Property market update: Brisbane, May 2019

Even though it has yet to witness stellar growth, the capital city has been attracting investors far better than other areas that are currently suffering from a continuous decline in property values as it boasts affordable entry points and a good potential for capital growth.

According to Streamline Property Buying’s Melinda Jennison: “Brisbane had a 38 per cent reduction in building commencements just in the last 12 months. We had an oversupply in the apartment market but that has been absorbed by the accelerating population growth. Vacancy rates are now declining in some of the inner city locations.”

The infrastructure spending across Brisbane, which will be a part of the government’s $100 billion-infrastructure plan over the next decade, is also expected to push Brisbane’s recovery forward.

“Look around Brisbane: We’ve got the harbourside development, we’ve got the rail network being worked on, and the airport being upgraded,” Right Property Group’s Victor Kumar said.

When the Queensland capital achieves employment and wage growth, the buyer’s agent believes that the capital city will have ‘perfect recipe for upward pressure on prices’.

Property value

CoreLogic’s May 2019 home value index showed property values declining across capital cities, although the rate of decline has considerably slowed down.

Overall, capital cities saw dwelling values decline by 0.4 per cent—the smallest month-on-month decline since May 2018.

Darwin led the capital city declines, recording a fall of 1.6 per cent over the month. This was followed by Perth with 1 per cent, Brisbane with 0.5 per cent, Hobart with 0.4 per cent and Canberra with per cent.

On the other hand, Adelaide recorded a rise of 0.2 of a percentage point, making it the only capital city to record a value rise over the month.

Housing affordability has largely improved over the quarter across major property markets, according to Housing Industry Association’s Tim Reardon.

“The improvement in housing affordability has been experienced across the country, with the exception only of Tasmania and the ACT, where ongoing house price growth has seen affordability remain static.”

In the past three months, Sydney saw the greatest improvement, with the index rising 12.4 per cent, followed by Melbourne at 9.6 per cent, Perth at 7.7 per cent, Darwin at 5.9 per cent and Brisbane at 2.5 per cent.

“With completion of new homes remaining at elevated levels, affordability is poised to continue to improve,” Mr Reardon said.

Selling prices

While overall property values are declining, Brisbane is currently performing well in terms of final selling prices, according to CoreLogic’s Cameron Kusher.

Over the last three months, only 67.2 per cent of Brisbane properties were selling under the original listing price—considerably lower than the capital city’s 10-year average of 71.4 per cent.

In contrast, Sydney recorded 78.1 per cent of property sales below with original listing price, while Melbourne had 76.3 per cent, Adelaide had 75.4 per cent, Perth had 74.1 per cent and Darwin had 85.4 per cent.

Additionally, the Prime Global Cities Index – Q1 2019 report by Knight Frank found that Brisbane is the highest-ranking Australian city for luxury residential price growth, coming in at number 14, followed by Sydney at position 18, Melbourne at position 22 and Perth at position 23.

According to Knight Frank’s Michelle Ciesielski: “Despite a recent cooling of the market in Sydney and Melbourne, these markets recorded yearly price growth of 2.4 per cent and 1.8 per cent, respectively, while Brisbane recorded year-on-year growth of 3.2 per cent and Perth recorded growth of 1.8 per cent.”

Sustaining the luxury markets are millionaires, whose number is expected to increase by 21 per cent from 2018 to 2023.

“Over the past five years, four millionaires were created every day in Sydney… [and] this is expected to rise to 11 millionaires per day over the next five years. In Melbourne, we saw three millionaires created per day over the same period, with projections that it will rise to seven millionaires a day over the next five years.”

“Perth’s millionaire numbers are expected to double from two per day over the past five years to four per day over the next five years, while for Brisbane, the figures will triple from one to three millionaires being created every day over the same time frame,” Ms Ciesielski highlighted.

Supply and demand

New listing volumes were down in most capital cities during the final week of May, with the exception of Hobart, Darwin and Adelaide, which saw a rise of 9.7 per cent, 4.9 per cent and 3.3 per cent, respectively.

The largest decline was seen in Sydney at 25.5 per cent, followed by Melbourne at 24.6 per cent, Canberra at 18.1 per cent and Perth at 17.2 per cent.

Despite the decline, CoreLogic found that there are still months’ worth of extra housing stock across Australia’s major capital cities.

In fact, according to Mr Kusher, Australia has 5.3 months’ worth of housing supply available for purchase—the highest figure since 2012.

“Credit conditions are tight, which means fewer buyers, and generally leads to a slower rate of sales. Although vendors have responded by bringing fewer new properties to the market, total stock for sale remains elevated leading to a heightened months of supply figure.”

Brisbane, in particular, has 5.9 months’ worth of housing supply on the market, which is a seven-year high for the capital city. This is largely due to a higher volume of stock for sale combined with lower transaction volumes.

