Property market update: Brisbane, August 2020

Melbourne, in particular, has been bearing the brunt of price changes, with -4 per cent coming off the value of houses and -2.2 per cent off units over the last three months, with stage 4 shutdowns further impacting the Victorian capital.

On the contrary, in Brisbane, despite small cluster outbreaks from time to time, the strict border control measures appear to be keeping the virus under control, according to Brisbane-based buyer’s agent Melinda Jennison.

“Most of us are able to return to the labour market, sentiment is fairly strong and we seem to be able to move around with a certain degree of freedom. This is all very positive for our local property market as well,” she said.

While there remains uncertainty brought about by the looming easement of JobKeeper and JobSeeker payments and discontinuation of mortgage repayment deferrals, Ms Jennison remains confident that Brisbane will continue to weather the storm.

She explained: “Queensland makes up approximately 17 per cent of the total number of NAB home loan facilities and 16 per cent of the total home loans that have been deferred across Australia. Compare that with NSW/ACT, which makes up 38 per cent of the total portfolio but 40 per cent of the total deferrals, and Vic/Tas, which makes up 31 per cent of the total portfolio and 32 per cent of the total deferrals.”

“This provides a greater level of confidence for property owners and property buyers in Brisbane, given our exposure is a lot less than other locations around Australia.”

Moving forward, Brisbane affordability and low income-to-debt ratio will allow the capital city market to thrive amid the “new normal”.

“Property markets around the country are all responding differently as a result of the pandemic, and at this stage we remain optimistic about the performance of Brisbane in the months ahead,” Ms Jennison highlighted.

Property values

The latest Corelogic data showed overall dwelling values in Brisbane declining by -0.1 per cent, with most of the decline coming from the unit sector, down -0.3 per cent, while houses remained stable.

Since January, Brisbane house values have reported an increase of 1.6 per cent despite the pandemic, yet unit values have slipped -1.8 per cent.

Median house value is currently recorded at $557,969 while median unit value is at $387,672.

Rental market

Data analysis by CoreLogic has revealed that there has been a significant increase in rental stock around inner-city areas around Australia, particularly in Sydney and Melbourne, since the onset of the coronavirus pandemic.

According to CoreLogic’s head of research Eliza Owen, the regions with significant accumulations in rental stock have exposed many of the “pain points” spurred by the COVID-19 downturn, particularly the “gaping hole” in housing demand due to international border closures.

“The dominance of Sydney and Melbourne with regards to heightened rental supply highlights the much-localised nature of the shock to rental demand that has been seen since the onset of the pandemic,” she said.

She added that these trends have been placing downwards pressure on rents and upwards pressure on vacancy rates.

CoreLogic has analysed the increases in rental stock by SA4 regions, which are defined by the Australian Bureau of Statistics (ABS) as broad regions of 100 to 300,000 people, counted in the 28 days leading up to 15 March, the week in which Australia recorded its 100th COVID-19 case, compared with that counted in the 28 days to 9 August.

Of the 88 SA4 regions measured across the country, 78 regions declined in the volume of rental listings between these days.

Across the 10 regions that have seen a rise in total rental stock, eight were across Sydney and Melbourne, while rental stock also rose in inner-city Brisbane and Adelaide Central and Hills.

These 10 SA4 regions that have seen a rise in rental listings between March and August together comprised 29.1 per cent of the net overseas migration to Australia over the year to June 2019.

Despite the rise in rental stock, Ms Jennison maintained that Brisbane’s rental market has remained resilient over the past few months.

SQM Research has shown that, after an initial spike from March to April 2020, vacancy rate at a city level continues its downward trajectory.

According to Ms Jennison: “Since then, rental markets have tightened, with many markets across greater Brisbane experiencing the tightest vacancy for many years. We are also seeing multiple applications from prospective tenants being submitted on properties for rent, illustrating the shortage of quality rental properties available.”

However, there remain some “at risk” locations in certain pockets of Brisbane, she said.

For instance, postcode 4000, which includes the Brisbane CBD, has a local vacancy rate of 13 per cent, which is extremely high risk for an investor who may be looking at buying into that market.

Supply and demand

According to SQM Research, listing volumes are still 9.7 per cent lower in Brisbane than they were 12 months ago, and in the last month alone, between July and August 2020, listing volumes were down a further 5.1 per cent.

In August, Brisbane recorded a total of 28,995 housing stock on market, down from July’s 30,500 and August 2019’s 32,059.

“We expect transaction volumes will remain low for some time yet, simply due to limited supply,” Ms Jennison said.

In terms of auction volumes, CoreLogic’s preliminary figures showed Adelaide recording the highest preliminary clearance rate for the week at 83.9 per cent, followed by Canberra with a preliminary clearance rate of 75.9 per cent.

The combined capital city preliminary auction clearance rate improved across a higher volume of auctions overall, CoreLogic found. For the week concluding 30 August, there were 1,163 homes taken to auction over the week, up on the 1,064 the week prior.

Of the 837 results collected so far, 67.7 per cent were reportedly successful, which was higher than last week’s preliminary figure of 64.7 per cent, later revising down to 60 per cent at final collection.

This time last year a higher 1,615 capital city homes were auctioned with a final clearance rate of 70 per cent.

Expert advice

Following the release of research showing that Queensland’s rental market continues to face tight conditions, REIQ CEO Antonia Mercorella said that it’s become more necessary than ever for current and prospective buyers to consider the rental data, including vacancy rates, of the suburb they’re interested in.

