After years of slow growth, the Brisbane property market emerges as a solid performer, with experts agreeing that it might just be the best-performing capital city today. Should investors flock to the Queensland capital for the best opportunities?
Most capital city markets are feeling the effects of the softening of the Sydney and Melbourne property markets—both of which have just come off an unprecedented property boom—Brisbane bucks this downward trend as it continues to thrive in the changing landscape through a strong local economy.
The Queensland capital’s vacancy rates in the most recent quarter sits at 2.1 per cent for both houses and units, well below Sydney’s rates at the moment.
According to economist Dr Andrew Wilson: “Overall, it has a strong local economy with a lifestyle and affordability advantage. Brisbane will continue to be at the top of the pack in terms of growth prospects.”
“Even though we're only talking a rise of about one to two per cent because we don't have the low interest rate driver and incomes remain flat, there's no doubt that the Brisbane property market is pushing ahead with more demand than supply.”
Queensland’s strong interstate migration supports the demand for housing across the state, particularly its capital city. Within a year, 24,000 people moved interstate to Queensland, according to data from the Australian Bureau of Statistics.
RE/MAX Australia Michael Davoren said: “Queensland is through the worst of its mining construction downturn; gas exports are performing strongly and tourists continue to flock to the state. Job growth is quite strong, with nearly 130,000 net new jobs created in the past year alone, partly due to almost $30 billion worth of projects under construction.”
“And it is not only the number of incomers that is significant; the fact is that cashed-up people coming out of the southern markets are looking for somewhere to invest.”
Despite high hopes for its property market, Brisbane joins Sydney, Melbourne andin seeing a decline in dwelling values during the final week of November. The capital city markets fell by 0.1 per cent, 0.5 per cent, 0.3 per cent and 0.2 per cent, respectively, according to the CoreLogic’s Property Market Indicator.
Brisbane’s median dwelling value currently sits at $491,925. Majority of the regions are more expensive than the overall median, with West Brisbane being the most expensive at $659,554 and Ipswich being the most affordable at $350,511.
CoreLogic’s Cameron Kusher said that the closer the property is to the city centre, the more expensive it gets.
“Although it is clichéd; location, location, location holds true and purchasers still pay a significant premium for well-located properties,” he highlighted.
Meanwhile, listings rose across most capital cities during the week ending November 30, with only Sydney and Melbourne witnessing a rise.
Houses remained more popular than units, while vendor discounting sits between 4.5 per cent and 6.8 per cent for houses across most capital cities and between 4.6 per cent and 6.6 per cent for units.
Throughout Queensland, properties are taking longer to sell compared to a year ago due to overall softening conditions of most markets and the tightening of the lending environment.
In Brisbane, the median days on market is currently at 53 days, increasing from 37 days last year—the longest it has taken since February 2013. On the other hand, regional Queensland takes an average of 69 days to sell a home, up from 55 days a year ago—the longest it has taken to sell since February 2016.
Mr Kusher said that these conditions are providing buyers with more choice and less urgency.
“As a result of these trends, it is expected that the median days on market figure will continue to trend higher over the coming months as vendors of ’stale’ inventory eventually adjust their price expectations lower or withdraw their property from the market.”
“As housing market conditions have weakened, buyers have more stock to choose from and far less urgency. They are gaining more leverage, negotiating harder and a growing proportion of vendors are selling at prices lower than their original advertised price,” according to him.
Across capital cities, 73.6 per cent of properties were sold for less than their list price over the past three months while only 21.5 per cent were sold for more.
Moving forward, the current tightening of the lending market is expected to continue to impact Australia's housing supply, according to Housing Industry Association’s Tim Reardon.
Over the past 18 months, the credit squeeze has influenced the reduction in house prices, which is now being felt in the construction industry as residential building activity started to decrease.
New home starts are expected to decline by 11.4 per cent over the course of this year, and then by an additional 7.4 per cent in 2019, Mr Reardon said.
“The fallen house prices tends to cool first home buyer activity in the market as well as cooling other owner-occupiers activity, so as a consequence, the fallen house prices are likely to lead to lower levels of building activity in the market,” Mr Reardon said.