Days on market

Houses remained more popular than units, but the average time for houses on market fluctuated across the capital cities—Melbourne, Darwin and Canberra reporting declines, Brisbane and Perth recording rises and Sydney, Adelaide and Hobart holding steady.

Hobart recorded the fastest time on market for houses at 38 days again, followed by Melbourne, Sydney and Canberra at 46 days for the former and 50 days for the two latter; while Perth, Darwin and Brisbane had the slowest time on market at 87 days, 79 days and 73 days, respectively.

For units, Hobart was also the fastest at 39 days, while Perth, Brisbane and Darwin were the slowest at 89, 84 and 78 days, respectively.

Over the last three months, Brisbane properties have taken an average of 60 days to sell, a significant rise compared to last year’s 34 days.

Still, the Queensland capital remains slightly better off than other capital cities, according to Mr Kusher.

“Although values have declined over the past year in Brisbane and regional Queensland, it has been a much more moderate decline than in Sydney and Melbourne, although there still has been a sharp spike in days on market highlighting that selling conditions have become much tougher despite values having only fallen moderately.”

Meanwhile, vendor discounting was between 5.2 per cent and 8.3 per cent for houses across most capital cities and between 6.7 per cent and 9.5 per cent for units, with Canberra as the low-end exception and Darwin as the high-end exception for both houses and units.

Growth drivers

Moving forward, Brisbane and other capital cities, as well as surrounding areas, are expected to benefit from upcoming railway developments.

Property group CBRE’s A New Train of Thought report said that the planned 107 per cent-increase in metro rail infrastructure investment over the next seven years is highly likely to impact the residential property market.

“We estimate that associated real estate development projects within railway station suburbs in the rail projects outlined herein will reach ~$28 billion over the next 10 years,” the report noted.

In Brisbane, the Brisbane Cross River Rail, expected to be completed in 2024, will go through Woolloongabba, Dutton Park and Bowen Hills.

As a result, a number of mixed-use developments is expected to be introduced in the surrounding areas, with a lean towards residential usage.

Woolloongabba, in particular, is expected to see mixed-used residential developments and build-to-rent housing across 30,000 sqm of land.

Other upcoming railway developments to watch across major capital cities are the Sydney Metro Rail, the Melbourne Metro Tunnel, and Perth’s Metronet.

Strategy

When investing in Brisbane, or any other property market, investors are encouraged to study the fundamentals that will drive growth into their assets over the long-term.

Among them are ongoing and upcoming infrastructure projects in the area, such as transport networks, universities and other major community facilities.

According to Ms Jennison: “We love trains and sub-train line locations, but Brisbane is very widespread and we don’t simply buy in all train line locations.”

“There are blue chip suburbs and the fringe suburbs just on the outer areas of those blue chip locations—the train lines there, that’s where we’re certainly looking at right now… Where there's price disparity between one suburb and the next, there are certainly opportunities for investors there.”

Rezoning may also spur growth in certain property markets across Brisbane in the near future.

As local councils often rezone land to assist in the planning for future growth, this typically occurs around growth corridors or areas where there is rapid increase in population and infrastructure spending.

“A lot of the land has been rezoned and we’re certainly still finding great opportunities in that region for investors that are in the $500,000-price point. If we were to categorise investors in Brisbane based on price point alone, that would definitely be our preferred location right now,” Ms Jennison said.

With Brisbane still on the way to recovery, there is an abundance of off-market opportunities available for investors. Thus, engaging property professionals could help investors maximise their wealth-creation potential in the Queensland capital.

Property professionals with local knowledge of the markets could serve as the perfect guide and ‘insider’ as investors try to navigate the real estate landscape, especially in changing markets such as Brisbane.

According to the buyer’s agent: “We’re certainly getting a lot of off-market opportunities presented to us as we get an influx of interstate investor activity… There's some great buying opportunities across Brisbane, and we’re achieving yields of upwards of 5 per cent right now.. Even up to 5.5 or 6 per cent per annum.”

Hotspots

Despite the softening of most capital city markets, Brisbane continues to boast several areas that have been performing well over the past 12 months.

With only a 1.9 per cent-annual decline, the Queensland capital holds a bulk of higher growth areas in the west of the city, close to Ipswich, according to the data from the latest CoreLogic Property Pulse report.

The top spot was taken out by Karalee - Barellan Point, growing 6.7 per cent, while the largest loss was seen in Carole Park at a decline of 19 per cent.

Moreton Bay is also expected to witness an improvement in the property market with the establishment of the new campus of the University of Sunshine Coast and The Mill at Moreton Bay, the new destination with the University at its core.

Stage 1 of the campus, which will be located adjacent to the Petrie railway station, is set to be completed in time for the first semester of 2020.

“We feel that Moreton Bay will gentrify quite quickly with young university students moving in, so we’ll see the types of accommodation gradually change over time to suit their preferences. There’s lots of opportunities within the area and the region as a whole because of this gentrification,” Ms Jennison said.

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