Property market update: Brisbane, May 2022

But despite the Sunshine State capital continuing its growth streak, data showed that the heat from the property boom is also leaving the market.

“We are now seeing month-on-month price growth momentum in Brisbane start to slow, and this is something we have been expecting for some time,” Melinda Jennison, the managing director of Streamline Property Buyers, said.

The local expert added that “with the pace of growth experienced throughout the later months of 2021 across Brisbane, we knew this was simply not sustainable”.

CoreLogic research director Tim Lawless said that while there was much buzz about the impact of rising rates on the property market, it’s “only one factor causing growth in housing prices to slow or reverse”.

As of writing, the Reserve Bank of Australia has hiked the official rate by 0.25 per cent in May and 0.50 per cent in June as the regulator looks to get inflation under control and the economy on track.

Mr Lawless explained that it’s “important to remember housing market conditions have been weakening over the past year, at least at a macro level”.

And with the RBA slated to steadily increase the cash rate through the rest of 2022 and into 2023, Mr Lawless forecast that the declines in housing values would be more widespread as mortgage rates trend higher and demand becomes weaker.

Meanwhile, PropTrack economist Paul Ryan stated that while the city will also see the same slowing growth as its peers as the year progresses, Brisbane will continue to outperform other capital markets.

“Brisbane looks set to continue to see strong conditions over the coming period” – relative to other capitals, that is,” he stated.

He cited the wider growth trend the city recorded during the last 12-month period. “[Brisbane has] grown 26 per cent over the past year. At the end of 2021, the annual pace was 30 per cent, so there’s a bit of slowdown there, but nowhere near the slowdown of other capitals which have fallen in the last few months,” he said.

Mr Ryan said Brisbane’s solid gains in the past year made it “the strongest of all housing markets across the country”.

“It’s more a statement of relative performance,” Mr Ryan further explained.

He added that Brisbane would continue to “do well” as it continues to benefit from the preference shifts – particularly to lifestyle locations and towards more affordable regions – that the market is currently seeing.

How will Brisbane fare in the shifting market waters? For now, let’s see how the Queensland capital performed in May 2022.

Property values

The latest data from CoreLogic showed that Brisbane’s property values recorded a 0.8 per cent gain in May, significantly slowing down from the 1.7 per cent increase seen in April.

Brisbane also relinquished its title as the fastest-growing capital in May to Adelaide, where property values were up 1.8 per cent during the period.

Commenting on the figures, Ms Jennison stated: “This further supports the fact that the Brisbane market is cooling, and instead of rapid price growth, the city is now moving at a steadier pace.”

Despite the Queensland capital losing some steam month on month, it is still performing relatively well compared to its southern counterparts on a quarterly basis. Over the last three months, the city’s growth is up 4.6 per cent. For comparison, both Melbourne and Sydney’s quarterly growth were in the negative territory during the same period.

Compared to the same period last year, the median price tag for a property in the city is up by 32.6 per cent, the biggest 12-month growth among capital cities. This brought the median price for all dwellings in Brisbane to $779,895, representing a month-on-month price growth of more than $9,000.

Brisbane’s housing market similarly posted a 0.8 per cent growth in May, slowing down from the 1.7 per cent increase seen in April.

On an annual basis, the average value of detached houses is up 30.2 per cent, with the median price currently standing at $885,633. The figures represent a monthly price increase of $5,301.

For units, the sector saw a 1.2 per cent increase in May, slowing down from the 1.4 per cent gain in April and the 1.6 per cent recorded in March.

The 12-month growth for units across the city is now 15.7 per cent, bringing the current median unit price to $498,521, which is $10,500 more than one month ago.

With the average unit in Brisbane worth about 56 per cent of the value of an average house, Ms Jennison said that: “We expect that this will change as the unit market maintains growth momentum in the months ahead, whilst the rate of growth in the housing market throughout Brisbane slows.”

Meanwhile, a separate analysis of Australian home price growth by PropTrack showed Brisbane has bucked a nationwide 0.11 per cent fall in home prices in May.

Data from the REA-owned group showed dwelling values in the city were up 0.35 per cent in May, a strong showing compared to negative results in Sydney (-0.29 per cent), Melbourne (-0.27 per cent), Hobart (-0.05 per cent), and ACT (-0.12 per cent).

The only capital at par with Brisbane’s performance was Adelaide, which posted a 0.58 per cent gain in property values during the month.

Supply and demand

While there is much talk about how the rising rates and climbing inflation have the same effect on all markets, Ms Jennison said it’s market fundamentals – particularly supply and demand – that are dictating growth trends.

