Property market update: Brisbane, February 2020

Team leader of Momentum Wealth’s buyer’s agents Emma Everett said: “All of the capital cities which recorded a home preference in this year’s survey were either in the growth phases of their property cycle, or entering recovery with growth anticipated in the short to medium term, which likely contributed to the positive outlook in these respective states.”

Investor interest remained highest in Perth and Brisbane, with 37 per cent and 26 per cent of over 400 respondents respectively choosing the capital cities as the best locations to invest in the next 12 months.

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 their property markets.

“Brisbane’s property market has been recording steady growth for some time… Investors are also recognising the value for money these markets offer, especially in comparison to places like Sydney where prices remain significantly overvalued and affordability constraints are pushing buyers out of the capital city market in favour of regional or state alternatives.”

Further, Brisbane emerged as the most popular market for investors actively seeking opportunities.

Domain’s Property Price Forecasts for February 2020 indicated that the Queensland capital city can expect to see some sustained value gains over the next two years – with home values jumping by 8 per cent and unit values increasing by 6 per cent in 2020 alone.

In 2021, a further 7 to 9 per cent and 4 to 6 per cent growth in home and unit values are expected, respectively.

Property values

Brisbane continues to display its stability and strength as a property market as it records a new median house price of $503,265 in February.

According to the CoreLogic Hedonic Home Value Index, property values across all areas of Greater Brisbane saw an increase of 0.6 per cent, in line with the national trend for positive property price growth since June last year.

Further, the Valuer-General’s 2020 Property Market Movement Report showed that the residential median land value also increased in Brisbane from $455,000 to $460,000 over the last 12 months. Increases were particularly notable in several inner northern suburbs including Kalinga and Wooloowin.

Brisbane’s upper quartile values are 2.2 per cent higher over the last 12 months compared with the lower quartile, up by 1.3 per cent.

According to Streamline Property Buyers’ managing director Melinda Jennison, the trend shows stronger performance across premium markets, which may be attributed to the dominance of owner-occupiers over investors during the last 12 months.

However, despite the growth in the Queensland capital, experts remind investors to be careful about jumping into its property market and ultimately do due diligence before making a financial commitment.

CoreLogic’s head of research Eliza Owen said that the narrative of oversupply and underperformance in Brisbane, particularly across the unit market, has dominated conversations around south-east Queensland property for almost five years.

Last month, Brisbane unit values remain 11.5 per cent below their 2010 peak to be at similar levels to 2007.

This trend, however, is “very much a unit-centric story”, according to Ms Owen. Houses across Brisbane continue to post strong capital growth in recent years, “except for a brief, cyclical downturn over part of 2019”.

“In the previous trough-to-trough cycle that lasted between 2012 and 2019, annual house value growth outperformed unit growth by an average of 290 basis points. This is larger than usual discrepancies and is above the series average difference of 130 basis points,” Ms Owen highlighted.

“In other words, the past cycle saw units significantly ‘underperform’ relative to housing stock in Brisbane. The rolling annual growth figure shows that unit values have largely declined since July 2016.” 

Rental market

During February, gross rental yields in Brisbane compressed slightly from 4.6 per cent to 4.5 per cent, according to data form CoreLogic.

Ms Jennison said that this current trend may be attributed to house values rising slightly more rapidly than rental rates, but it may also be due to seasonal factors.

Further, mortgage rates are trending lower with some three-year fixed rate loans now being offered to investors for as low as 3.14 per cent. Depending on an investor’s deposit amount and mortgage structure, there are still a lot of neutrally geared or positively geared property investment opportunities in Brisbane, she said.

Supply and demand

While the underperformance of the unit market remains notable, the latest data suggests that construction and population growth are driving a change in the story.

Ms Owen noted that both CoreLogic and ABS data showed that there’s been a convergence between the number of dwellings required and supplied since the beginning of 2018.

With approvals data suggesting a decline in construction and steady estimates of population growth, Queensland dwellings may fall into undersupply in the year ahead, she said.

As rental yields are also well above the capital city average, there could also soon be a turning point in investor demand.

“However, one unknown in this analysis would be projects that have stalled due to falling unit values in the past few years. If these recommence, added supply could once again weigh down growth,” according to Ms Owen.

“The turnaround in the supply-demand dynamic is already being seen in unit values. Since bottoming out in June 2019, CoreLogic indices show the Brisbane unit market has recovered 2.2 per cent. This fits in with a more broad-based recovery, as reductions in the cash rate have reduced the cost of servicing debt, and increased incentive to purchase property.”

CoreLogic’s Property Market Indicator summary for the week ending 16 February 2020 showed that 1,555 homes were taken to auction across all capital cities last week – returning a preliminary auction clearance rate of 78.6 per cent.

It’s a jump on results from a week prior, where 1,167 auctions were held, which returned a final clearance rate of just 67.7 per cent.

