Compared to other major capital city markets, Brisbane has been tagged as “less dramatic” due to its consistency. Will the stability of the Queensland capital translate to better returns for property investors?
"There was some minor price softening in our markets, but not enough to give owners the jitters. In addition, when compared to some of the country’s larger markets, we were probably considered a stellar performer by some,” the report noted.
While the potential for growth may not be extraordinary, the series of infrastructure projects across the capital city are expected to increase employment prospects and housing demand, ultimately impacting the local economy.
“Of course, with the election over and APRA starting to relax borrowing guidelines, it could be brighter times in the months to year’s end.”
As major declining markets are expected to bottom out this coming September, Brisbane could be looking at up to 20 per cent growth over the next three years, according to BIS Oxford Economics managing director Robert Mellor.
“It could be even three months earlier. What’s the other possibility? The return of not only owner-occupiers but investors in the market could be greater and they could be… a little mini surge in prices,” he said.
“Now, if I was giving a three-year forecast, I’d still be very cautious about price forecast in Sydney over a three-year time, whereas Brisbane, over a three-year period, I could be looking at 20 per cent price growth.”
However, while the federal election result and strong population growth could spur growth in the Brisbane market, investors are still advised to be wary of risks in the Queensland capital, posed by factors such as oversupply and unemployment.
The Australian Residential Property Update 2019 report by Momentum Wealth found that, while both consistent, Adelaide recorded a higher level of confidence than Brisbane over the last five quarters, mainly due to Queensland’s unemployment rate of 6 per cent.
National dwelling values declined by 0.2 per cent over June, the smallest decline since March 2018, according to Corelogic’s home value index.
Meanwhile, Darwin and Canberra tied for the greatest value decline for the month at 0.9 per cent down to $387,382 and $585,193, respectively. This was followed byat 0.7 per cent down to $439,732, then Brisbane at 0.6 per cent down to $486,121 and Adelaide at 0.5 per cent down to $430,654.
According to the PRDnationwide Affordable and Liveable Property Guides 1st Half 2019, the proportion of affordable properties (priced at $500,000 or lower) over the last 12 months increased the most in Brisbane, from 10.6 per cent in the 1st Half 2018 Report up to 42.4 per cent in the 1st Half 2019 Report. This was followed by Melbourne from 1.9 per cent to 4 per cent and Sydney from 0 per cent up to 0.5 per cent.
On the other hand, premium markets with properties priced above $2 million declined over the last 12 months in Sydney, Melbourne and Brisbane.
On a national level, rents held steady over June, while rental rates outperformed dwelling values, according to CoreLogic.
Gross rental yields across capital cities are up at 3.9 per cent, while combined regional areas recorded an increase in gross rental yields at 5.1 per cent.
Over the last 12 months, gross rental yields were up in every capital city, with Darwin leading the way at 6 per cent.
Following this was Hobart at 5.2 per cent, Canberra at 4.8 per cent, Brisbane at 4.6 per cent, Adelaide at 4.5 per cent, Perth at 4.3 per cent, Melbourne at 3.7 per cent and Sydney at 3.5 per cent.
Meanwhile, the national rental vacancy rate declined over the month, falling 0.1 per cent to 2.2 per cent, according to data from SQM Research.
Darwin saw the biggest decline of 0.3 per cent down to 3.3 per cent. Following this was Brisbane, which declined by 0.2 per cent down to 2.4 per cent. Sydney, Perth, Adelaide and Hobart all declined by 0.1 per cent to 3.3 per cent, 3.1 per cent, 1.1 per cent and 0.5 per cent, respectively.
Melbourne and Canberra recorded no movement and held steady at 1.8 per cent and 1.2 per cent, respectively.
According to Louis Christopher, managing director of SQM Research, Brisbane and Perth stand out with the most potential for growth, particularly in the rental market.
“I think the rental market is decidedly turning in favour for landlords in these two cities… Both cities also recorded fairly strong increases in asking rents for the month. Indeed, Perth is now recording a 6 per cent rise in asking rents for houses over the past 12 months.”
“With no expected material increase in new dwellings, I believe the rental market will continue to tighten from here for the two cities.”
Like property values, new listing volumes were also down in Brisbane, as in all capital cities.
The largest declines were seen in Melbourne at 31.9 per cent, Sydney at 29.5 per cent, Perth at 19 per cent, Canberra at 13.5 per cent, Brisbane at 12.4 per cent, Adelaide at 6 per cent, Hobart at 4.1 per cent and then Darwin at 1.3 per cent.
Meanwhile, houses remained more popular than units, with the average time for houses on market decreasing in Sydney and Hobart. On the other hand, Brisbane, Adelaide, Perth, Darwin and Canberra recorded rises while Melbourne held steady.
Hobart was the capital city with the fastest time on market for houses at 35 days, followed by Melbourne at 43 days and Sydney at 45 days. Darwin, Perth and Brisbane had the slowest time on market at 90 days, 86 days and 73 days, respectively.
