Brisbane, along with Melbourne, has recently replaced Sydney as the “bell of the property ball”. Find out how investors can maximise wealth creation opportunities in the Queensland capital.
In the latest Finder RBA Cash Rate Survey, Brisbane and Melbourne overthrew Sydney as the most attractive capital city to invest property dollars in when 27 per cent of leading experts and economists chose them as their primary investment locations should they have $500,000 to spare.
For Brisbane-based buyer’s agents Melinda and Scott Jennison, it’s truly the Queensland capital’s time to shine as a prime location for property investment, particularly in the next five years.
While lending remains tight, the conclusion of the royal commission and the federal election, the consecutive rate cuts and the 38 per cent reduction in building commencements over the past 12 months have allowed Brisbane to experience considerable growth in recent times.
“We've certainly had a lot of headwinds, as have all property markets, but now, the royal commission is behind us and the federal election is also behind us… In the second half of the year, if we have one or two more rate cuts, that will provide further stimulus into the market,” Ms Jennison highlighted.
“We also had an oversupply in the unit and apartment market recently but that seems to have been absorbed by the accelerating population growth into the region… Then, we’ve got vacancy rates now declining in some inner city locations.
“Generally, if we’re looking at the fundamental drivers of property prices, we’ve already got supply that’s going to be drying up and accelerating population growth. If we can see some employment growth and wages growth, I think that we’ve got the perfect recipe for upward pressure on prices in Brisbane.”
Truly, the market has responded to recent developments in the political and economic landscape, according to CoreLogic’s research director Tim Lawless.
While the “recovery trend” is still early and home prices have yet to return to their peak, the property expert believes that the growth trends are gathering some pace, particularly in the largest capital cities, including Brisbane, Melbourne and Sydney, spurred by an improvement in market confidence and in the supply of credit.
“It’s likely that buyer demand and confidence is responding to the positive effect of a stable federal government, as well as lower interest rates, tax cuts and a subtle easing in credit policy,” he said.
“At CoreLogic, our expectation has been that this recovery would be a slow and steady one; however, with housing credit restrictions easing and mortgage rates likely to reduce further, this rebound could potentially turn into a ‘V-shaped’ recovery.”
For the first time in nearly two years, Australian dwelling values are on their way up, based on CoreLogic’s home value index over the month of August, which showed an increase of 0.8 per cent nationwide.
It’s the first increase seen in nationwide property values since October 2017, and also the largest rise in value seen in a month since April of the same year.
Commenting on the upward movement, Mr Lawless said that “the significant lift in values over the month aligns with a consistent increase in auction clearance rates and a deeper pool of buyers at a time when the volume of stock advertised for sale remains low”.
Housing value increases were reported in Sydney (1.6 per cent), Melbourne (1.4 per cent), Canberra (0.8 per cent), Hobart (0.5 per cent) and Brisbane (0.2 per cent), while losses were reported in Adelaide (-0.2 per cent), (-0.5 per cent) and Darwin (-1.2 per cent) over the month.
August marked the third successive month of capital gain in Sydney, Melbourne and Hobart and the second successive monthly increase in Brisbane, according to Mr Lawless.
Despite the increase, Brisbane remains one of the most affordable capital city property markets in Australia, with only 8.7 per cent of houses and 3.8 per cent of units reaching $1 million.
In contrast, Sydney has 30.2 per cent of houses and 16.4 per cent of units reaching $1 million; Melbourne has 23.1 per cent of houses and 6.5 of units; Perth has 10 per cent of houses and 4.1 per cent of units; and Canberra has 11.5 per cent of houses and 2 per cent of units.
Over the next 12 months, home owners expect dwelling prices to increase, with higher proportions of owner-occupiers expecting market growth in Brisbane, Sydney and Melbourne, according to a survey done by the ME Bank.
The report found that investors in Sydney were the most optimistic about property values, with 54 per cent expecting an increase, followed by investors in Brisbane, with 50 per cent expecting increases, and Melbourne, with 44 per cent.
Sales data analysis by CoreLogic revealed that property owners are holding on to their homes for longer, with the past 12 months indicating that houses are currently held for 11.3 years on average, while units are held for 9.6 years on average.
Across the capital cities, Melbourne houses recorded the longest period of ownership, with buyers holding on to their homes for 12.5 years on average. This was followed by Sydney at 12.4 years, Brisbane at 11.3 years, Perth at 11 years, and Hobart and Canberra, both at 10.9 years.
Adelaide and Darwin houses saw the shortest period of ownership, with buyers holding on to their homes for 10.1 years and 9.2 years, respectively.
Meanwhile, in terms of units, Perth took the top spot with buyers hanging on them for 10.8 years on average. This was followed by Brisbane at 9.8 years, then Sydney, Adelaide and Hobart at 9.6 years, Darwin at 9.5 years, Melbourne at 9.3 years, and Canberra at 8.7 years.
“The data suggests that homeowners are much more reluctant to sell their property than they were a decade ago, which is also highlighted by the ongoing decline in sales transactions,” research analyst Cameron Kusher said.
“Other factors at play include the rising cost of selling and purchasing property combined with affordability constraints across some of Australia’s more expensive capital cities [contributing] to owners holding on to their properties longer.
