While most major property markets struggle to stay afloat, Brisbane market is believed to be exhibiting resilience yet again. How will the Queensland capital city market fare in the remaining months of 2020?
Despite the overall median data trend showing slight falls in house values, Brisbane continues to witness a significantly high demand for quality housing, according to property professional Melinda Jennison.
“Over July, some open homes we have attended over the month of July have seen more than 30-40 groups through. This illustrates that buyers are still very active in the Brisbane property market,” she highlighted.
“Advertised properties that are listed for sale in desirable locations are being sold very quickly in Brisbane. Often, the sale is a result of multiple offers being submitted on the property. If listed for sale by auction, they are achieving high prices with multiple registered bidders.”
While Sydney and Melbourne lead the fall in capital city values with as much as a 1.2 per cent decline, Brisbane continues to witness strong prices still being paid for quality properties in many regions around the city, as well as several properties being traded off-market.
Ultimately, the COVID-19 outbreak has not resulted in a measurable fall in property prices across Brisbane, so buyers should not expect a bargain brought about by the pandemic, according to Ms Jennison.
House prices across Australia have fallen by 2 per cent, while unit prices are down even further at 2.2 per cent over the quarter, according to the latest edition of the Domain House Price Report.
Brisbane, in particular, saw property values drop by just 1.4 per cent over the quarter – buffering price falls better than Sydney and Melbourne.
Over the month of July, the latest Hedonic Home Value Index data by Corelogic found dwelling values in Brisbane declining by 0.4 per cent.
Median house values for the greater Brisbane region fell by -0.3 per cent over the month, bringing the median house value to $555,284, while unit median values declined by -0.5 per cent, bringing the median unit value to $384,681.
According to Domain, Brisbane is showcasing a “two-speed property market” as Brisbane City, Moreton Bay, Scenic Rim and Somerset house prices all fell over the quarter, while Ipswich and Logan remained stable.
Domain’s Dr Nicola Powell said: “Prior to COVID-19, there was promising growth in prices for Greater Brisbane. Although this has reversed over the quarter, the fall in prices to date has been minimal considering the economic aftermath of border closures and shutdowns.”
“An initial pullback in seller and buyer activity during the lockdown acted to underpin prices, government financial support has kept distressed or urgent sales minimal, and incentives have encouraged buying journeys to begin.
“The outlook for residential property has improved vastly in recent weeks.”
Ultimately, despite value losses across major capital city markets, Domain noted that the impacts “have been minimal” as the expected drastic price falls were buffered by significant government stimulus, mortgage holidays and the continued low-interest rates supporting home values that have also kept distressed and urgent sales low.
Supply and demand
For the week ending 26 July, CoreLogic found that, of the 1,315 reported auctions, 54.1 per cent returned a successful result, which is an improvement from the week prior when a 53.1 per cent final clearance rate was recorded.
In Melbourne, 540 homes were scheduled for auction, but less than 50 per cent of these returned a successful result.
In Sydney, the final auction clearance rate fell across a higher volume of auctions last week as there were 594 homes taken to auction, which returned a final auction clearance rate of 60.6 per cent, lower than the 61.4 per cent over the week prior when 515 auctions took place.
Across the smaller cities, Canberra was the best-performing capital city, with 77.6 per cent of homes selling at auction. However, this was lower than the week prior when an 88.6 per cent final clearance rate was achieved.
Following Canberra’s results are Adelaide (60.7 per cent), Brisbane (43.9 per cent) and(28.6 per cent).
Over the quarter, unit rental yields fell by 3.2 per cent (equivalent to $15 per week), marking the biggest drop in more than 15 years as COVID-19 pushed landlords to reduce rates, Domain’s latest research found.
House and unit rental prices fell across most major capitals, with Sydney and Hobart unit rentals hardest hit.
According to Dr Powell: “The rental market has become highly fragmented in recent months. With weaker conditions for units compared to houses, tenants have a better chance of nabbing a cheaper unit.”
“This weakness has been led by significant rent reductions in Sydney and Melbourne inner-city areas due to a surge in advertised rentals from March to June.”
Meanwhile, Brisbane house and unit rents also fell over the quarter, but year-on-year data showed that rents remained flat.
At a city level, the rental market in Brisbane has definitely recovered, according to Ms Jennison.
