Property market update: Brisbane, April 2018

Prices remain affordable and the city continues to present some of the best growth prospects across Australia, so as long as you buy the right property at the right price, you are most likely to benefit from the strong market.

Aside from the growth drivers in Brisbane, including population growth, infrastructure and jobs growth, other capital cities also play a part in its rise to the top.

According to Right Property Group’s Victor Kumar, the high median house pricing in both Sydney and Melbourne leads investors to explore the more affordable capital city.

The difference between median house prices in metro Sydney and metro Brisbane usually lies at 26 per cent, but right now, it sits at 76 per cent—a big gap that is expected to get back to normalcy as Brisbane catches up to the big players.

In other words, while Sydney and Melbourne are believed to have already reached their peak, Brisbane is only on its way to the top.

“To bring that back to normality, which is the 26 per cent, there are two things that will happen. One, the Sydney and Melbourne prices will contract, which is already starting in Sydney. Two, Brisbane will go through a natural growth curve, the same as which happens in every cycle,” Mr Kumar explained.

Houses and units

House listings in Brisbane have fallen by 3.8 per cent in the past month and vacancy rate has also decline by 0.2 per cent to 3.2 per cent.

Meanwhile, house asking prices fell by one per cent but units asking prices rose by 0.4 per cent.

With only $300,000 in pre-approved finances, investors can enter the city’s premium markets such as New Farm and Teneriffe.

Brisbane’s unit market also provides good opportunities for investors who want to enter the city’s property market or simply diversify their portfolio.

New residential multi-storey unit complexes built over the past 18 months within the two kilometer radius of Brisbane CBD has flooded the market and, therefore, pushed prices down.

These cheap units can be an entry point for budding investors looking to start their journey in a capital city.

The affordability in Brisbane is expected to be one of its main growth driver as its property market continues to move upward.

Rent

Median rent price in Brisbane currently sits at $436 following a 1.2 per cent rise in the past quarter.

In terms of rental yield, the capital city is also among the standouts with yields at 4.40 per cent, preceded only by Darwin, Hobart and Canberra, and followed by Adelaide, Perth, Sydney and Melbourne.

Strategy

There are many ways to take advantage of Brisbane’s current upward movement:

Near-CBD properties

Suburbs in and around 60 minutes north of the CBD is currently primed for growth mainly due to infrastructure growth.

Some of the sites considered as primary drivers of growth are Petrie University, Caboolture Base Hospital and town centres.

With only $400,000, you can already purchase a house in the middle ring of Brisbane CBD, particularly to the north.

Locations within the five to 10 kilometre radius of Brisbane and Gold Coast are also considered hotspots, offering a significant potential for growth in the next six to 18 months.

Moreton Bay, in particular, saw a median house price growth of 21.4 per cent in the past quarter.

Other areas near the Brisbane CBD also experienced growth ranging from seven per cent to 35 per cent.

Micro-apartments

In order to take the pressure off in densely populated areas, including suburbs within 10 to 20 kilometers of Brisbane CBD, the Brisbane City Council allows the creation of up to five micro-apartments in a single house.

Investors who take advantage of this opportunity have the chance to enjoy positive cash flow and good capital growth, with up to double-digit returns.

If the strategy is implemented correctly, secondary dwellings have the potential of producing returns ranging from five to six per cent.

However, keep in mind that building in Brisbane will most likely cost a lot.

The International Construction Costs 2018 report from Arcadis stated that Brisbane is the 22nd most expensive city to build property in.

The only other two Australian cities included in the list are Sydney and Melbourne, which took the 19th and 21st spots, respectively.

Commercial property investment

Aside from residential properties, it may also be worth considering investing in commercial properties to diversify your portfolio and, consequently, lock down solid capital growth and improve cash flow.

According to Rethink Investing’s Scott O’Neill, commercial properties in Brisbane offer the best yield across Australia—up to seven to eight per cent, which is twice as good as the yield in Sydney.

Commercial properties also offer good cash flow, especially considering the positive state of the city’s economy.

However, this does not mean that investors should give up on residential properties.

Mr O’Neill encouraged getting ‘the best of both worlds’ by investing in both residential and commercial so, at the end of the day, you get capital growth and cash flow better than what average investors normally could.

Growth drivers

In order to find the best Brisbane suburbs for property investment, take note of the primary drivers of growth in the capital city:

Infrastructure

The government is currently dedicating $9.3 billion for the Melbourne to Brisbane Inland Rail project, which is expected to commence this year. Its construction will create approximately 16,000 direct and indirect jobs.

Aside from that, there is also $300 million reserved for the Brisbane Metro project.

Jobs growth

In the past year, jobs in Brisbane has grown by 7.6 per cent and unemployment has declined by 5.5 per cent.

Among the industries that created jobs in the capital city are health, education, professional services and accommodation, food services and tourism.

Considering the big infrastructure projects underway, job growth is expected to get stronger in the next months.

Fundamentals

Overall, Brisbane carries solid underlying fundamentals necessary for successful property investment, according to Propertyology’s Simon Pressley.

“If it can get local confidence going, the Brisbane market could do really well,” he concluded.