Property market update: Brisbane, October 2018

According to PIPA chairman Peter Koulizos, while other capital cities are on a downward spiral, Brisbane continues to experience growth, albeit at a slow pace.

In fact, within 10 years, the capital city has seen a median price growth of almost 40 per cent despite flood events and the end of the mining boom.

“I’m not saying they’re going to have double-digit growth, but if you’re looking to park your money somewhere for the next five or 10 years, it wouldn’t be Sydney or Melbourne because they’ve already had their growth and it wouldn’t be Hobart, too, because it's already had its growth. Therefore, it’s Adelaide or Brisbane.”

Brisbane may not be set for a spectacular property boom as witnessed by Sydney and Melbourne years ago, but it will continue to see moderate increases of around one to three per cent in the coming years, experts said.

At the end of the day, this ‘slow and steady’ growth could be better than a property boom, which could lead to affordability issues similar to what Sydney and Melbourne are seeing now.

Mr Koulizos said: “The affordability of Brisbane compared to Sydney and Melbourne has really come into sharp focus in the past year.”

“Not only are investors considering the Sunshine State capital as an investment location, but a growing number are also choosing to migrate to take advantage of the significant value gap as well as Queensland’s enviable lifestyle and strengthening economy.”

Property values

Brisbane was the only capital city to reverse the declining values trend during the final week of October—while Perth, Melbourne, Sydney and Adelaide saw value declines ranging from 0.1 per cent to 0.3 per cent, Brisbane saw overall property values rise by 0.1 per cent.

Over the year, house prices grew by 2.2 per cent to $567,376, while unit prices fell by 6.8 per cent to $376,972.

According to the Domain senior research analyst Dr Nicola Powell, the affordability in Brisbane and other property markets is a welcome change for Australia’s first home buyers who are seeking entry to the property market.

“The downturn has been aided by the tightening of credit by the banks following regulatory intervention and a bruising royal commission. Rising mortgage rates, tighter credit conditions and reduced borrowing power have impacted all capital cities to a varied degree.”

“Australia’s six-year low unemployment rate, strong population growth and continued economic growth suggests [that] the decline we’re seeing, particularly in Sydney and Melbourne, has been driven by deliberate efforts to tighten credit availability.

“This is new territory for an Australian housing downturn, with prior slowdowns tending to coincide with increasing rates from the Reserve Bank,” Dr Powell highlighted.

Supply and demand

After experiencing an oversupply, the Brisbane property market has started to show signs of restabilisation, according to Propertyology’s Simon Pressley.

“The 7,718 apartment approvals last financial year in Brisbane represents half of the 15,835 approved two years earlier but, is still well above the 4,500 apartments or less per year prior to 2013,” Mr Pressley said.

“On the whole, though, Brisbane’s housing supply stock is back close to equilibrium,” he said.

Meanwhile, Brisbane defied trends once again as one of the three capital cities that saw higher property turnover than the rest of its state, with the capital city turnover being 5.6 per cent compared to the rest of Queensland’s 5.5 per cent.

However, Brisbane, along with Melbourne and Darwin, saw vacancy rates rise by 0.1 per cent to 2.9 per cent over the month.

Rental market

Brisbane was the only capital city to record growth in median unit rents over the quarter, according to Domain’s Quarterly Rental Report.

Median weekly house rent is currently at $400 while median weekly unit rent sits at $375.

Queensland’s capital also provided the third strongest gross rental yields for houses and fourth for units compared to all other Australian capital cities. House gross rental yields went up by 0.6 per cent to 4.62 per cent, while unit gross rental yields increased by 0.7 per cent to 5.12 per cent, which is the strongest annual increase in more than six years.

According to Domain’s Dr Nicola Powell, Brisbane’s rental market is currently seeing its longest period of stability.

“Apart from a couple of fluctuations, tenants in the Sunshine State have enjoyed four years of steady house rents at $400 a week. The unit market appears to have had a minor turnaround, with rents increasing for the first time in two years.

“Brisbane’s advertised rental stock slipped as a result of the unprecedented inner-city unit development slowing. The state experienced a decade-high level of internal migration, with Brisbane becoming one of Australia’s fastest-growing city populations. All signs point to a broad tightening of the rental market,” according to her.

To further improve the experience of tenants and ultimately improve the investability of Brisbane properties, the Queensland government began the ‘Open Doors to Rental Reform’ consultation program, which allows renters, landlords and real estate agents to express their opinions on renting across the state.

Suggestions can be posted on social media with the hashtag #RentinginQLD or directed to officials through consultation activities that will be held in selected markets and shopping centres. The consultation program will conclude on 30 November.

Hotspots

Buyers and renters have started to choose Brisbane over the ‘prime markets’ of Sydney and Melbourne, which continue to become unattainable due to sky-high prices.

Experts believe that the capital city’s affordability, jobs growth, infrastructure growth, population growth and interstate migration will serve as catalysts for stronger demand and, ultimately, the long-term economic growth across the city and the state.

According to Mr Koulizos, at the end of the day, the secret to finding the best investment area in capital cities is simply going back to the fundamentals of a good property.

"Look for undervalued areas around prime hubs. It's not just based on median price because before it might just be really cheap because the soil is contaminated."

"Go and have a look, drive down the streets. Are the houses similar in the prime suburb as they are in the undervalued suburb? Are the streets similar? We're looking for wide, tree-lined streets—they're the key there. Then, make sure that you compare apples with apples. If you can tick those boxes, it should be alright,” according to him.

In Brisbane, which he considers as the best contender for growth among all capital cities, Mr Koulizos expects Herston, Kelvin Grove, Woolloongabba, Redcliffe Peninsula, Sandgate, and Brighton to keep moving forward.

“Woolloongabba is probably my favourite because that's an area that is almost finished in the gentrification process, or there’s the Redcliffe Peninsula and areas just below that, like Sandgate and Brighton.”

Meanwhile, affordable corridors will offer the best high cash flow options in Brisbane.

Mr Pressley cites Coopers Plain for its $400,000-houses and an annual positive cash flow of $3,600, as well as the suburbs of Cedar Vale, Russel Island, Blackstone and Gailes for good cash flow positive opportunities.

Ferny Hills, Eaton Hills and Strathpine boast investment opportunities at $600,000, complemented by decent-sized suburban blocks, abundant shopping and lifestyle facilities and easy access to public transport, while Moreton Bay and Redcliffe Peninsula boast affordability, transport links, high sales volumes and high levels of investment activity.

Ipswich City offers investment opportunities in the form of large vacant lands that are primed for development. The region, which also benefits from strong population growth, is widely considered as one of the fastest-growing real estate markets in Australia due to active development activities accompanied by major spending on infrastructure and property investment.

Other Brisbane suburbs considered as top performers in the property market are Herston, Kelvin, Grove, Woolloongabba, Sandgate and Brighton.

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 201, June 2018, July 2018, August 2018 and September 2018 market updates. Visit Smart Property Investment's Property Market News page to get updates on other major capital cities.