Property market update: Brisbane, January 2020

During the start of 2020, there was a record number of people attending open homes, most likely due to the low interest rates, the limited property stock, and the increasing market confidence in Brisbane’s property market.

One of the biggest drivers of growth this year is the strong market confidence in the city. In a survey conducted by Perth-based property investment consultancy Momentum Wealth, Perth and Brisbane were seen as cities with best buying prospect by respondents, with Brisbane recording the biggest home preference at 81 per cent.

According to the team leader and buyer’s agent of Momentum Wealth Emma Everett, the spike in confidence from previous surveys is most likely due to the changes in Australia’s property cycles.

Ms Everett said that the relative affordability and growth opportunities in both Brisbane and Perth are likely to be the primary drivers of continued interest in the cities’ property markets.

In the survey, Brisbane was also named as the most popular market for investors actively seeking opportunities.

With The First Home Buyers Deposit Scheme implemented this year, stronger competition is also expected in the property market. In Brisbane, properties now have a cap value of $475,000 for first home buyers.

For most investors, the Brisbane property market might have been slightly stagnant in the past few years. But some experts, including Eliza Owen, head of research at CoreLogic, believe that 2020 will be a more positive year for the Queensland capital city, mainly due to its more affordable price point compared to other capital cities.

Additionally, the unit market is anticipated to rebound as supply rates begin to moderate this year.

The jobs growth across Queensland in various fields including the scientific, technical and professional services is also seen to contribute to the positive expansion in the property market as it creates high incomes which in turn will underpin the demand for housing.

With a solid start to 2020, can the Brisbane property market maintain its momentum for the rest of the year?

Property values

According to the CoreLogic Hedonic Home Value Index, the first month of 2020 saw the national housing value index increase by 0.9 per cent.

Monthly data from CoreLogic showed that the average dwelling values in Brisbane rose again in January by a modest 0.5 per cent. On houses alone, the growth was 0.7 per cent. Meanwhile, units witnessed a negative growth of -0.6 per cent across January.

Melinda Jennison, the managing director of Streamline Property Buyers Brisbane, reminded that Brisbane is “not one property market and there are certainly local pockets where growth has been much greater than the overall city average.”

The latest Domain House Price Report reported a number of suburbs that outperformed the Brisbane average. Many suburbs reported strong annual growth above 7 per cent. A few suburbs even reported double-digit growth.

Supply and demand

Supply is currently restrained and there is strong demand for property in Brisbane. Listing volumes continue to be 6 per cent lower compared to the same period last year in the city, limiting the market supply.

The number of dwelling approvals, commencements, and completions, declined across Queensland, despite a continuous increase in the region’s population. The latest quarterly ABS data reported a 27 per cent slump in total dwelling commencements from the prior year.

Despite the steady performance of the Brisbane housing market, some experts are still discussing if housing units in the city were still in oversupply. Ms Owen noted that in January 2020, the value of units in the Queensland capital was still 11.5 per cent below their 2010 peak to be at similar levels to 2007.

However, Ms Owen said that the most recent data on property values and population growth may indicate that the trend is changing.

“With approvals data suggesting a decline in construction, and steady estimates of population growth, Queensland dwellings may fall into undersupply in the year ahead. Rental yields are also well above the capital city average at 5.3 per cent gross, meaning there could also soon be a turning point in investor demand,” she said.

However, Ms Owen cautioned that supply could affect growth once more if projects that were stalled due to declining unit values in the past few years were restarted.

In terms of demand, interest rates are expected to see further reductions throughout the year which are likely to continue to support housing demand in Brisbane.

Rental market

CoreLogic reported that Brisbane experienced rental price growth of 1.8 per cent over the last 12 months in January. Data from SQM Research supports these figures, reporting a 3.7 per cent hike in asking rents over the last 12 months across Brisbane as a whole.

In the suburbs, OpenAgent.com.au reported that Murarrie, Cannon Hill and Morningside saw the highest rental yields for units at 5.90 per cent, 5.68 per cent and 5.28 per cent, respectively.

For houses, the highest rental yields were found in Murarrie, Morningside and Cannon Hill, with 4.38 per cent, 4.05 per cent and 4.01 per cent, respectively.

The houses of Cannon Hill, units of Balmoral and units of Bulimba reported the biggest jump in weekly rent prices at +8.16 per cent, +5.14 per cent and +4.17 per cent, respectively over the past 12 months.

Low vacancy rates were reported in Murarrie (1.90 per cent), Cannon Hill (2.50 per cent) and Morningside (2.50 per cent).

Meanwhile, according to Property Council Australian Office Market Report, office vacancy in Brisbane CBD rose to 12.7 per cent despite the high level of demand.

Strategy

The price of inner city units, which has weighed on Brisbane’s property market last year by 5 per cent compared to the prior period, is seen to make a comeback.

Universal Buyers Agents’ Darren Piper said investors are now buying discounted apartments as a surge in interstate migration and a steadying supply in the market are seen to reverse the trend of decline.

The current data seems to confirm this analysis. BIS Oxford Economics data shows that apartment supply is anticipated to be at 5,700 completions compared to last year’s 10,700 completions.

Meanwhile, ABS data showed 11 000 people have moved to Brisbane. Both information are seen to contribute to a market recovery.

With these factors, Mr Piper advises that now is the time to make purchases in Brisbane, due to a “significant shift in growth” anticipated by the end of March 2020.

“As the market steadies itself, more interest increases from investors and demand increases from new occupants; it is creating the perfect burst of energy for the market,” he said.

He added that investors should take advantage of the low interest and the steadying supply in the market following the 2017 unit peak this year.

Furthermore, he stated that Brisbane is still one of the most affordable cities in the country, with the current price-to-income ratio 5.3 times at a median house price of $524, 000.

For those looking to buy outside Brisbane, Ms Owen said the Gold Coast and Sunshine Coast in South East Queensland are presenting good investment opportunities as “lifestyle markets”.

“We’re seeing a redevelopment of the Sunshine Coast – they want to put in a new SunCentral CBD, which could attract commercial tenants and promote jobs in the area as well," Ms Owen said.

Hotspots

Gross yields continue to be attractive in Brisbane, averaging at 4.5 per cent. Herron Todd White’s latest Month Review advised investors to buy closer to Brisbane CBD if they are looking for sustained capital growth opportunities this year.

Based on the recent data, detached housing will still likely attract better growth premiums compared to attached housing.

The latest Herron Todd White report said that investors can explore further out from Brisbane CBD, but the investment location must be near public transportation options, major services and employment centres.

Latest insights from OpenAgent.com.au indicated that both housing and unit markets in inner-east Brisbane (particularly Murarrie, Morningside and Cannon Hill) exhibit strong investment opportunities this 2020.

OpenAgent.com.au data analyst Carson Teh indicated that the population has grown in all these inner-east Brisbane suburbs compared to the most recent census. He said that the existing population trends will likely support the demand in the future.