For units, Hobart was the fastest at 41 days, while Perth, Darwin and Brisbane were the slowest at 87 days for both Perth and Darwin and 76 days for Brisbane.
Vendor discounting was between 4 per cent and 8.8 per cent for houses across most capital cities and between 5.6 per cent and 7.5 per cent for units. Canberra as the low-end exception for both houses and units, Darwin as the high-end exception for houses and Perth as the high-end exception for units.
According to Herron Todd White’s Month in Review report for June 2019, the oversupply of high-rise units have been easing off, especially within investor supply. As such, this property type has witnessed a continued decline in value.
New house and land also saw a slowdown in the rate of sales during January to June.
In contrast, owner-occupied boutique units were seeing relative success in the face of development sales rates at historically low levels.
Rental properties have also seen a slight and gradual rise throughout the first half of the year, providing some relief for landlords.
Moving forward, the improving sentiment across property markets following the result of the federal election is expected to drive eventual growth into investments.
“In fact, the feeling is pent-up demand for investing in real estate will be released as we travel through to the end of the year. This may well result in improved values too, but let’s report on that when December rolls around,” the report noted.
The affordability of Brisbane properties will allow investors to enter the Queensland market and ultimately begin their wealth-creation journey in a major capital city.
Pure Property Investment’s Paul Glossop said that there is an abundance of opportunities in the Greater Brisbane area at the moment, even away from the central business district.
“In the middle to outer rings, there was a time between 2012 and 2015 when they did see a bit of a rally. It was a small amount of growth, somewhere between 10 and 20 per cent, depending on what you owned and where you owned it.
“Since around about 2015-16 to where we are now, we’re seeing that sort of wave through again,” he said.
Areas to the north of Brisbane, in particular, display high potential for growth as they feature tighter supply.
“There’s still areas there which are going to be some turnover of some larger blocks of land that are going to be cut up into smaller portions, but that Morton Bay region from Kippering, the peninsula down towards the Petrie University campus, further down towards probably Boondall, Nudgee, over towards Sandgate, they’re regions there which are already fully developed,” he said.
“They’re now going into zoning changes backfill, and I think the next five to 10 years there is looking good. Vacancy rates are still 2 to 2.5 per cent and you’re seeing about 5 per cent yield in a market where we’re probably seeing money get a little bit cheaper in the next six months; I don’t mind it.”
Meanwhile, he advised investors to avoid the Logan corridor through to the upper Gold Coast due to oversupply.
Mr Glossop explained: “You go out there and it’s a wash of developments, big new shopping centres, etc. which people get excited about, but unfortunately don’t create anything other than supply. They’re just not fulfilling any of that demand.”
“That market in the lower edge of Brisbane and the upper edge of the Gold Coast, I’m not that much of a fan of, probably more so for the next five to 10 years, just because I can see it can keep going.”
Looking at parts of the infill towards the Ipswich area, like larger double blocks that are closer to main infrastructure, shows lower supply and solid job data, but the Springfields Lake region towards Ripley shows unfavourable conditions for investors for at least the next 10 years.
Glenn “Goose” McGrath of Dashdot said that while investors can skip over the Moreton Bay region due to oversupply, some investment viability can be found in select pockets around Ipswich.
“The project pipeline is really strong in Ipswich; the local council’s got huge population growth targets, and they’ve been keen to meet those historically, so that’s very good to us, and that’s going to have a huge impact on the area,” he said.
“Plus, there’s a lot of both private and public infrastructure projects happening there, which is going to have a huge economic impact.”
Mr McGrath also encouraged investors to look into North Brisbane for an effective long-term play, as well as farther markets such as North Queensland’s Townsville.
“What we’re seeing there is probably going to have slower first-year growth, but the long-term view is quite strong. I think everyone agrees Brisbane has got a positive outlook in the short to medium term,” he said.
In order to find the strongest yields along with solid growth characteristics, the property expert recommended to find property priced between $200,000 and $325,000, while a well-performing property in a development would cost between $400,000 and $500,000.
Meanwhile, a joint report by CoreLogic and Archistar found that adding a granny flat could increase the property’s value by as much as 30 per cent and improve the rental income by 27 per cent.
Brisbane, in particular, has the highest proportion of properties that held potential for granny flat inclusion among all major capital cities, with 21.6 per cent of all properties, or 204,598 properties, having the required minimum of a spare 60 square metres.
Gailes, with a median value of $275,037 and over 50 per cent of all properties with a granny flat potential.has the largest number of properties that could include a granny flat at 2,784, or 42.8 per cent, while the most affordable suburb with granny flat potential was
Meanwhile,offers investors the highest yield for suburbs with subdivision potential at 6.2 per cent. The suburb has a median value of $289,193 and 747 properties able to be subdivided, or 44.1 per cent of all properties.
Other suburbs in the top 18 Brisbane suburbs for granny flat potential are Albany Creek, Morayfeld, Deception Bay, Kallangur, Alexandra Hills, , , Rochedale South, , Sunnybank Hills, Aspley, Chapel Hill, Inala, Bray Park, Strathpine and Petrie.