Property market update: Brisbane, March 2020

Over the next two years, the capital city is expected to record some of the most significant house price rises in Australia over the next two years – up to 8 per cent growth in property values over the next 12 months, followed by an additional 7 to 9 per cent boost before the end of 2021.

Rising confidence, low interest rates, interstate migration and improving jobs growth are among the reasons cited for the price growth. Further, Brisbane’s affordability in comparison to other property markets allows for long-term demand and growth.

“I’d be making a beeline for the closest open home right now”, Mr Worrad said.

“The city is ideally located between the magnificent beaches of the Gold Coast and the Sunshine Coast. It has come of age culturally too with world-class bars, eateries and cafés, which are the equal of those found in other capital cities.”

Property values

Amid the ongoing COVID-19 crisis, low interest rates and mortgage repayment relief measures could cushion residential property prices from a looming “plunge” in housing market activity, according to CoreLogic.

CoreLogic’s latest Hedonic Home Value Index reported a 0.7 per cent rise in national home values in March, driven by a 0.7 per cent increase in combined capital city values and a 0.6 per cent increase in combined regional values.

Darwin recorded the sharpest monthly increase in dwelling values (2 per cent), followed by Sydney (1.1 per cent), Brisbane and Canberra (0.6 per cent), Perth (0.5 per cent), Melbourne (0.4 per cent) and Adelaide (0.3 per cent).

Hobart was the only capital city to record negative price growth in March, with values down 0.2 per cent.

Despite the latest home values continuing the trend of positive growth, CoreLogic head of research Tim Lawless believes that the housing market will ultimately feel the impact of the health crisis in the months to come.

For one, residential property sales could fall dramatically moving forward as a consequence of tanking consumer confidence, a rising jobless rate and more cautious lending practices.

Further, Mr Lawless said: “Restrictions on open homes and on-site auctions will compound the slowdown in buyer activity, as would any future policy announcements relating to peripheral services such as building and pest inspections, conveyancing and furniture removals.”

Market indicators have already begun pointing to a slowdown in sales activity, with auction clearance rates falling below 60 per cent.

The reversal in sentiment has prompted some analysts to forecast price declines of up to 15 per cent against an unemployment rate of 10 per cent (currently 5.1 per cent).

However, while much will depend on the length of the current crisis, conditions underpinning the mortgage market, such as low interest rates and the repayment relief arrangements recently announced by lenders, would partly shield housing values from the looming “plunge” in sales activity.

“Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record-low interest rates, housing values are likely to be more insulated than sales activity,” Mr Lawless said.

“The extent of any fall in housing values is impossible to fathom without first understanding the length of time this health and economic crisis persists. Arguably, the longer it takes to contain the virus and bring economic operations back to normal, the higher the downside risk to housing values.”

In the meantime, current restrictions on property transaction activity would limit the reliability of statistical analysis of market trends.

Supply and demand

During March, the better part of the Australian property market has managed to avoid the impact of the coronavirus, with high volumes of sales and strong clearance rates, according to the latest data from CoreLogic.

Preliminary auction clearance rates were 70.6 per cent for the week concluding 15 March, as 2,220 homes were taken to auction for the combined capital cities.

As the effects of the health crisis become more widespread, pushing a rise in uncertainty and slip in confidence, the risk of reduction in housing activity could weigh on auction markets over the coming weeks.

However, based on the early auction results during the said week, the housing market has proven to be relatively resilient so far.

Brisbane held 102 auctions, with a preliminary clearance rate of 51.7 per cent, while Adelaide had 99 auctions with 68.4 being sold.

Meanwhile, in Melbourne, a preliminary auction clearance rate of 70.1 per cent was recorded across 1,173 auctions this week. Sydney saw 749 auctions, returning a preliminary clearance rate of 74.6 per cent.

In the country’s west, Perth had 28 auctions with 57.1 per cent being sold, while the nation’s capital had a preliminary clearance rate of 69.4 per cent.

Finally, Tasmania’s lower volumes have once again led to a high clearance rate of 83.3 per cent.

The lack of construction in Brisbane is tipped to be the driving force behind sustained gains for property investors, according to industry experts.

