Property market update: Brisbane, August 2022

After posting its first monthly decline in July, the latest data showed that weaker conditions in Brisbane accelerated sharply through August, with both the city’s unit and house sector posting declines for the first time in over two years. 

CoreLogic’s research director Tim Lawless said the city’s transition into decline had been “acute” following almost two years of sustained growth that was driven by record-high internal migration and relative affordability.

“It was only two months ago that the Brisbane housing market peaked after recording a 42.7 per cent boom in values,” Mr Lawless stated. 

But Brisbane was not the only one that suffered a frostbite throughout the chilly season. 

CoreLogic’s latest report showed that every Australian capital city except Darwin is now in a downturn, with the country’s property values falling at a rate not seen since the 1980s. In July, only five cities were in the negative territory — indicating an acceleration in the housing market downswing. 

And while spring is usually seen as a period of revival of market activity after the traditional winter lull, Mr Lawless said that it’s difficult to discern if the coming months will bring back life to the property market due to significant headwinds prevailing. 

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” he said.  

The central bank’s rapid-fire interest-rate hikes have pumped up the country’s official cash rate over a five-month period from a historically low level in May to 2.35 per cent in September — the highest level in seven years.

Melinda Jennison, the managing director of Streamline Property Buyers, commented that the declines are to be expected given the current sentiment in the market.  

“Whilst interest rates continue to rise, eroding the borrowing capacity of property buyers, and inflation continues to put pressure on household expenses, it is reasonable to expect the demand for property to remain suppressed,” the local expert stated. 

And with the Reserve Bank of Australia predicted to continue its monetary policy tightening cycle to rein in inflation within its 2 to 3 per cent band target, Mr Lawless forecasts that the property market will continue to be under pressure. 

“From current levels, interest rates are likely to increase by at least another 75 basis points, and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values,” the expert said. 

Will Brisbane recover some ground in prices come spring? Or is the city’s growth conversely intertwined with the rate hike cycle?

For now, let’s see how Brisbane’s property market performed in August 2022.  

Property values  

CoreLogic data showed Brisbane’s dwelling values fell for the second month, posting a 1.8 per cent drop in August after declining by 0.8 per cent in July. 

The city’s quarterly values are also in the negative territory, contracting by 2.5 per cent during the three-month period to August. 

Compared to the same period last year. Brisbane’s property values are still up by 17.5 per cent. However, the average price of a property in the city is now at $762,284 — representing a $19,566 monthly decline in the median cost. 

The city’s housing sector bore the brunt of the declines, with the average price falling by 2.1 per cent throughout August. The latest monthly figures indicate a deeper downturn from the 1.1 per cent drop recorded in July. 

Compared to the same period last year, the median price of a house in Brisbane is up by 18.1 per cent. The average price tag of a house in the city is now  $864,149, which is $20,187 less than last month.

The city’s unit sector proved to be more resilient than its house counterpart during the period, edging down by only 0.2 per cent in August. 

With the unit market’s annual growth rate now at 13.9 per cent, the average price of an apartment in the city currently stands at $501,396. The figures are down by $3,124 from last month.

While the city’s prices were still comfortably above pre-pandemic levels, Mr Lawless commented that the equity buffer looked likely to be squeezed further as the Reserve Bank continued its monetary policy tightening. 

Supply and demand 

Brisbane bucked the trend of rising listings traditionally seen in the lead-up to the spring selling season, as the number of properties for sale across the city fell in August. 

Data from SQM Research showed that total residential listings declined by 2.8 per cent over the month, falling from 20,697 in July to 20,108 in August.  

Compared to August 2021, the number of available stock in the city is also down by 3.2 per cent — making Brisbane the second-biggest decliner on an annual basis after Adelaide (-9.3 per cent). 

New listings (or properties that have been on the market less than 30 days) in Brisbane fell by 10.3 per cent from 7,940 in July to 7,120 in August. Compared to the same period last year, new listings in the city are down by 8.2 per cent.

Notably, old listings or property listings over 180 days in the city rose by 5.5 per cent from 1,851 in July to 1,952 in August. On an annual basis, old housing stock in the city is down by 38.2 per cent. 

Managing director of SQM Research Louis Christopher said that the decline in listings during the month was surprising, as normally, August is a month when listings start to rise ahead of the spring selling season. 

“It would suggest to me spring is going to be weaker on the activity front. Vendors are clearly cautious to sell in this environment, and there is no panic selling at this stage,” he commented.  

