Property market update: Brisbane, October 2019

According to Right Property Group’s Steve Waters: “The ‘Brisbane boom’ has been a long time coming. This is not really the city for super quick growth, but continues to be an excellent long-term bet if you buy the right asset in the right location.”

Further supporting the stability of the capital city market are the increased infrastructure spend, strengthening employment prospects and rising net interstate migration.

Property values

CoreLogic’s Home Value Index results for October showed that national dwelling values rose 1.2 per cent throughout the month, marking the biggest monthly gain since May 2015.

October is the fourth consecutive month to see growth in national property prices following a consistent decline which totalled 8.4 per cent nationally between October 2017 and June 2019.

Across the combined capital cities, home prices are now up 3.6 per cent above their June 2019 floor but still 5.4 per cent below their peak.

While the uptick in property values is largely driven by the recovery of Sydney and Melbourne, other capital cities have also recorded growth.

However, Brisbane was one of only two capital cities to record house price falls over the quarter and the year, with unit investors able to purchase properties at a six-year low.

According to Domain’s latest House Price Report, houses in Brisbane fell by 1 per cent to a new median price of $562,847.

Unit prices fell by 5.6 per cent over the year, making it the steepest annual drop in just over 18 years. The median unit price in Brisbane is now $375,179. Brisbane is now the fourth most affordable unit market of the Australian capital cities.

The latest Housing Affordability Index revealed that, over the past 12 months, all eight capital cities saw improved affordability, with Perth leading the charge at a 15.3 per cent increase, followed by Darwin with 13.5 per cent, Sydney with 11.9 per cent, Melbourne with 11.6 per cent, Brisbane with 7.0 per cent, Adelaide with 4.9 per cent, Hobart with 3.3 per cent and Canberra with 1.4 per cent.

HIA’s chief economist Tim Reardon said that the cuts to interest rates have offset the rise in home prices to ensure an ongoing improvement in housing affordability.

However, it could be a challenge to maintain affordability in some of Australia’s major capital city markets moving forward, according to him.

“With little opportunity for interest rates to be reduced further, improvements in affordability will require the right economic conditions with a strong volume of new homes, low interest rates and supportive policy settings from state and federal governments,” Mr Reardon highlighted.

“Up to 50 per cent of the cost of a house and land package can be red tape and taxes. Reducing the tax on homes and ensuring an adequate supply of homes [are ongoing challenges] for governments.”

Still, experts consider the capital city as “competitively priced”, ultimately benefiting investors in the long run.

According to the Real Estate Institute of Queensland (REIQ): “Property managers have indicated that the Brisbane market is competitively priced as the oversupply of properties continues, particularly in terms of new developments for both the inner and outer Brisbane regions.”

Supply and demand

CoreLogic found that favourable buying conditions and increased borrowing power contribute largely to the steady improvement of conditions in the housing market.

However, while buyer demand increases, the number of properties hitting the market is still down 12 per cent compared with last year, and 17 per cent below the decade average.

According to CoreLogic’s head of research Tim Lawless, stock levels have not been this low since the global financial crisis.

“There has been a shortage of new listings for several years, which has likely resulted in some pent-up demand from home owners looking to sell. Despite the improved selling environment, new stock additions remain low for this time of the year, which is likely a reflection of ongoing uncertainty and low confidence,” he said.

Australia’s overall sluggish economy, largely stagnant wage growth and ongoing low levels of consumer spending might have also been contributing to low stock levels, Mr Lawless said.

As of September 2019, total advertised stock levels are 11 per cent lower relative to last year and tracking at the lowest level since 2010.

The property expert said: “Buying and selling a home requires a high degree of commitment, which becomes much harder when there are doubts around household finances or job prospects.”

“Such a small pool of available stock against rising buyer demand is creating some competitive pressure among buyers, which is adding to urgency in the market and supporting upward pressure on values.”

Rental market

Rates have fallen across five of the eight capital cities in three months ending October 2019, according to CoreLogic.

The largest declines were seen in Darwin, where rents are 1 per cent lower over the past three months, and Sydney, where rents are down 0.7 per cent.

According to Mr Lawless, several factors contributed to the softening of the rental conditions, including an abundance of supply, a significant increase in dwelling construction and renters transitioning to first home buyers in light of the recent market downturn, ultimately denting rental demand.

Rental yields have also taken a hit. Across the combined capital cities, gross rental yields have fallen to 3.65 per cent – the lowest gross yield since November last year.

Brisbane and Adelaide were the only capital cities that saw rents improve, with increases of 0.2 per cent and 0.3 per cent, respectively.

The rental market of the Queensland capital has been undergoing a particularly strong rental period, re-entering the tight range for the first time in three quarters due to low vacancy rates, according to the REIQ Rental Vacancy Report.

Overall vacancy rate for Brisbane currently sits at 1.6 per cent – its lowest vacancy rate in 11 years.

Redland and Logan City reported the tightest vacancy rates of 1.5 per cent each, followed by Moreton Bay with 1.7 per cent and Ipswich City with 2.9 per cent.

REIQ said: “The Greater Brisbane market also reported its lowest vacancy rate in over a decade at 1.7 per cent, 0.7 per cent lower than previous quarter and 0.5 per cent lower than the same quarter in 2018.”

“Outside of Brisbane, Cairns vacancies reached a historical record low for the region, reporting 0.9 per cent for the quarter.

“Across Queensland, vacancy rates moved marginally from 2.4 per cent in the June quarter to 2.2 per cent for the September quarter, resulting in a positive outlook for investors and landlords.”

Meanwhile, weekly median rents over the quarter for three-bedroom houses were up 1.2 per cent year-on-year, while three-bedroom units increased by 3 per cent.

The median house rent charged per week in Brisbane is $405, while the median unit rent is $380, according to Domain’s latest Rental Report. This is a 1.3 per cent increase for median house rent over the quarter, and a stable result for median unit rent.

“Brisbane median asking rents rose over the year, as the rental vacancy rate fell, but Brisbane remains one of the most affordable capital city rental markets in the country,” Domain said.

Unit rents in the Greater Brisbane area remained relatively steady over the past few years despite high levels of apartment development, ultimately recording a rise in unit rental yields from 5.1 per cent to 5.4 per cent over the past year.

Hotspots

Nerida Conisbee, chief economist at realestate.com.au, said that more people are opting to invest in the northern part of Brisbane rather than its east coast neighbours.

“While prices in Sydney and Melbourne have tumbled over the past two years, pricing in Brisbane has been remarkably stable. This is despite a lot of concerns about apartment oversupply, which have turned out to be vastly overstated.”

Five suburbs, in particular, stood out for being able to guarantee good return, including:

1. New Farm
2. Bulimba
3. Auchenflower
4. Camp Hill
5. Wishart

The rental market has also been deemed as promising by property experts due to high demand and low vacancy.

According to Ms Conisbee: “While prices are still relatively flat, we are starting to see some positive signs for rental demand. Inner Brisbane is seeing some of the highest views per listing for rental properties in Australia. This is now starting to flow through to rental growth.”