“APRA’s restrictions were designed to curb high risk lending practices but we are now seeing ordinary home buyers experience delays and constraints in accessing finance.
“If these disruptions to the home lending environment prove to be long lasting then we could see building activity retreat from the recent highs more rapidly than we currently expect.”
The increasing barrier to accessing finance is likely to result to less home buyers entering the market, less new homes beginning construction and, therefore, less housing supply within six to nine months.
However, Mr Reardon reminded investors that the building market is cooling from high levels of activity, which means that even at the end of that downturn, they could still expect building activity to be well above historical averages.
“Traditionally, we'd build between 130,000 and 180,000 homes per year, but in 2016, we cracked 233,000 homes per year, which is 20 to 30 per cent above the long-term average."
“The fact that we're now coming down off that, by seven or eight per cent since 2016, and we're looking at the same decline for the next two or three years, would normally mean the end of the world for us, but in this cycle that’s coming off an enormous boom, the bottom of the cyclical downturn is going to be higher than any of our previous peaks,” the economist highlighted.
In order to avoid any destabilising influence on the housing market, Mr Reardon urged banks to maintain stable lending practices in light of the current banking royal commission.
Brisbane’s apartment market is the capital city’s shining light, signalling a market turn-around is finally on the horizon, most experts believe.
Despite the overall weakened property market over the last few years, apartment values in Brisbane are expected to rise by 6.5 per cent, according to CoreLogic’s Australian Home Value Index.
The combination of a strong local economy, an enviable lifestyle and an affordability advantage makes Brisbane’s apartment market a top choice for home buyers, investors and renters alike.
Universal Buyers Agents’ Darren Piper said: “After so much doom and gloom we’re already seeing a huge uplift in the amount of enquiries we receive for Brisbane.”
“Sydney and Melbourne prices are falling but they are still well out of reach for the average buyer. But Brisbane’s more affordable market puts property buying squarely in the reach of first-home buyers, investors and people looking for a location change.”
“We’re seeing a lot of buyers attracted by the lifestyle, great schools, weather and prices of course. There’s also a renewed confidence in the market, so we’re seeing more people upgrading, that which we haven’t seen for the last 12 months.”
Across the major capital cities, Brisbane recorded the most amount of sales at 420, followed by Melbourne with 330, Perth with 236, and then Sydney with 46.
While the rise in dwelling values may sail between one to two percent due to low interest rates and slow income growth, there’s no doubt that the Brisbane property market is pushing ahead with more demand than supply, experts highlighted.
In fact, Brisbane’s vacancy rate fell to 2.7 per cent from 2.9 per cent in September and is down from 3.4 per cent a year ago.
Meanwhile, the Rental Affordability Index report from National Shelter, Community Sector Banking, SGS Economics & Planning and the Brotherhood of St Laurence found that out of all the capital cities, Hobart is the least affordable, with a rental affordability index (RAI) of 101 as of June 2018.
Tasmania’s capital is followed by Greater Sydney with an RAI of 113, Greater Adelaide with an RAI of 114, Greater Brisbane with an RAI of 123, Greater Melbourne with an RAI of 127, the Australian Capital Territory with an RAI of 128 and Greater Perth with an RAI of 144.
Currently, Brisbane stands behind Sydney with the most expensive apartments across capital cities. The median price for Sydney apartments sits at $833,152 while Brisbane apartments cost an average of $736,065.
Amid a changing property landscape, investors are advised to avoid getting swayed by the doom-and-gloom headlines that predict an enormous crash across the country, particularly in the major capital cities, as a result of the softening of the Sydney and Melbourne property markets.
In fact, according to Right Property Group’s Victor Kumar, it’s all 'business as usual'.
Investors need only to reassess their strategies and ensure that it fits the current state of the property market, as well as their goals, capabilities and limitations, both personal and financial.
“We need to remember that this is part of the cycle. As we come to a peak, it does flatten out, but for those that have seen this before, or those who have invested over more than one property cycle—this is business as usual.”