Melbourne and Sydney saw 717 and 578 auctions for the week, respectively – the highest across all of Australia’s capital cities. The capital cities recorded preliminary auction clearance rate of 79.2 per cent and 80.3 per cent.

Across the smaller auction markets, Brisbane had the largest auction volume, reporting 104 homes as having gone under the hammer and reaching a preliminary clearance rate of 61.5 per cent.

Adelaide, Canberra and Perth were up next, with 82, 48 and 19 auctions and clearance rates of 75 per cent, 90 per cent from 48 total auctions and 80 per cent, respectively.

Growth outlook

Several factors are being monitored in relation to the future of the property market of Brisbane, particularly the movements of property values, according to Ms Jennison.

Broadly speaking, the primary factors supporting the steady price growth in Brisbane remain in place. These include the low cost of debt and improved borrowing capacity.

Additionally, Brisbane remains affordable with a median house price of $369,669 cheaper than in Sydney and $185,823 cheaper than in Melbourne so affordability pressures are less likely in our city.

Population growth is still 2.3 per cent greater than the decade average, while economic growth is up 21.2 per cent above the “normal” decade average level of output. Further, job growth is trending higher and unemployment is reducing with the lowest trend jobless rate in 10 months, according to the CommSec State of the States economic performance report.

However, there certainly may be supply chain issues for the construction industry, slowing down the delivery of an already lacklustre level of new housing supply due to falling construction commencements over the last 12 months.

Foreign investment has also plunged by 58 per cent year-on-year in the 2017/18 fiscal year to the lowest level in a decade.

There may also be some impact to properties associated with tourism and student accommodation in light of the coronavirus epidemic, although it’s too early to tell for sure, according to Ms Jennison.

“We can’t estimate the impact that it may have on consumer confidence or economic growth, but looking back on the SARS outbreak in 2003, there was a sharp slowing of output growth in China for a few months, before a sharp bounce back as the outbreak was controlled and economic stimulus measures were introduced,” she said.

Overall, while the country is entering a period of uncertainty, Brisbane is still poised to report robust growth based on the fundamentals outlined above.

“With continued signs of strength across many locations in Brisbane is it a great time to secure your next home or investment property in Brisbane,” Ms Jennison highlighted.

Ultimately, 2020 could be a much better year for the Queensland capital, mainly because of its affordable price points, according to Ms Owen.

Outside Brisbane, South East Queensland, particularly Gold Coast and Sunshine Coast, are presenting good investment opportunities as “lifestyle markets” as redevelopment attracts commercial tenants and promotes jobs.

For those looking to buy properties in the $500,000 to $600,000 price point, she recommended looking into the Sunshine Coast or Gold Coast, which could be more expensive than Brisbane but definitely more attractive, both aesthetically and commercially.

“They’re such beautiful parts of the country. The thing that has been missing is commercial focus, but that’s starting to change as there’s sort of a wider gentrification and modernisation of these environments,” she said.

Moving forward, investors are advised to be strategic in their property selection.

Right Property Group’s Victor Kumar said: “In more affordable places like Brisbane, there is the potential for growth over the short and medium term. However, you must also be strategic in your property selection.”

“Like I always say, successful property investment can happen in any market cycle and at any time of the year. The success stories are the people who recognise this – and invest wherever necessary when the timing is also right for them.”

Hotspots

Latest insights from OpenAgent.com.au found that suburbs near the Brisbane city centre boast rental yields over 5.6 per cent.

The Logan suburbs with the highest rental yields for houses are Logan Central (6.49 per cent), Kingston (6.19 per cent) and Woodridge (6.16 per cent).

Kingston and Woodridge are under a half-hour drive to Brisbane, while Eagleby and Beenleigh are just over a half-hour drive to the Gold Coast.

According to OpenAgent’s data analyst Carson Teh, the Logan region is expected to grow significantly this 2020, driven by the increase in population as well as several enhancement projects.

“The Queensland government expects the population in Logan to grow from 326,615 people in 2018 to 432,000 by 2031,” said Mr Teh.

“The Logan Enhancement Project has been backed by the Queensland government, making Logan a more attractive place for businesses to set up headquarters, and leading to a strengthened economy and increased population.”

Due to its yield potential, Damian Piotto, real estate agent from Ray White in Marsden, believes that Logan is ideal for investors, particularly those from interstate.

“Rental returns are always going to be strong with the area located right in the middle of Brisbane and the Gold Coast, great public and private schooling, and the blue-collar industry within a 10-minute drive of these areas,” Mr Piotto highlighted.

“With the local and state government continuing to improve amenities, new water parks, Logan Metro Sports Centre and the Logan Entertainment Centre, it’s easy to see why families get a lot of bang for their buck so to speak.”

Some of the high-yield suburbs across Brisbane include:

Inner-east Brisbane suburbs are also prime for investment in 2020, according to OpenAgent.com.au.

Both housing and unit markets in inner-east Brisbane present strong investment opportunities this near year, according to new insights from OpenAgent.com.au.

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.