“The reason we are now seeing some markets around Australia perform differently [from] others relates to property market fundamentals. News commentators would have you believe that rising interest rates and higher levels of inflation, for example, will impact all markets in the same way. But this is simply not true,” she said.

The local expert stated that some capital city housing markets are now in decline due to a combination of factors that have led to higher supply and lower demand.

“When supply outstrips demand, prices fall. The opposite is true as well. When supply is low and demand is high, prices rise.

“In Brisbane, we have a low supply environment. Whilst our market has the same headwinds as other markets around Australia in terms of rising interest rates and higher inflationary pressures, we also have higher demand,” she explained.

Citing data from CoreLogic, she said that total advertised stock levels in the city are currently standing 38.2 per cent below the five-year average.

“This is a fundamental difference between the Brisbane property market where prices are still growing, and other capital city markets, where prices are now in decline,” she stated.

Separate data from SQM Research showed that total residential property listings in the Queensland capital fell by 1.7 per cent month on month from 18,623 in April to 18,313 in May.

Compared to May 2021, the number of available stock in the city is down by a staggering 22.1 per cent, the biggest annual decline in listings among capital cities.

New listings (or properties that have been on the market less than 30 days) in Brisbane declined by 0.7 per cent from 7,978 in April to 7,919 in May. Compared to the same period last year, new listings in the Queensland capital are down by 5.3 per cent.

Data showed that old listings or property listings over 180 days also fell by 5.5 per cent from 2,067 in April to 1,954 in May. Brisbane was the only capital city to see a drop in old stock during the month, indicating strong absorption rates in the city.

On an annual basis, old housing stock in the city is down by 57.3 per cent.

Commenting on the monthly figures, managing director of SQM Research Louis Christopher said that new and total listings fell over the month of May “due in large part to the election with many sellers and buyers waiting on the market sidelines for the outcome”.

Further weighing in on the supply trend, Mr Crhistopher added: “A number of properties which were already listed struggled to sell over the month and that pushed up the counts of old listings – a phenomenon that happens during market slowdowns.”

Despite the traditionally quieter winter months ahead, the expert stated he expects listings to see an upward trend.

“Going forward, I expect a surge in new listings for this current month, even while we have now reached the quieter winter months. SQM Research has recorded a surge in new auction listings, hence why we have this view,” he stated.

On the demand side, Ms Jennison said that the market has “unique advantages” of very strong levels of interstate migration and relative affordability, making Brisbane more attractive to both home buyers and investors.

“Even with the rapid price increases over the last 12-18 months in Brisbane, compared to median values in other capital cities, our market is attractive for buyers looking to get more bang for their buck,” she stated.

She also noted the rapid increase in the number of property investors looking to take advantage of the opportunities that investing in Brisbane can deliver.

“Not only are investors taking a long-term view to capitalise on the fact that our city will be hosting the 2032 Olympic Games, but they are also looking at the yield opportunity as well. With vacancy rates at record lows, rents continue to rise and this creates a unique opportunity for investors to hedge against inflation,” Ms Jennison explained.

The local expert also touched on the changing buyer sentiment across the city. “We are starting to see a shift in the demand for some property types across Brisbane. For example, properties that need a lot of renovation or improvement work are becoming less popular,” she said.

She noted that the shift might be due to several reasons, including difficulties in locking tradespeople to complete renovations or the uncertainty around cost inflations associated with the construction industry as a whole.

“There may be some good buying opportunities for these types of properties in the months ahead,” Ms Jennison advised prospective buyers.

Auction markets

Auctions are markedly becoming a popular way to sell properties in Brisbane. Domain reported that a total of 711 Brisbane properties were scheduled to go under the hammer during the month, the highest number of auction listings for May since its records began.

Despite the impressive volume, the city did not escape the weakness in the auction market, as the city posted a 54.7 per cent clearance rate during the month.

Domain chief of research and economics Nicola Powell explained that clearance rates are an indicator of whether the property market is rising, falling, or remaining steady, with rates above 70 per cent pointing to an annual house price rise of at least 10 per cent.

Meanwhile, anything below 60 per cent broadly points to a fall in prices and a weakening market.

“Clearance rates have fallen below 70 per cent in all capital cities this month as a result of more homes on the market but reduced competition among buyers, highlighting the overall slowdown in the property market,” Dr Powell said.

She added: “The gradual shift to a buyers’ market could see a continual run of softening clearance rates, reduced choice among buyers and a change in seller price expectations.”

Clearance rates for units outperformed houses in Brisbane, with the sectors recording a clearance rate of 64.6 per cent and 53 per cent, respectively.

Brisbane’s median auction house price hit a record high of $1.21 million during the period, representing year-on-year growth of 19.5 per cent.

