Buyers have turned up the heat again in Brisbane

Lending data – what does this tell us?

Lending data from ABS confirms that there is elevated borrowing activity, but most of this is refinancing. For new loans being taken out, the total value of new loan commitments for housing has declined 29.8 per cent between December 2021 and December 2022.

The number of first home buyers has slumped to 53.1 per cent lower than the peak in January 2021. The value of new lending to property investors was down 28.3 per cent year-on-year in December 2022. It is likely that new lending will continue to be impacted whilst the full impact of increasing interest rates flows through to households.

The composition of buyers in Queensland according to ABS Data seems to be unchanged from June 2022 through November 2022 with 22.5 per cent of borrowers being first home buyers and between 33.4 and 33.5 per cent of borrowers being property investors.

Auction data

Auction clearance rates in Brisbane, according to Domain, have almost halved in the first two reported weeks in 2023 compared to the same period in 2022. However, clearance rates are not always a reflection of the strength of the market. More often, they reflect the seller’s motivation to meet the market more so than the willingness of buyers to bid. The average number of registered bidders is increasing week on week in Brisbane according to Apollo Auctions data.

Sales volumes

Sales volumes year on year according to CoreLogic were down 19.3 per cent in Brisbane. For the last three months, sales volumes in Brisbane declined 36.5 per cent relative to the same period last year. This was evident on the ground when we reflect on the fact that most of us in the industry worked right through Christmas and New Year 12 months ago, whereas the industry had a well-deserved break this year. There were fewer listings and fewer buyers active at that time.

Whilst this data indicates that the market is not as strong as it was 12 months ago, there are signs that in Brisbane, we may have passed the worst of market conditions.

It appears that some momentum has left the downturn in Brisbane with quarterly trends clearly pointing to a reduction in the pace of median value declines across the city. The changes in value within different price segments of the market have not changed much over the last quarter with the top 25 per cent of property values still showing higher median value declines than the bottom 25 per cent of values. Based on this data it could be interpreted that the higher-value properties have been falling at a faster rate than the lower-value properties throughout Brisbane.

What we don’t have disclosed in this data is the volume of sales within each market segment in Brisbane and how the median value within each market segment is changing over the same period of time. This would help us to understand if these trends are more a reflection of what is selling, given that the median value is always the “middle score” based on a ranking from the lowest to the highest sale.  

What separates Brisbane from other markets across the country is the fact that new listings have dried up. With 44.4 per cent fewer new listings compared with the same period 12 months ago, there are very few options for buyers to choose from in the Brisbane market right now. This is not quite double the fall in new listings compared to all other locations throughout Australia.

Dwelling values in Brisbane

Price falls in Brisbane have been described this month as being the fastest pace of price falls in more than a decade. Whilst this reflects overall dwellings data based on CoreLogic information, not all data correlates with this.

Even so, price adjustments must always be considered in conjunction with the preceding gains. In Brisbane, from COVID-19 through to the peak, our market experienced 42.7 per cent growth. The decline from peak according to CoreLogic is now 10.7 per cent, which means overall those who owned properties prior to COVID-19 have seen capital appreciation of 32 per cent.

According to the Hedonic Home Value Index by CoreLogic, Brisbane median dwelling values declined by 1.4 per cent throughout January 2023. This equates to a quarterly fall of 4.8 per cent and an annual change of -4.7 per cent. The median value for a dwelling in all of Greater Brisbane is now $698,204.

The alternative view reported by PropTrack data is that in January 2023, Brisbane dwelling values declined only 0.7 per cent with an annual reported change of -0.24 per cent. PropTrack data put Brisbane’s current median value for a dwelling at $716,000.

Brisbane’s house values

Throughout January 2023, house values declined more than unit values in Greater Brisbane, according to CoreLogic data. It was reported that the monthly change for the median value of a Brisbane house was down 1.6 per cent. The median value for a house in Greater Brisbane according to CoreLogic is now $773,509.

House values according to PropTrack data declined 0.13 per cent in Brisbane in January 2023. PropTrack places the median value for a house in Greater Brisbane at $798,000.

Brisbane unit values

The change in values in the unit market in Brisbane has been a lot less severe than in the housing market according to CoreLogic data. In January 2023, units declined only 0.2 per cent with annual value changes still up 5 per cent higher. The median value for a unit in Greater Brisbane according to CoreLogic is now $489,769.

PropTrack data also shows annual growth in the unit segment of the market in Brisbane with 5.52 per cent growth reported. In January, this data demonstrates positive growth of 0.33 per cent for Brisbane units and a median value of $544,000.

We remain uncertain about why each data set reports different results month-to-month and assert our position that on-the-ground observations must also be relied upon to come to a determination about what is really happening at a local level.

Brisbane rental market

The rental market in Brisbane is still extremely tight with vacancy rates still well below long-term trends. Whilst we observed a small increase in December 2022, up to 1.1 per cent from 0.8 per cent in November, this is likely to be a seasonal trend. Many tenancy agreements expire in the peak season at this time.

With vacancy rates still tight, we are seeing rents continue to increase. Combined with property values trending down, it is good news for investors given gross yields are improving month-to-month.  

Gross rental yields for houses in Greater Brisbane are now 4.1 per cent and for units, it is higher at 5.3 per cent according to CoreLogic. Whilst investors may have been feeling the pinch with higher costs associated with rising interest rates, it appears that rent rises could be offsetting some of those costs across the board.

Rents have increased by 12.5 per cent in Brisbane for houses and 15.3 per cent for units across the last 12 months. This is a significant price shift for tenants, many of who may be reaching affordability caps with this rate of increase in living costs. In the absence of any improvement in the immediate supply of rental accommodation, we do not expect to see much slowdown in this space in the immediate future.

Summary

Based on the data presented, it would be easy to assume that the Brisbane property market is pretty flat right now. However, this is not what we are seeing on the ground.

Normally, at the start of any new year, activity on the ground is subdued until after the Australia Day Public Holiday on 26 January. This year was different. From the first open homes held by agents across the city, we observed heightened demand for properties from buyers. These observations have been seen across the board with agents reporting an increase in the number of buyers attending open homes, an increase in the number of people attending auctions, and an increase week-to-week in January in the average number of registered bidders per auction. Whilst this might indicate more buyers have become active, we are not yet certain if this also means stronger prices.

There has been a lot to be uncertain about in recent months in the Brisbane market. Consumer confidence is still very low and both buyers and sellers struggle to make big decisions like buying or selling a property when they are not feeling confident about the direction of the market. We notice shifts in buyer behaviour when sensational media headlines hit the papers. Big media messages can really impact consumer behaviours regardless of whether the reported information is factual or not.

We observed a gradual increase in the attendees as open homes from August through to the end of 2022, but this did not necessarily correlate with increased urgency or increased competition. In the October market update last year, we suggested that buyers were sitting on the sidelines getting ready to pounce. They had started to look, but not buy. People often start attending open homes to familiarise themselves with what might be happening in the market before they are ready to transact.

The weeks ahead will help us to determine the direction of the market. We feel that there has been a shift in buyer sentiment; however, with further interest rate rises pending, this may or may not be short-lived. Next month, we may have more clarity as we move through another few weeks of activity to monitor what the sentiment is like throughout the city.

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