Class Real Estate’s agent John Kubatov explained: “The postcode 4170 has lots of infrastructure like train lines, good main roads, good bus services, close to shopping centres.”

Over the past 12 months, the houses of Cannon Hill, units of Balmoral and units of Bulimba saw the largest increases in weekly rent prices at +8.16 per cent, +5.14 per cent and +4.17 per cent, respectively.

Meanwhile, low vacancy rates can be found in Murarrie (1.90 per cent), Cannon Hill (2.50 per cent) and Morningside (2.50 per cent).

For those looking specifically for affordable properties near the CBD, OpenAgent.com.au found that the southern Brisbane suburbs with some of the fastest public transport commutes to the CBD are Macgregor (25 minutes), Tarragindi (27 minutes) and Holland Park (30 minutes).

Meanwhile, short drives into the city can be found in Tarragindi (10 to 22 minutes) and Holland Park West (10 to 24 minutes). Times can vary dramatically depending on peak hours.

Property prices across these areas range from $367,500 to $791,250.

According to Mr Teh, a short commute into the CBD is a highly desirable feature for buyers.

“Those looking to sell property in these areas should emphasise the fast commute, a feature that will undoubtedly attract working professionals, young families and investors,” he said.

Comparing the most recent census to the one before, the population has grown in all the southern Brisbane suburbs within a 35-minute commute, suggesting there is an increasing demand for affordable property that still offers easy access to the city.

Beenleigh-based real estate agent Sarah Schultz said that people who needed access to the CBD moved to areas like Holland Park after inner-city suburbs started becoming more expensive.

“It’s close to the city, has had good growth over the last 10 years and has become a thriving, sought-out suburb,” she said.

“After everything in the city started becoming more unaffordable, places like Holland Park started going up in price.”

Out of the seven suburbs, the lowest median house prices can be found in Upper Mount Gravatt ($600,000), Salisbury ($605,000) and Mount Gravatt ($642,500).

For more affordable options, investors may choose to invest in apartments.

Median unit prices go lowest in Upper Mount Gravatt ($367,500), Salisbury ($398,500), Holland Park West ($400,000) and Macgregor ($400,000).

Bridgeman Downs, an under-the-radar suburb 13 kilometres north of the CBD, has also been tipped to be the next hotspot for property investors, an analysis by ASPIRE property advisory network reveals.

The suburb has evolved from home buyer hub of rural residential to a solid investor option.

Founding and managing director of ASPIRE Richard Crabb believes it follows all the fundamentals, which should see prices rise.

“Increasing rents, falling vacancies, rising population and affordable property options are the gold standard when it comes to selecting promising investment locations, and Bridgeman Downs ticks all those boxes."

According to SQM Research, Bridgeman Downs rental vacancy rate has progressively dropped from its peak figure of 4.5 per cent in November 2016 to 3.2 per cent in November 2019.

In addition, the research showed that asking rents are up by 4.0 per cent for units.

“A combination of rising rents and tightening vacancies is a key indicator of investment income growth potential,” Mr Crabb said.

The population of Bridgeman Downs has also grown around 13.4 per cent over the past five years and is set to continue, driven by the suburb’s family lifestyle, combined with excellent access to services, facilities, schooling and transport routes.

“In addition, much of the suburb’s developable land has been exhausted, so supply is tightening,” he said.

Price rises had already begun in the suburb, with Domain data revealing Bridgeman Downs was among Brisbane’s top 10 suburbs for median house price growth reflecting 7.2 per cent to December 2019.

Investors may also find opportunities in the new Brisbane luxury apartment project and master-planned community, which is currently on stage two and is nearing completion.

Located just six kilometres from the CBD, Brookfield Residential Properties’ luxury project Gallery House – a part of the Northshore Hamilton community and urban renewal project – has started welcoming residents in its second stage of development.

Planned to take future growth into account, Gallery House contains premium resident-only facilities, such as a rooftop sanctuary with an infinity pool, lounge and barbecue areas, among its other offerings.

According to Brookfield Residential Properties’ managing director, Lee Butterworth, the master plan was “meticulously designed to offer some of the best living opportunities in Queensland”.

Stage two of the development is already 90 per cent sold, with sale prices ranging from $575,000 to $2.795 million across the 315 apartments.

“The three and four-bedroom apartments and penthouses in Gallery House are bigger than many homes, so buyers don’t feel like they are compromising on space. Instead, they are upgrading to a brand-new apartment with all the modern luxuries and lifestyle amenities at their doorstep,” he said.

Gallery House forms part of a greater $5 billion Northshore Hamilton precinct. The precinct is one of the largest urban renewal projects in Queensland – at 304 hectares.

Brookfield Residential Properties reported that it had already delivered six apartment buildings as part of its Portside Wharf retail and residential precinct.

The Hamilton Recreation Reserve has also recently reopened after a $10 million face lift, “which boasts green space for cricket and football, an amphitheatre, picnic areas, a dog park and water play facilities” Mr Butterworth said.