“All you need to do is simply adjust your strategy to suit the current market phase that we've got. Realign what you’re buying and where you’re buying. These contractions will eventually lead us back to normality or the averages, so to speak, and you would know that if you have gone through several market cycles. This is history repeating itself—just dressed differently,” the property expert highlighted.
Apart from taking on a long-term mindset, investors would also benefit from chasing yield as the 'era of property hotspots' comes to an end.
According to Dr Wilson, a steady stream of cash flow serves as a strong risk mitigation in the midst of market fluctuations.
Moreover, the margin between gross yields and deposits is now the widest it’s ever been, but despite the changes in the cost of money, gross yields for property remains stable.
In other words, yields have been consistently immune to the unpredictable movements of the property market, particularly in recent times, when some of the biggest markets continue on to the softening phase, the economist said.
“The highs and lows of capital growth have always been a hook to investors. The cycle always rises on the back of speculative investors wanting to get in on higher prices but if we take that roller coaster ride out of it, residential investment offers tremendous positives in the form of yields that are highly tax-advantaged,” the economist said.
Where appropriate, it is also advisable to seek the guidance of property professionals to be able to filter out all the information available and ultimately focus on your own wealth-creation journey, he said.
As Christmas approaches, investors can take advantage of the lull in the property market to bag incredible bargains.
According to Ms Helen Collier-Kogtevs of Real Wealth Australia: “I see it as a fabulous time to for those that have already got their finances sorted, their budget sorted, they’ve got a savings plan … their credit files are clean, so they’re paying their bills on time, because that’s now becoming more important.”
“Now’s a great time, especially over Christmas when there aren’t as many buyers around, it’s a great time obviously to be bagging a bargain.”
To spruce up a property for sale this Christmas, consider making the property's outdoor features more appealing by installing decorative plants and outdoor shade structures.
Over the past decade, Brisbane has seen a median price growth of almost 40 per cent despite flood events and the end of the mining boom.
According to Property Investment Professionals of Australia (PIPA) chairman Peter Koulizos, the affordability of the Queensland capital has come into sharp focus in the past year, with investors considering Brisbane as a prime investment location and home-seekers choosing to migrate over to the capital city.
Moving forward, the growth in Brisbane will be supported by jobs growth and interstate migration, which will ultimately strengthen the demand for dwelling across the city and all over Queensland.
“Investors and home buyers are keen to take advantage of the significant value gap as well as Queensland’s enviable lifestyle and strengthening economy,” Mr Koulizos said.
Based on The Smart Property Investment’s Best Suburbs data, among the top performing suburbs in Queensland in terms of annual median growth are:
|Median price||Annual median growth||Gross rental yield|
Apart from those, there are more than 60 suburbs across Queensland that delivered double digit capital growth over 12 months, according to the Real Estate Institute of Queensland’s Queensland Market Monitor report.
The area with the strongest growth was Blackwater, rising by 151 per cent.
Other top-performing suburbs includes Spring Mountain, Collinsville, Minyama, , Hollywell, Miles, Mount Coolum, Dundowran, Boonah, Idalia, Rasmussen, Yaroomba, Biloela, Burnett Heads, Tivoli, , , Sunshine Beach and Noosa Heads, among many others.
Moving forward, Prime Minister Scott Morrison’s announcement of $800 million infrastructure projects in Central Queensland is expected to attract a huge number of investors to the state.
After Rockhampton fell victim to major flooding and a coal price downturn, Propertyology’s Simon Pressley said it’s about time the area experiences good fortune.
Prior to the challenges that has proved to be harmful to Rockhampton’s property market, the area experienced 168 per cent over the five years ending 2007.
“In addition to the $800 million ring road, development of the Rookwood weir (water security), construction of a major training facility for the Singaporean defence force, a Fitzroy River levy bank to flood proof the city, CBD urban renewal initiatives, and a $140 million CQ university master plan are a significant collection of projects,” Mr Pressley said.
“Recent property data suggests that the (mild) price falls from previous years has stopped. Housing stock volumes and buyer activity are both steady. Vacancy rates have tightened to their lowest in five years. The new housing supply pipeline is thin.
“With a much-improved economic outlook, the next logical step for Rockhampton is price growth,” Mr Pressley said.