According to her, while there’s evidence of longer-term renting of 10 or more years and some households facing the prospect of a lifelong tenure in this sector, figures suggest that the rental market has changed from its historical role as a transitional housing sector for people moving into home ownership or social housing to a long-term housing sector for a significant number of Queensland households.

“It’s for these reasons rental vacancies can actually act as a barometer that measures the health of our property market,” she said.

Ms Mercorella highlighted that vacancy rates are varied across the state.

For example, as the outer regions of our capital city currently highlight tight rental stock at a mean of 1.7 per cent, fluctuations are more pronounced from region to region – Ipswich (1.9 per cent), Logan (2.2 per cent), Moreton Bay (1.4 per cent) and Redland City (1.3 per cent).

Meanwhile, inside Brisbane’s five-kilometre city circle, the mean vacancy is 3.9 per cent – the state’s only “weak” rental market for the quarter.

However, when you drill down a little further into individual suburbs, postcode 4000 shows significantly higher vacancy levels (13 per cent) versus surrounding postcodes including 4005 (New Farm, Teneriffe – 2.6 per cent), 4006 (Bowen Hills, Fortitude Valley, Herston, Newstead – 7.9 per cent), 4059 (Kelvin Grove, Red Hill – 4.9 per cent), 4064 (Milton, Paddington – 3.3 per cent) and 4101 (South Brisbane, Highgate Hill, West End – 9.2 per cent), she explained.

At the end of the day, Ms Mercorella reminded investors that they are not buying into a city but buying into a suburb, which is why they need to understand that particular suburb’s vacancy rate now and in the future.

“For example, in Brisbane CBD we know the rental market has been hit harder due to the high number of renters facing financial stress due to change or loss of employment, a reduction in international tertiary students as well as permanent and temporary migrants, and a significant shift in short-term lets over to the longer-term rental market,” she said.

“It’s therefore likely we’ll see rents drop in the inner Brisbane areas, which in turn will result in tenants eventually returning to the city. However, much of it will also depend on the commercial and retail sector’s ability to rebound.

“It’s very much a ‘watch this space’ situation unlike anything we’ve ever experienced.” 

Hotspots

New research from realestate.com.au has revealed that Queensland property seekers are the most confident buyers in Australia. In Brisbane the suburbs with the highest views per listing according to realestate.com were as follows:

• Ashgrove Qld 4060
• Kalinga Qld 4030
• Chandler Qld 4155
• Holland Park Qld 4121
• Tarragindi Qld 4121
• Stafford Heights Qld 4053

According to Ms Jennison, these areas have strong demand from buyers with many properties going to multiple offers very soon after being listed.

“These are some of the areas that are outperforming, with upward pressure on prices. The high number of buyers, combined with limited listings, tends to have this effect,” she said.

For those wanting to build their own home, she advised: “Find near-city locations where it’s easy to demolish an existing home and create a clean slate. But the surburb must also have a wide price disparity between new and existing homes, gentrification, strong family-buyer demand and desirable attributes such as views.”

“It’s the magic formula that makes the figures work.”

Ms Jennison’s top six suburb picks for dream-home construction are:

1. Wavell Heights

“Wavell Heights has a huge price disparity where the difference from the entry price to the exit price is significant because the end product is so highly desired by the local buyer demographic,” Ms Jennison said.

“Wavell Heights is also the first suburb north of the CBD with limited numbers of character-protected homes, which means most older dwellings can be knocked down.

“It’s also an elevated suburb and some streets allow for city views. We are seeing rapid gentrification here with old homes transformed into brand-new large family homes. This continues to bolster value at the upper price point.”

2. Seven Hills

“Seven Hills is located five kilometres from the CBD and is the first suburb on the south-east not dominated by demolition-protected character residential. The entry price for an old house in this area is around $750,000,” Ms Jennison said.

“This pocket is family-friendly and is a small suburb that is only 1.8 square kilometre, so supply is limited, which helps keep end values high.

“It’s elevated, hilly topography provides opportunities for city views. Price disparity is also significant, making it easier to create instant equity from a new build.” 

3. Tarragindi

“There is plenty of new-build gentrification happening here, and it’s close to the new metro infrastructure that is coming to Brisbane, which is driving up price disparity,” she said.

“Multiple positions also have city views, and it’s highly desirable for families looking to knock down the older dwellings and build their dream home.

“Good access to desirable schools is also helping bring in families, and with a buy-in price for the older homes of $650,000, there’s excellent upside for new builds.”

4. Alderley

“In Alderley, you’ll find an array of different-sized blocks, solid retail facilities and great public transport options,” Ms Jennison said.

“Most properties aren’t demolition-protected, so having access to a large pocket of real estate just seven kilometres from the CBD to build your family home is a no-brainer.”

5. Corinda

“Corinda’s elevated streets – some with city views – are the start of its new-build appeal. Corinda has very little character-home protection so you can create an excellent homesite for building a dream home,” she said.

“Demand for Corinda feeds off the highly desirable suburbs of Chelmer, Graceville and Sherwood, which are areas with predominantly character-protected homes.

“By selecting the right position within Corinda, you can take advantage of the huge price disparity between existing and new homes.

“600-square metre blocks are achieving prices of around $650,000, but the median value of homes in this suburb is $850,000.”

6. Gordon Park

“The big sell for Gordon Park is its proximity to infrastructure and services. The busway, for example, has made commuting a breeze,” she said.

“The parkland lifestyle also attracts family buyers, which is bolstering the value of newly built homes relative to older stock.

“Finally, Gordon Park enjoys easy access to retail and lifestyle hubs such as the Lutwyche shopping district and Kedron Brook Road.”