Good news for Brisbane property owners: Values rise again for 2nd consecutive month
Brisbane has finally shown signs of passing the bottom of the market downturn, following a record-breaking streak of month-on-month median value declines. Since the start of 2023, the rate of price falls has rapidly recovered, with dwelling values experiencing slight increases for two consecutive months across the city. Despite potential headwinds in the coming months, most experts now predict that prices will continue to recover.
In April, when the Reserve Bank opted to maintain interest rates at their current level, it appeared to have a positive impact on the outlook of potential buyers. The decision helped to alleviate some of the uncertainty surrounding borrowing ability and mortgage expenses, enabling buyers to better gauge the purchasing power of their budget.
There were interruptions throughout the month due to Easter and Anzac Day holidays, but these did not seem to alter market activity. Buyer activity on the ground remained strong, and the market continued to pick up pace.
New listings tightened further during April, according to CoreLogic, compared to the month prior. New listings were down -22.5 per cent compared to the same period last year. The volume of sales across Brisbane also declined -22.3 per cent over the last 12 months, according to CoreLogic.
The decrease in sales is proportional to the decline in new listings, indicating that the properties listed for sale are finding buyers in the current market. Total listings were down only slightly by 1.8 per cent compared to the same period last year. There were 18,162 properties listed for sale in Brisbane during April. However, this number remains over 30 per cent below the monthly average of over 30,000 listings in 2019 and previous years, as reported by SQM Research. Supply is an ongoing issue, which has no doubt contributed to putting a floor under further property price falls.
In April, the Queensland government also introduced changes to the frequency in which landlords can increase the rent on their investment properties. As of 1 July, a lessor is not permitted to increase rent in a new lease if it was increased less than 12 months ago. Therefore, rental price increases that are more frequent than every 12 months are no longer permitted in Queensland.
In a rental report issued by the RBA, just over 70 per cent of all rental properties have lease agreements of 12 months or more already in place, so this is not likely to impact the majority of investors. It is, however, another small disincentive for property investors who have been hit with a number of proposed and legislated changes over recent years. It certainly does impact investor sentiment and, in turn, the number of investors willing to get into the market. This is especially true when a lot of the changes appear to be retrospective.
Despite these changes, the market appears to be getting stronger every week. Buyers are out in higher volumes at open homes. Auction attendance is strong, and bidder registrations remain elevated. Auction clearance rates have increased from a weekly average of 53 per cent across March to 62 per cent in April, according to Domain. For every property, there appears to be more than a single buyer, so demand is definitely outstripping supply. Fundamentally, this is what is putting upward pressure on prices once again.
Dwelling values in Brisbane April 2023
Brisbane dwelling values, reported by CoreLogic, increased for the second month in a row, with 0.3 per cent growth throughout April. This has also resulted in a turnaround in the quarterly growth for Brisbane dwelling values, which is now positive once again. The median value for a Brisbane dwelling is currently $705,016, which is $6,945 MORE than last month.
Source: CoreLogic
PropTrack data confirmed the same trend, with 0.14 per cent dwelling price growth reported throughout April.
Source: PropTrack
The price segmentation data for all dwellings from CoreLogic up to the end of March 2023 still shows that properties in the bottom 25 per cent of values are outperforming higher-value properties. In the first quarter of 2023, the lowest 25 per cent of property values that sold showed a decline in values of -0.6 per cent in Brisbane.
Alternatively, the top 25 per cent of properties that sold showed a median value price decline of -2.1 per cent.
One explanation for this is that units are typically filtered in the lower-value price segment. We know that the unit market has been outperforming the housing market in Brisbane over the last 12-plus months. There may also be some compositional bias based on what has been selling, with lower listing and sales volumes, and therefore a smaller volume of transactions would have contributed to this data.
Brisbane house prices April 2023
House values continue to recover in Brisbane, according to CoreLogic. With a further 0.2 per cent change in the median value throughout April, it is evident that prices have stabilised. Quarterly, house prices are still slightly down by -0.1 per cent, as reported by CoreLogic.
