May’s astonishing property price surge shakes up Brisbane

The availability of stock is the biggest concern for buyers in the Brisbane market. City-wide, the flow of listings in Brisbane is tracking 26 per cent below the previous five-year average, according to CoreLogic. Additionally, for-sale stock levels in Brisbane are 39 per cent below average. At the same time, housing demand is slightly above the previous five-year trend. This mismatch between the number of properties available for sale and the number of buyers in the market is causing an element of fear of missing out (FOMO) to creep back in for some buyers.

Some suburbs are demonstrating tighter supply than others, with some of the biggest decreases in new listings on realestate.com.au occurring in Clayfield (-66 per cent YoY per cent), Petrie (-63 per cent YoY per cent) and Kangaroo Point (-60 per cent YoY per cent). At the same time, other suburbs have seen listing volumes increase over the last 12 months. These locations include Aspley (+150 per cent YoY per cent), Greenbank (+50 per cent YoY per cent) and Jimboomba (+47 per cent YoY per cent). Local dynamics like this can have an impact on the performance of different segments of the Brisbane property market, so it is always useful to understand that not all Brisbane locations will follow the broader trend.

The competition is also causing days on market to trend lower, meaning properties are starting to sell quickly once again. It is very common for properties listed by private treaty sale to have multiple offers after the first Saturday open home. Brisbane buyers are once again compelled to be fully prepared for a purchase, often before inspecting. This means completing thorough property due diligence, pricing analysis and having advanced financing arrangements already in place.

The demand for Brisbane properties is coming from local, interstate and overseas buyers. Interstate migration is still very strong off the back of the post-COVID-19 boom, with southerners looking for a more affordable, warm and laid-back lifestyle. Also, according to PropTrack, Brisbane is one of the top five regions within Australia searched by international buyers from the United Kingdom, the United States, China, Hong Kong, New Zealand and Singapore. With the push for skilled migration, based on real estate search behaviours, it seems Brisbane is a destination of choice for many international migrants.

Apollo Auctions reported auction activity in Brisbane during May increased, with an average of 3.9 registered bidders per auction, which was up from 3.5 during April. On average, 60.3 per cent of registered bidders were actively bidding during auctions in May, compared to 53.5 per cent in April. Domain auction clearance rates came back slightly during May to 57 per cent, compared to 62 per cent in April. This is not due to the depth of buyers based on the volume of registered bidders, but perhaps due to seller’s expectations being ahead of the market.

It is not a surprise that property prices have surged during May as the mismatch between supply and demand in Brisbane continues to escalate.

Brisbane dwelling values

CoreLogic data showed a jump in dwelling values in Brisbane of 1.4 per cent in May, with quarterly growth now up 1.8 per cent. All segments of the market grew strongly, with a more rapid recovery in property prices being seen in the most expensive quarter of the market.

Source: CoreLogic

PropTrack also confirms positive price growth in Brisbane dwelling values in May, with prices 0.33 per cent higher across the month.

Source: PropTrack

House prices in Brisbane

House values grew 1.5 per cent in Brisbane in May, which was a large jump off the back of 0.2 per cent growth in April. The difference between last month’s median value and the median value this month is $10,244, which represents four weeks of market movement.

Source: CoreLogic

PropTrack data also confirms price growth in Brisbane houses for the month, with a 0.22 per cent increase reported over the month.

Source: PropTrack

Brisbane unit values

Units across Greater Brisbane grew 1.1 per cent in May. It is the first month since April 2022 when the housing market has outperformed the unit market in Brisbane, according to CoreLogic data. Units continue to outperform houses when looking at both quarterly and annual growth indicators.

Source: CoreLogic

Data by PropTrack also confirms growth in the unit market in Brisbane for May. This data shows 0.99 per cent price growth in the unit sector, which suggests that units are still performing stronger than houses across Greater Brisbane.

Source: PropTrack

Both units and houses have demonstrated month-on-month growth over the last three months in Brisbane, according to CoreLogic. The graph above shows the rapid recovery in the change in property values following several months of negative growth in median values throughout Brisbane.

Brisbane rental market

The rental market across Brisbane remains tight, with vacancy rates at 1 per cent for all dwellings throughout the city. The unit market is tighter than the housing market with vacancy rates, according to CoreLogic, sitting at 0.7 per cent and 1.3 per cent, respectively. These are well below the 10-year average vacancy rates for the city. These are 4.1 per cent for units and 3 per cent for houses across all of Greater Brisbane.

Source: CoreLogic

The tightening of vacancy rates in Brisbane has been caused by a combination of a reduction in the supply of rental properties along with heightened demand. More people have been needing rental accommodation off the back of record interstate migration in the post-COVID-19 period and also the reopening of the international borders.

It appears that many property investors decided to sell out of the market during the latter months of 2021 and early 2022, with a higher-than-normal spike in the number of properties assumed to be investment properties hitting that market at that time. According to CoreLogic, at its peak, it was assumed that up to 41.3 per cent of properties being sold were investors off-loading. At the same time, the lending data confirmed that the buyers were largely those looking to purchase their home. So the net effect was a reduction in rental property supply.

Source: CoreLogic

Additionally, the number of advertised rental properties in Brisbane is almost 40 per cent below the previous five-year average. This is further confirmation that the supply of rental properties is supressed, at a time when more and more people are relocating to Brisbane and needing a place to call home.

Source: CoreLogic

As a result, rents are still increasing. Rental price growth is higher in the unit market compared to the housing market. Unit rents have grown 16.4 per cent in Brisbane over the last 12 months, and this growth still appears to be close to the peak rate of growth. House rents have grown 9.4 per cent over the last 12 months; however, the growth in rents in this segment of the market now appears to be slowing down month to month, perhaps due to some areas reaching affordability constraints.

Source: CoreLogic

Summary

On-the-ground buyers appear to have regained confidence, especially in inner-city and middle-ring locations. The market has turned around quickly, but the uncertainty remains regarding the direction of interest rates in the months ahead. It appears that buyer confidence picked up a lot at the time that interest rates paused in April, but it is possible that any further hike in interest rates in the months ahead could induce some further fear and uncertainty for buyers and consequently impact on confidence.

There is still little evidence of forced selling in Brisbane due to mortgage arrears; however, this is unlikely to be a uniform effect across all locations. Lower-income earning areas are more likely to feel the impact as higher-income earners generally have more of a buffer to withstand higher holding costs.

It’s important to note that unemployment remains historically low. This is reassuring, given it is less likely that we will see forced selling if people coming off fixed-interest rates have a job. It simply means most people will be able to afford to keep their properties with some lifestyle changes in their spending habits.

The future still looks stable for Brisbane property, despite the headwinds. There are low volumes of properties to buy and low volumes of properties to rent at a time when demand is heightened. This fundamental mismatch between supply and demand will continue to support price growth in the months ahead.

Melinda Jennison – Streamline Property Buyers