Property market update: Brisbane, November 2019

According to Coronis managing director Andrew Coronis, the past month saw a large increase in property enquiries to 8,907 from October last year, largely brought about by major developments coming to Brisbane and more people moving from other states and overseas.

The 10 per cent year-on-year increase in open home attendees was the best result that the agency has gotten since 2016, he said.

“It’s a testament to everything that Brisbane has to offer for people looking for their ultimate Australian dream.”

“Brisbane is a growing hub of some fantastic developments, expanding job opportunities, cultural activities, entertainment and sunny weather all year long... It’s got something for everyone, and I think being within close proximity to some of the world’s best beaches is an added bonus,” Mr Coronis highlighted.

Due to the decreased number of listings and the growing demand for properties, Mr Coronis strongly encouraged investors to put their property in the market right now to ultimately set it up for success.

“With softening interest rates, lending restrictions, and first home buyer schemes, SEQ is a land of opportunities for everyone wanting to get into the property market... This only adds to the buyer confidence, and I think we’ll be seeing more people realising their property dreams in the Sunshine State,” he said.

Herron Todd White’s Month in Review report for November 2019 also found that Brisbane, along with Sydney, Melbourne, Adelaide and Perth, is experiencing a “balanced market” when it comes to rental vacancy.

With the affordability and reasonable yields in the Queensland capital, as well as increased infrastructure spending, strengthening employment prospects and rising net interstate migration, Right Property Group’s Steve Waters said that 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,” Mr Waters highlighted.

Moving forward, CoreLogic believes that Brisbane, which didn’t experience as harsh a correction as other capital cities, is due to see meaningful recovery within four months if values continue to grow at the same pace as the last quarter.

Brisbane’s economy is currently being supported by major projects such as Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani coal mine.

Property values

CoreLogic’s November Home Value Index revealed that that the value of properties sold across Australia grew by 1.7 per cent, which takes the new median value of homes to $537,506. This has been the fifth consecutive increase in the national index, the largest monthly gain since 2003 and the first positive annual growth since April 2018.

According to CoreLogic’s head of research Tim Lawless, while the five months’ worth of unexpected rapid recovery brings good news to investors, moving forward, it will be a matter of sustaining the high pace of capital gains.

“Annualising the growth rate over the past three months implies the national index is already tracking well above double-digit annual growth (15.3 per cent),” he said.

“Considering wages and household income growth remains low, economic conditions are losing momentum and housing affordability is once again worsening from an already high base in the largest cities, there are likely to be some headwinds in maintaining such a fast recovery.”

Compared to other capital cities, Brisbane has seen a much more shallow property downturn, with values falling by only 1.6 per cent below its peak in April 2018.

There has also been a mild growth cycle wherein values grew by an average of 0.8 per cent over the past five years.

This month, the Queensland capital has posted its fourth consecutive month of subtle gains, with house prices rising by 0.9 per cent and unit prices rising by 0.8 per cent. The average asking price across the capital city is now sitting at $631,800.

Supply and demand

The combined capital cities saw more than 2,500 homes go under the hammer during the second week of November, up from 2,412 over the previous week, according to CoreLogic’s Market Activity Update.

Preliminary results show a clearance rate of 74.1 per cent, slightly higher than the previous week’s 70.6 per cent.

One year ago, 2,745 auctions were held across the combined capitals, with only 42.0 per cent returning a successful result.

In Brisbane, there were 13.3 per cent fewer properties sold in the last 12 months compared to the previous year.

The capital city also saw an average selling time of 59 days, higher than last year’s 38 days.

Vendor discounting is at an average of 4.6 per cent, also higher than last year’s 4.5 per cent.

Still, with migration rates lifting, supply under control and healthy levels of housing affordability, the fundamentals of the Brisbane property market look significantly healthier than most of the other capital cities.

The underlying strong demand from both home buyers and investors at a time when yields are high and housing affordability is healthy also puts a floor under property prices.

Rental market

Meanwhile, Brisbane’s rental market has been relatively “soft” over the month due to an underwhelming economy, excess housing stock and low volumes of investment in residential real estate, according to Propertyology’s Simon Pressley.

In fact, Mr Pressley believes that the Queensland capital is back to “equilibrium status”.

“More recently, Brisbane’s reduction in residential construction, combined with an increase in internal migration, which is a by-product of housing affordability pressures in Sydney and Melbourne, has returned Brisbane’s rental market back to equilibrium status,” he said.

“Brisbane’s property supply levels are now supportive of a long-overdue property growth cycle.

"However, significant price growth will not occur without meaningful, private sector job creation first being produced.”

Hotspots

Despite challenges, Brisbane has been tipped as Australia’s newest investor hotspot, with properties within the 10-kilometre radius of the CBD predicted to boom as oversupply issues are expected to disappear soon, according to CoreLogic.

Mr Lawless said that properties just outside the Brisbane capital, in particular, offer excellent growth potential to investors.

“My first option would be buying a detached house within Brisbane, an established home within 10 kilometers of the CBD, at least 607 square meters of land, that’s your classic 24 perch block there,” according to him.

“And you’re going to be renting it out for 650 to 750 bucks a week, so classic 5.5 per cent yield. Really good value there. Values haven’t really moved too much in that bracket, and you got inherent scarcity there as well.”

Brisbane’s apartment construction may have peaked four years ago, but Mr Lawless said that some areas still stand to offer better buys than others.

Suburbs in the inner city such as West End, South Brisbane, New Farm, Teneriffe, Newstead are among the best options for investors, he said.

Pure Property’s Paul Glossop offered a similar sentiment, highlighting the potential of significant value growth in the freestanding established housing market.

“If I was in Brisbane, I’d be wanting to live in Brisbane or looking to downsize or buy my first home, I’d like it as that option. Still probably question whether four to 500 grand in that particular property in that market is the best place for my money at the stage,” he said.

While Brisbane’s growth has been subtle over the years, Mr Lawless said that investors would do well to take advantage of the affordability and the strengthening economy in the capital city.

“Look at the last 10 years, values have risen less than incomes. They drop like 1.5, 2 per cent per annum, mixed with some subtle rises, some subtle falls. So it’s a very affordable market, Australia’s third-largest city, very strong population growth,” Mr Lawless concluded.