15.4 per cent lower than this time last year. One of the biggest problems for Brisbane property buyers at the moment, despite a willingness to transact, is the struggle to find something to buy.

Sellers have been holding back. There has been less motivation to sell. This is partly due to the fact that sellers are reluctant to sell without the confidence that they will find another property to buy. Additionally, with vacancy rates so low and such a tight rental market, even the option of renting in between a sale and a purchase becomes more difficult. There is certainly no widespread panic putting sellers in a position where they have to sell. Instead they do nothing and the market tightens up even more.

The options available for property buyers are more limited in some Brisbane suburbs than others. PropTrack data reported new listings in Marsden in Brisbane’s south, popular for its secondary school catchment zone, declined 64 per cent in May this year compared to the same time last year. Other areas, such as Yeronga and The Gap, also experienced significant declines in year-on-year listings with 59 per cent and 55 per cent fewer properties available for sale respectively.

For other suburbs, there are more options for buyers than the same time last year. For example, in Ashgrove, in Brisbane’s inner northwest, the year-on-year listings increased 108 per cent. Other suburbs where there were more options for buyers in May this year, compared to the same time last year, included Ascot with 64 per cent more options and Auchenflower, also with 64 per cent more properties listed for sale.

Buyer demand

With the ongoing interest rate rises having a significant impact on people’s borrowing capacity, this does impact on the demand for property. However, what we are seeing is that people are making compromises based on what they can afford to buy, as opposed to stalling their property buying decisions.

Brisbane property remains much more affordable that other capital city markets. With the dwelling value to income ratio for Brisbane ranking below Sydney, Hobart, Adelaide and Melbourne, it is no surprise that buyers from other east coast capitals have been flocking to our city. The Brisbane market remains one of the most affordable capital city markets within Australia.

For Brisbane property buyers, the percentage of household income required to service a new mortgage is 39.9 per cent according to CoreLogic. In Sydney this value is 51.6 per cent, Hobart is 44.6 per cent, and Adelaide is 44.1 per cent. Brisbane remains the most affordable east coast capital city in our country.

This is one of the reasons we’ve seen buyers relocating from the south over recent years. These new arrivals have often been selling their homes in New South Wales or Victoria to buy something just as good in Brisbane, with plenty of cash left in the bank. Alternatively, they are upgrading their homes to create a better lifestyle, knowing they will get more bang for their buck when selecting a quality home in Brisbane.

Brisbane dwelling values

For the fourth consecutive month, Brisbane dwelling values have increased. In June, dwelling values across greater Brisbane were up 1.3 per cent according to CoreLogic. This puts quarterly growth at 3 per cent. The current median value of a dwelling in greater Brisbane is $725,397.

PropTrack data also shows positive dwelling price growth of 0.08 per cent for the month across greater Brisbane with a median value of $731,000.

Brisbane house values

For the second consecutive month, median value growth for Brisbane houses surpassed the growth for units. Median house values were up 1.3 per cent across the month of June with quarterly growth now at 3 per cent. The median value for a house in greater Brisbane is $806,781.

Positive growth in the housing market was also reported by PropTrack with a 0.18 per cent increase in June. This brings house prices up 2.9 per cent since December and confirms six consecutive months of price growth as per this data set.

Brisbane unit values

The median value for units across greater Brisbane increased 1 per cent in June with the current median being $512,262. This is a record high for Brisbane median unit values. Quarterly unit growth is the same as the housing market, up 3 per cent. Over the last 12 months, units have outperformed houses in Brisbane, up 1.5 per cent compared with housing where median values have fallen 9.9 per cent.

Contrary to the above, PropTrack data showed a small negative change in median unit prices in Brisbane throughout June of -0.53 per cent, with the current median value recorded as $546,000.

Brisbane rental market

The latest SQM Research Vacancy Rates in Brisbane have remained consistent between April and May, holding at 1 per cent. Some regions within greater Brisbane are showing an upward trend in vacancy despite the broader city-wide trend remaining unchanged. The Ipswich region has come off lows of 0.5 per cent in August last year and now have vacancy rates recorded at 1.5 per cent. The Brisbane CBD has also come off more recent lows of 0.9 per cent in February, with vacancy trending higher every month since and now sitting at 1.4 per cent.

International demand for Brisbane rental properties is strong. Net overseas migration is expected to reach 400,000 this financial year. This is almost 27 per cent above the previous record high recorded in 2008. The majority of overseas migrants typically rent rather than purchase when they first relocate.

According to PropTrack, the top countries for rental searches are New Zealand, the US, the UK, India, China, and Singapore. With the return of Chinese students to Australia, PropTrack data confirm that this has significantly impacted the increase in rental searches.

Brisbane is still seeing growth in house rents as well as unit rents. The momentum of growth is slowing for houses, perhaps due to many of the mortgage belt areas reaching rental affordability caps. House rents are up 8.6 per cent over the last 12 months according to CoreLogic, whereas unit rent growth is almost double at 16.3 per cent.

Rental yields held firm this month with gross yields for houses remaining at 4 per cent and gross yields for units at 5.4 per cent.

Summary

The Brisbane market remains resilient, despite the higher interest rate environment. Like elsewhere across Australia, the market is being underpinned by very tight supply. Given the current circumstances, it is unlikely that we will see large changes in listing volumes in the foreseeable future.

It is possible that some people may opt to sell as holding costs become prohibitive. This is especially true for those coming off fixed interest rates through the latter months of 2023. Currently, the buyer depth is sufficient to absorb this. Unless the demand drivers change, it is unlikely that we will see further price falls in Brisbane in the coming months.