Separate data from CoreLogic painted the same picture in terms of supply. On a national level, data showed that freshly advertised housing stock was 13.4 per cent higher than a year ago and 6.5 per cent above the previous five-year average over the four weeks ending 28 August.

“Despite the downwards trend in new listings through the colder months, the total number of capital city homes advertised for sale held reasonably firm, and there are currently 11.3 per cent more homes available for sale compared to this time last year,” Mr Lawless commented.

Mr Lawless stated that the spring selling season would be a test for the demand as listings increase. However, he expects selling activity will be more subdued this year, given the current trend in supply and demand. 

“Between winter and spring, we typically see a 22 per cent rise in the number of new capital city listings based on the pre-COVID five-year average,” Mr Lawless said. 

“The flow of new listings this spring season may not be quite as active with the housing downturn dissuading some prospective vendors, but we are likely to see more listings added to the market than in winter.”

He also forecasts a slowdown in buying activity as higher interest rates and low sentiment continue to weigh on demand. 

Ms Jennison weighed in that it’s not just buyers getting jitters from the current market trends, pointing out that Brisbanite vendors are retreating from the selling front as well. 

“During times of change and uncertainty, such as the current rising interest rate cycle, buyers tend to take a ‘wait-and-see approach’. Sellers also often sit out of the market waiting to see signs of improved confidence, unless there is a real motivation to sell,” the local expert explained. 

Providing on-the-ground insights, Ms Jennison said that a lot of properties are failing to sell throughout Brisbane, despite some vendors being open to meeting buyer expectations. “The gap between buyers and sellers does not seem to meet, and when there is no real motivation to sell, the days on market simply trend higher,” she said. 

Auction market 

Domain’s latest auction showed that Brisbane’s clearance rate clocked in at 38.8 per cent at the end of August, up 3.1 per cent from July. The figures represent the second consecutive month the city’s clearance rate was below the 40 per cent mark. 

Compared to the same period last year, Brisbane’s clearance rate is down by 22.5 per cent. 

Domain noted that the significant annual drop is due to the unusually high clearance rates in August 2021 and aligns with what the Queensland capital would normally see as it has a less auction-centric market, and clearance rates vary on a monthly basis. 

Out of the 506 scheduled auctions in the city throughout the month, data showed that 12.2 per cent was sold prior, while 11.8 per cent were withdrawn from being on the block. 

Data showed that unit clearance rates continue to perform better than houses, indicating that increasing investor interest or downsizers capturing equity growth in their houses. 

During the month, the city’s house and unit sectors recorded clearance rates of 38.8 per cent and 38.9 per cent, respectively. 

On an annual basis, clearance rates for houses are down by 26 per cent, while unit clearance rates fell by 3.5 per cent. 

The median auction price for houses in Brisbane stood at $1,137,500 at the end of August, representing a 1.2 per cent decline in the average house price tag month-on-month. Over the year, the figures are up by 14 per cent. 

Separate data from CoreLogic showed that out of 576 properties auctioned in Brisbane throughout the month, the city’s average clearance rate stood at 42.4 per cent at the end of August. 

Vacancy rates  

Domain’s data showed that Brisbane’s vacancy rate was unchanged over the month of August at an extremely low level of 0.6 per cent for the fourth month in a row. 

While the portion of available rental listings continued to be far from healthy levels, Domain noted the city’s rental market could be stabilising as the number of vacant rentals recorded only a 0.9 per cent month-on-month decline to 1,509 in August.  

Compared to the same period last year, the figures are down by 52.5 per cent. 

The areas with the highest vacancy rates across the city were Sunnybank (1.2 per cent), Kenmore – Brookfield – Moggill (1.2 per cent), Brisbane Inner (1.2 per cent), Mt Gravatt (1.1 per cent),  and Jimboomba (1 per cent). 

Meanwhile, the areas with the lowest vacancy rates were Strathpine (0.1 per cent), North Lakes (0.2 per cent), Bald Hills – Everton Park (0.2 per cent), Nundah (0.3 per cent) and Caboolture Hinterland (0.3 per cent). 

Separate data from SQM Research showed the city’s vacancy rate stood at 0.7 per cent in August, unchanged from last month. At the end of the period, the number of vacant listings in Brisbane stood at 2,382. 

Mr Christopher said the results in August are a testament to the rental market’s deterioration to “unprecedented levels”. 