The median value for a house in Greater Brisbane is now $781,881, which is $9,861 MORE than last month.
Source: CoreLogic
PropTrack data also confirms this trend with 0.17 per cent growth in house values for April reported.
Source: PropTrack
Brisbane unit values April 2023
Unit price growth in Brisbane continues to outperform house price growth across the city. In April, CoreLogic data showed 0.9 per cent unit price growth, with quarterly data now demonstrating a 1.1 per cent increase in values.
The median value for a unit across Greater Brisbane is $498,374, which is $5,959 MORE than last month.
Source: CoreLogic
While CoreLogic data is reporting that unit values have outperformed house values throughout April, PropTrack data shows a different trend where units have retracted ever so slightly by -0.02 per cent.
Source: PropTrack
Rental market in Brisbane April 2023
There has been little change in the rental market across Brisbane throughout April. Vacancy rates remain well below 1 per cent across the city, an indication that supply is limited for most property types.
The change in rents has been more significant in the unit market over the last 12 months compared to the housing market. Unit rents in Brisbane have increased 16.5 per cent based on CoreLogic data, whereas house rents have increased 10.3 per cent. The level of escalation in rents across both segments of the market is well in excess of inflation, which is putting more stress on tenants who are having to find additional income to cover their cost of living.
Source: CoreLogic
This is becoming more problematic in some locations compared to others. Lower-income earners are finding a higher portion of their income is now being spent on housing, and rental affordability is becoming a more significant issue for many individuals and families.
For example, based on the last census data obtained by the ABS in 2021, suburbs including Caboolture, Deception Bay, Sandgate, Scarborough and Waterford West had a larger-than-average portion of their population who were spending 30 per cent or more of their take-home income on rent. This was before many of these areas experienced rental price growth in excess of 20 per cent. Paying more than 30 per cent of take-home income in rent is a benchmark that defines rental stress.
On the contrary, there are other areas, including Bardon, Camp Hill, Upper Kedron and Wilston, that have a much lower portion of their resident population who are in rental stress.
This is also an important consideration for property investors, given some locations are less likely to see further rental income growth. This is due to certain demographic groups simply not having the capacity to pay more, which will put a ceiling on how much further rents can grow in some locations.
Tenants may compromise on the property type they choose to live in by considering a smaller property, such as a unit of a townhouse, in the same location. The alternative is that they may have to consider shifting locations and changing where they live, which results in longer commute times and a shift in lifestyle.
It is possible that this has already been occurring, given the much higher growth in unit rent prices, possibly caused by a drive to more affordable options, which has increased the demand for this property type.
Summary
Overall, the outlook looks positive for Brisbane property owners but not so bright for tenants. The short but sharp downturn appears to be in the past.
While interest rates might be stabilising, or reaching their peak, there are other key drivers behind the current improved conditions.
With a striving economy in Queensland, it is not a surprise that the state ranks as one of the strongest across the country. In the latest CommSec State of the States report, Queensland ranks highly for its strong relative population growth and low levels of unemployment. These factors provide a level of certainty that will underpin property values in the months ahead, despite any headwinds.
With more and more people entering our state, this is putting more pressure on the rental market. Everyone who relocates from interstate or overseas needs somewhere to call home. Due to the very tight rental market, it is also possible that people will buy sooner if they can’t source appropriate rental accommodation.
Additionally, with employment prospects still strong across Queensland, it is apparent that anyone who needs a job has one. This will also ensure any potential distressed selling due to the anticipated fixed-rate mortgage cliff or seeing the full impact of higher interest rates carry through is likely to be contained.
Buyers who have been waiting for the Brisbane property market to hit rock bottom before making a purchasing decision may have missed their chance. However, with gradual and consistent monthly price changes, it’s never too late to enter the market, particularly if you are looking for a high-quality property that will continue to outperform others over an extended period.
Melinda Jennison, Streamline Property Buyers