“It’s expected that this trend will continue over the coming years, given such concerns aren’t likely to see much improvement in the near future.”
Still, there’s been less apparent lowering of new listing rates in the Queensland capital’s number, with new listings only down 16.6 per cent, according to data contained in CoreLogic’s Property Market Indicator Summary.
In contrast, Sydney suffered from volume losses at 28.3 per cent, Perth at 14.5 per cent and Melbourne at 25 per cent drop in new listings over the 12 months.
Across all capital cities, the number of new listings has dropped by 21.2 per cent in comparison to figures from 12 months ago.
For those looking to sell their properties in the Queensland, CoreLogic found that the average Brisbane house time on market is 81 days, with the average vendor discount for houses sitting at 6.7 per cent.
It’s a similar statistic for the city’s units, which spend a median 86 days on market for the same average vendor discount.
The Infrastructure Australia’s 2019 Australian Infrastructure Audit recognised the critical infrastructure needs of the country’s growing cities, especially the “big four” of Sydney, Melbourne, Brisbane and Perth.
According to the Property Council of Australia’s CEO Ken Morrison, while the biggest cities have continued to grow rapidly, their infrastructure base has failed to keep up.
“[It’s a] comprehensive national infrastructure plan that we sorely need,” he said.
Infrastructure Australia’s audit called for a “new normal” of elevated infrastructure as the transformation in the country’s largest cities is expected to last for decades.
For one, Australia’s population is forecast to grow by 24 per cent to over 31 million by 2034. More than three-quarters of this will be focused on the big four cities.
The Property Council of Australia fears that if the government does not commit to investing in these capital cities, the quality of life and economic productivity and competitiveness of Australia as a nation will suffer.
According to Mr Morrison: “Australia’s big cities are not experiencing a one-off growth spurt. They’re being shaped by economic trends that have turned them into increasingly powerful people magnets.”
“From the inner city to the urban fringe, we need the infrastructure to power the economy and support high liveability cities. If our big cities fail, the country fails.
“Infrastructure investment is vital, and it needs to be accompanied by good planning and strong governance to provide the right outcomes.”
In the 2014 City Plan for Brisbane, the local government allowed the subdivision of smaller blocks, such as those in the 600-square metre range, according to Ms Jennison.
With future subdivision potential, investors can ultimately maximise the earning potential of their properties over the long term.
“There [are] certain requirements that must be fulfilled in order to qualify a property for that type of subdivision, but a lot of people don’t know about that tweak in the city plan… We have already picked up a couple of those types of opportunities for clients just recently,” the buyer’s agent said.
For this opportunity, Mr and Ms Jennison are looking into fringe suburbs, or suburbs that are “sitting right at the edge” of blue-chip locations.
According to Ms Jennison, these locations are still achieving yields of around 4.5 to 4.7 per cent — a strong performance considering that they are only 13 kilometres to 14 kilometres from the central business district.
“We are loving this strategy for clients who are wanting to lock in the future development potential. For those types of opportunities, we’re looking anywhere between $600,000 and $750,000 as an entry point, depending on the location,” she said.
When looking into properties with subdivision potential, Mr Jennison recommended flat sites.
He explained: “Make sure the stormwater can get away from the site, so that leaves us, generally, with flat sites. You can retain things.”
Mr Jennison also advised focusing on property investment fundamentals, such as the proximity to infrastructure, services and amenities, as well as “practical things” such as the implications of the existing sewer system and electrical system, council plans and overlays to any future development.
Finally, get in touch with trade professionals once the development has been decided.
“Contacts in the industry are important. Carpenters, plumbers, electricians, all those tradies, they can really help when you move forward, especially to pricing things,” the buyer’s agent highlighted.
When advising clients, Mr and Ms Jennison often recommend “train line locations”, blue-chip suburbs and fringe suburbs.
“We love train line locations because Brisbane is very widespread. But we don’t like all train line locations, of course. Then, there’s blue-chip suburbs and fringe suburbs, just on the outer areas of those blue-chip locations. Fringe suburbs are good provided that they’re on a train line.”
The area surrounding the University ofCoast also offers opportunities for investors looking to enter the market through a $500,000 price point or below, with most properties sold through private treaty instead of through auction.
According to Ms Jennison: “There’s a lot still happening in that area as construction is well underway. A lot of the land has been rezoned. We’re certainly still finding great opportunities in that region for investors that are in a price point under $500,000.”
“If we were to categorise investors based on price point alone, in Brisbane, that would definitely be our preferred location right now… We’re achieving yields upwards of 5 per cent in areas where capital growth for the last five years has been in excess of 5.5 or 6 per cent per annum.
“We’re not going Logan or Ipswich in those directions for the simple reason that it’s all about supply and demand and the availability of future supply of land. Moreton Bay region is a lot more limited in supply than the west, toward Ipswich, or the south, toward the Gold Coast.”
BIS Oxford Economics predicts that Brisbane could be looking at up to 20 per cent growth over the next three years as a result of high levels of interstate migration, steady population growth and major infrastructure projects, including the new Queen’s Wharf and the construction of Brisbane’s second airport runway.