Separate data from CoreLogic showed that 783 auctions went under the hammer in the city, with a final average clearance rate of 57.7 per cent. The monthly average is down from the 63.4 per cent clearance rate out of 679 auctions recorded in April.

If you want to be in the loop about what’s happening across auction markets in the country, follow our weekly updates in our News section.

Vacancy rates

Brisbane’s rental crisis hit a new critical point in May, as the city’s vacancy rate fell further during the month.

Domain’s latest report showed that vacancy rates in the city stood at 0.6 per cent at the end of the month, down from the 0.7 per cent seen in April.

Dr Powell said the figures were a vote of confidence in the rental market recovery, as demand was now exceeding supply two years after the onset of the pandemic.

“This has resulted in the overall decline seen in 2022 and could see lower vacancy rates remain in the coming months,” Dr Powell said.

She further stated that rising interest rates and the slowdown in median home price growth are the biggest factors driving the rental crisis, with landlords trying to boost their returns by increasing rents.

The number of available listings in the city was down 4.8 over the month to just above 1,500, indicating that tenants are now scrambling over the meagre rental supply in the city and solidifying Brisbane’s status as a landlord’s market.

During the month, the areas with the highest vacancy rates across Brisbane and the Gold Coast were Jimboomba (1.5 per cent), Brisbane inner (1.4 per cent), Sunnybank (1.3 per cent), Mt Gravatt (1 per cent) and Brisbane inner – west (0.9 per cent).

Meanwhile, the areas where tenants will find it difficult to find a rental in the area were Caboolture Hinterland (0.2 per cent), North Lakes (0.2 per cent), Southport (0.2 per cent), Bald Hills – Everton Park (0.2 per cent), and Nerang (0.2 per cent).

SQM Research’s data showed that Brisbane’s vacancy rate also stood at 0.7 per cent at the end of May, with the total number of rental listings at 2,403.

Mr Christopher said that “there is nothing yet in the data that would suggest we are about to see a reprieve”.

“The national rental crisis continues on, unabated, and as a result, asking rents are skyrocketing,” he added.

Data from SQM showed that Brisbane’s combined rents have risen by 18.6 percent in the last 12-month period, with the weekly rents for houses and units at $559 and $610, respectively, after marginal gains over the month.

In response to the rental crisis in the city, Brisbane unveiled its new budget, which included a steep rate hike for property owners trying to make money off the short-term accommodation marketplace.

Rental market

The record-low number of rental vacancies in Brisbane has driven rent prices higher over May, according to Domain.

Data showed that the average house in the city is now listed for $602, while a unit was $428 at the end of the month.

The figures indicate a 21.7 per cent increase during the past 12 months in house rent prices and a 10.4 per cent growth for apartments.

According to Dr Powell, the record-high asking rents and reduced choice in rentals resulted in tightening conditions that continued to favour landlords. These conditions will also increase the likelihood of rental price rises after the reduction in rental prices seen during COVID, the expert said.

She further forecast: “The rise in investor activity, the arrival of overseas migrants, and the return of international students will see rental demand remain elevated, worsening conditions for tenants.”

Separate data from CoreLogic showed that Brisbane house unit rents had risen 12.8 per cent and 8.1 per cent, respectively, in the last 12 months.

Notably, the 12-month change in Brisbane house rents has been recorded as the strongest rental market growth, compared to every other capital city.

Outlook for Brisbane’s market

With the RBA set to steadily raise the cash rate through the rest of the year and into 2023 up to 2.5 per cent, most market experts predict a sharp decline in buyer demand over the next 12 months, which in turn will push down price growth the country.

For Dr Shane Oliver, the chief economist at AMP, the declines will be felt at varying rates across capital markets.

“Sydney, Melbourne and Canberra are likely to be hardest hit, Brisbane and Adelaide may hold up for a few months longer and Perth and Darwin may hold up better as Perth is only just above its 2014 high and Darwin is still below,” Mr Oliver stated.

Ms Jennison also believes that it will be interesting to see how the latest rate hikes, along with other market events, will impact Brisbane’s overall performance.

“Brisbane has been performing well across most segments of the market, but it is likely that we will start to see markets within markets once again,” she stated.

“As we transition into a different phase of the property cycle in Brisbane, we expect to see some locations and some property types perform better than others. Changing market conditions like rising interest rates impact some people more than others and we believe that some areas may be at risk,” Ms Jennison said.

To get a sense of how the market might fare in the period ahead, read our article on Brisbane’s performance during the last 50 basis points increase.

For more industry expert insights on the property market, check out our amazing podcasts. Also, make sure to check our News section for the latest property market reports, insights, news and useful tips and strategies for investors.

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