“Rental listings thus far recorded in September would suggest another fall in rental vacancy rates for the current month,” he said.

“I note the recent alerts and warnings issued by the various housing bodies as to what is happening on the ground and our data would concur with such concerning reports,” Mr Christopher stated. 

Rental market 

As the supply of rental accommodation across Brisbane continued to be at a crisis level, rents across the city continued to rise in August.

In the 30 days to 13 September, SQM’s data showed that the average weekly rental price for a dwelling in the Sunshine State capital stood at $556, representing a 2.3 per cent gain over the month and a staggering 22 per cent annual increase. 

As rental supply in the city continues to decline, Mr Christopher warned that asking rents could also continue rising. 

“Asking rents continue to rise across the country at a red-hot pace. All capital cities are recording double-digit percentage rental increases over the past 12 months,” Mr Christopher said.

Separate data from CoreLogic showed rents continued to trend higher through August. On an annual basis, house and unit rents in Brisbane rose by 14.1 per cent and 10.7 per cent, respectively, on an annual basis.

The figures put the city ahead of its capital city peers, recording the biggest growth in rents changed by landlords to tenants over the last 12 months. 

Due to the slowdown in property prices and the continued growth in rents, gross investment yields continue to recover. The median gross yield for Brisbane houses has increased from 3.4 per cent last month to 3.6 per cent now. And for units, the median gross rental yield has increased from 4.7 per cent last month to 4.8 per cent at the end of August. 

Overall, gross yields for dwellings in the city stood at 3.8 per cent in August, up from 3.4 per cent in July. 

Ms Jennison commented that while higher yields are starting to offset the increasing holding costs for investors holding assets throughout Greater Brisbane, it is not good news for tenants. 

“There are so many instances where properties are still receiving rental applications prior to an inspection taking place, and in most cases where a rental property is appropriately priced, there are multiple applications received from tenants, which gives a landlord choice,” she commented.

Adding to Brisbane’s rental market woes, an expert recently warned that Queensland’s controversial land tax (set to take effect next year) would only add more strain not just for landlords but for tenants as well. 

Outlook 

Generally, experts are in consensus that Brisbane’s dwelling values will not find a floor until the Reserve Bank begins to wind back its monetary policy tightening — a move that is generally pencilled in for mid- or late 2023. 

Estimates for the terminal cash rate generally range from the mid-2 per cent to the mid-3 per cent range, although financial markets are pricing in a peak cash rate of just over 4 per cent by August next year.  

Mr Lawless said the range of forecasts for the cash rate highlights the sheer uncertainty associated with inflation, wages growth and monetary policy.

With this, the expert expects Brisbane’s downturn will continue to play out through the remainder of the year, and possibly into 2023.

On the upside, Mr Lawless highlighted that housing values across most regions continue to be significantly higher than pre-COVID levels, with most areas still 15 per cent or higher than the level recorded in March 2020. 

This indicated that most properties have a significant equity buffer before their home is likely to be worth less than what they paid.

Ms Melinda’s forecasts are generally in line with that of Mr Lawless, noting optimistically that once inflation is under control, interest rates will find their “new point”, and buyers will regain their confidence — consequently instilling vitality in the market. 

“At that time, we expect that the buyers who have been ‘sitting on the sidelines’ will re-enter the market, and the depth of buyer’s pay tip us back into a seller’s market,” she stated. 

Over the near term, the local expert expects days on the market to continue to trend higher if buyers and sellers’ expectations continue to be at a disconnect when it comes to price expectations. 

“If sellers and buyers can’t find that place where each party sees value, which may cause an increase in older listings in the months ahead. If this is coupled with any noticeable increase in new listings, it will give buyers more choice, which may tip in favour of the buyers,” Mr Jennison stated. 

She also dismissed any predictions of a market crash in Brisbane, underlining that the city’s fundamentals continue to be strong. 

“We have a tight labour market, a strong local economy and income growth is gathering momentum. There is unlikely to be a material increase in distressed sales under these circumstances. Instead, we take the view that property is an asset class that warrants a long-term view,” she stated. 

For those looking to invest in the city or have an unfulfilled dream of moving to Queensland, Ms Jennison advised them to “buy right now”. 

“If you get the opportunity to choose a quality property with less competition in the current market, it makes sense to buy right now. Properties that become available for sale within the next few months will not be the same properties that become available for sale next year,” she advised. 

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