Streamline Property Buyers’ Melinda and Scott Jennison said that record numbers of enthusiastic investors making “emotional purchases” based on low stocks and low vacancy rates are making it difficult for investors looking to snag a bargain.

“There’s been a big drive from owner-occupiers and we are seeing a lot of competition from those emotional buyers, with the buyers’ debt being phenomenal. We saw a slight uptick in sales volumes, but there are certainly still a lot of supply issues from the sales perspective,” Ms Jennison said.

This competition was one of the reasons why the property market will remain strong, Ms Jennison highlighted.

“We’ve been to some auctions where recently there were 29 registered bidders and 40 to 50 people at an open home,” Mr Jennison stated.

The couple expects the trend to continue in the medium term while construction, which is currently down 24 per cent on the decade average, catches up with investors.

Ultimately, investors will do well investing in Brisbane as a number of large-scale investments drive the local economy.

According to Mr Jennison: “There’s a lot of things happening and also planned. Just a list of a few things that I’ve brought down here is the Queen’s Wharf project, a $3.6 billion project. It’s currently under construction, opening in 2022, about 2,000 jobs during construction, about 8,000 once it’s operational.”

“Cross River Rail project, $5.4 billion for that project as well. Underground stations connecting Woolloongabba to the CBD.”

Further, strong population growth will assist the Brisbane property market as it seeks to thrive amid uncertain times.

Queensland has continued to show strong population growth mainly from interstate migration as housing affordability issues hit Sydney, Melbourne, Newcastle and Wollongong, Propertyology’s Simon Pressley said.

Brisbane has seen a steady growth of 1.9 per cent, reflecting steady migration numbers.

Expert insights

Moving forward, while the great Australian dream of home ownership lives on with Australia’s youth, affordability concerns hinder them from buying their first property, according to PRDnationwide.

In their recent study amongst tertiary-educated Australians, 77 per cent of Millennials rate buying a home as important or very important. However, the survey also revealed that younger Aussies are putting off purchasing a property for the medium term.

“Although home ownership was identified as ‘extremely’ or ‘very important’ to tertiary students, it was revealed to be a future aspiration by many surveyed (five-plus years into the future). Participants also indicated that while home ownership is currently desirable, their preferences could change over time,” the report found.

Nearly 59 per cent believe the cost of acquiring a property is a major barrier, while many tertiary-educated Australians do not have the knowledge to acquire a property.

In Brisbane, despite a strong supply of apartments, Millennials’ ideal property is a freestanding house, the report highlighted.

The ideal property in the Brisbane market according to Millennials is a “standalone house with three bedrooms, two bathrooms, one lounge room and enough room for two cars. It was also found they would like to live within a 6 to 10-kilometre radius of Brisbane’s CBD and be close to transport modalities and public amenities.”

The participants favour the price range of $400,000 to $600,000 for a home.

Investors looking for affordable housing are encouraged to take advantage of Brisbane’s east coast neighbours, according to SPACE Property Ashgrove principal Michael Shean.

Low volume levels and high buyer demand are creating the perfect storm for sellers in these areas.

“This year is expected to be bigger than ever, with the strongest demand coming from young professionals and families,” he said.

Mr Shean also believes the Brisbane market was the prime beneficiary of a slowdown in the Sydney and Melbourne markets, with investors looking elsewhere for growth.

In fact, a growing number of investors are attracted to Brisbane due to an improvement in its economy and job growth as a result of infrastructure spending.

“Many people are also moving to Brisbane for affordability and lifestyle, with South East Queensland emerging as Australia’s most preferred destination for internal migration,” according to the property expert.

“Brisbane is a fabulous city with liveability, affordability and economic prospects. Over the next five years, Brisbane is tipped to be Australia’s best-performing property market.”

Ashgrove, in particular, presents an excellent buying opportunity for investors and homebuyers alike as it offers exceptional schools, walking paths, green spaces and large character homes.

“In the past five years, Ashgrove has witnessed average growth of over 30 per cent in prices, and it will continue to be in high demand due to its positive attributes and proximity to the city,” Mr Shean highlighted.

Meanwhile, for those looking into the Brisbane property market to increase potential for yield, renovation or development are the recommended strategies, according to Mr and Mrs Jennison.