With over 1,200 REIQ property management member agencies surveyed throughout Queensland, results show that only 6.05 per cent of residential rental tenants qualified as “COVID-19 impacted” under the state government’s COVID-19 Emergency Response Regulation. This represents approximately 3,950 renters from a state total in excess of 577,000 residential tenancies.
However, there are still some at-risk markets around the city, particularly in terms of the imbalance in supply and demand.
While Brisbane real estate has not been impacted like other cities with international border closures, plummeting foreign student numbers, job losses and pay cuts have still made their mark, with Brisbane’s CBD particularly exposed to reduced rental demand.
“The vacancy rate in many locations is trending down and is very tight. The areas where this trend is not happening are in the Brisbane CBD and locations immediately surrounding this and also in areas where there are a lot of higher-density unit developments. In these locations, vacancy is still a big problem. Therefore, these markets remain high-risk,” she said.
Moving forward, there remains a lot of worry and concern about what might happen to property values across the country when the government’s fiscal response starts to taper in October and repayment holidays expire at the end of March next year.
For one, experts are forecasting a rise in distressed properties coming to the market.
However, they have yet to see whether this would also mean any downward pressure on prices.
“This is where I think the different property markets around Australia will each experience something slightly different,” according to Ms Jennison.
According to the Commonwealth Bank Home Buying Spending Intentions Index, there was a 6 per cent rise in home buying intentions nationally up to the end of June 2020. This index showed the index had returned back close to levels seen in March – after much weaker readings in April and May.
“We are definitely seeing this trend on the ground with the current high volume of buyers in Brisbane. Because of this, I’m sure we could see some moderate increase in new listings come to the market without any significant impact on the supply and demand balance,” she highlighted.
“Remember, property prices will only fall when supply outstrips demand.”
With dwelling approvals now at the lowest level in eight years, the future supply pipeline also looks tight. The most recent Australian Bureau of Statistics data showed a decline of -10.9 per cent in new detached house approvals in Queensland.
Overall, real-time demand remains strong in Brisbane as property buyers are being fuelled by the lowest-ever interest rates, good levels of affordability and strong rental yields compared with many other state capitals.
Amid economic uncertainties, Atelier Wealth’s managing director Aaron Christie-David said that conditions are likely to be more difficult in the short-term, but those with a long-term view will most likely prevail.
“For investors wanting to sell, days on the market have increased as has vendor discounting, which could further impact median prices,” Mr Christie-David highlighted.
“The good news is that while yields have been trending downward, in May rental yields recovered by 3 basis points. There continues to be opportunities for investors, with supply at record lows and demand strong in certain suburbs.
“Areas which will benefit from First Home Buyer incentives and where incomes and jobs have been less impacted by the economic downturn will remain attractive to investors and will withstand any potential deeper price falls from September.”
Home upgraders will also have good opportunities in today’s market, according to him.
“Falling property values will allow for upgraders to access better homes. Steeper falls will lead to better discounts, but will also affect those opting to sell their PPOR. Record low-interest rates are also making purchases much more affordable,” he said.
Meanwhile, first home buyers will have government incentives, record low-interest rates and falling prices providing them opportunities.
Mr Christie-David advised them to focus on saving for their deposit right now so they could take advantage of the dropping property values.
“The higher the deposit, the lower the [loan-to-value] ratio (LVR) which may potentially allow you to avoid lenders mortgage insurance… If rates fall again or remain steady, this can provide good opportunities for first home buyers,” he said.
While there’s no certainty about the future of the property market, Mr Christie-David advised investors to avoid panicking and, instead, watch the market closely.
As September is a potential danger zone, he strongly encouraged undertaking extensive and engaging professionals in order to assess how any investment decision will affect their portfolios in the short, mid and long-term.
For those keen to buy, Propertyology’s head of research Simon Pressley highlighted five major government projects in Queensland that are tipped to lift the housing market:
Track the major market movements in Brisbane and get to know more about the capital city’s growth drivers and hotspots through Smart Property Investment’s April 2018, May 2018, June 2018, July 2018, August 2018, September 2018, October 2018, November 2018, December 2018, January 2019, February 2019, March 2019, April 2019, May 2019, June 2019, July 2019, August 2019, September 2019, October 2019, November 2019, December 2019, January 2020, February 2020, March 2020, April 2020, May 2020 and June 2020 market updates.
Visit Smart Property Investment’s Property Market News page to get updates on other major capital cities.