Property market update: Brisbane, February 2022

Instead of Aussies bidding a quiet goodbye to summer, the entire nation was caught off guard as torrential rains sparked widespread flooding in Queensland’s south-east region throughout the last few days of the month.

Data showed that a staggering 887 millimetres fell in February – more than the nearest monthly high of 366 millimetres recorded in 2020. In three days alone, Brisbane received 80 per cent of its annual rainfall, Premier Annastacia Palaszczuk reported on 1 March.

She described the rain event as “bigger than 1974”, with more than 30 suburbs across the south-east pocket seeing more than a metre of rain.

The recent “rain bomb” swamped roads, claimed lives and livelihoods, inundated thousands of properties and rendered some suburbs in flood-prone zones uninhabitable in the wake of the disaster, Queensland authorities reported.

But despite the recent flooding being dubbed as one of the most extreme disasters in Australia’s history, industry figures believe that property prices in the Sunshine State capital are too resilient to falter.

Though the city’s market will face a hit in sale prices for properties affected by the flood, many agents and property analysts expressed their confidence any market downturn will be short, and followed by a quick recovery.

Domain’s head of research and economics Dr Nicola Powell said that while property prices in flooded areas could again take a short-term loss, Brisbane’s unshakeable market would ensure home values were resilient long term.

“There will be an impact – particularly if someone was flooded and they were looking to sell their home – but property prices are actually pretty resilient and it’s the land that holds the value,” Dr Powell opined.

“The floods are going to hinder some sales but we can’t disregard the position of the Brisbane market. The market is hot … there’s strong demand for properties and this puts Brisbane in a strong position to recover,” she added.

Also citing historical data, Pete Wargent, the co-founder of BuyersBuyers Australia, said that detached houses in the Brisbane region experienced a 25 per cent price increase in the five years following the 2011 floods. He predicts that this cycle will be repeated again after this year’s flooding event.

“Over the medium and longer-term, history shows that there will be a relatively insignificant impact on the housing market,” he said.

Real Estate Institute of Queensland chief executive Antonia Mercorella said that based on previous flood events around the region, it was likely there would be a “fairly immediate” dip in the sale prices for flood-affected properties.

“History has shown that we have a resilient property market, and there is still incredible demand for housing, and now a significant proportion of available stock will be taken out of both the sales and rental markets,” she said.

“We may find that sale prices and rents increase due to diminished stock levels. Additionally, unaffected suburbs may affect premium prices due to their ‘safety’ appeal.”

But Ms Mercorella also noted that it was difficult to predict how the natural disaster would affect demand, growth, and consumer confidence.

“What makes it even more difficult to predict, is that in some cases, the flood-affected suburbs are actually among some of the most prestigious pockets and there will always be a desire to live in inner-city suburbs or waterfront on the river,” she said.

Will the recent flooding pour cold water on the city’s growth? Or will its impact on Brisbane’s property market be just water under the bridge in the long term?

For now, let’s see how Brisbane performed in February 2022.

Property values

CoreLogic reported that dwelling values in the city rose by 1.8 per cent over the month. The monthly gain is lower than November, December and January, indicating a slowdown in the rate of growth across the city.

Despite the tapering growth, Brisbane continued to be the strongest-performing capital in February, marking the fourth consecutive month the city bested its capital market peers.

On a quarterly basis, Brisbane also led the capital city pack by recording a growth of 7.2 per cent over the period.

The Queensland capital also saw the highest annual growth rate across the capital cities, with housing values up 29.7 per cent.

The current median value for dwellings across Brisbane now stands at $722,433, representing a $15,893 increase in prices from January.

Adding to its monthly laurels, the Brisbane housing market also remained the top-performing housing market across all capital cities in February. Over the month, values for Brisbane rose by a further 1.9 per cent.

Taking a look at the monthly trend, the rate of growth has slowed down for the third month in a row, down from the November 2021 high of 3.2 per cent, followed by 3.1 per cent price growth across December 2021 and 2.5 per cent in January 2022.

But the Queensland capital continued to outperform all other housing markets, with Adelaide following behind with a 1.6 per cent gain during the same period.

Additionally, the slowdown in momentum also did not hinder housing values from hitting another new record high. The current median value for a house in the city is now at $828,175, the highest on record. The figures are also $18,362 higher month-on-month.

The 12-month change in the Queensland capital’s house prices is up 32.8 per cent, the strongest annual house price growth across all capital cities.

The unit market also performed strongly during the period, rising 1.5 per cent during the month. The figures are a slight step up from the 1.4 per cent growth seen in January.

Compared to the same period last year, apartment values have risen by 14.4 per cent. This brings the current median unit price in the city to $468,393, which is $10,244 more than one month ago.

Analysing the monthly data, CoreLogic noted that Brisbane’s middle segment of the market has now overtaken the top end of the market in terms of quarterly price growth.

For the past several months, the price growth was being led by the top end; however, CoreLogic underlined that this trend has now changed.

On a monthly basis, the growth in the top end of the market slowed because the top 25 per cent of property values across the city was at 9 per cent and it has now fallen to 8.3 per cent, according to CoreLogic.

Meanwhile, the middle 50 per cent of property values previously saw price growth up to the end of last month of 8.5 per cent, but this has increased slightly to 8.6 per cent this month. The lower segment of the market was previously at 7.2 per cent and is now at 7.3 per cent.

These results indicate that the only segment of the market that has started to slow in terms of price growth is the top end in Brisbane and will be a trend that market observers should keep their eye on, CoreLogic stated.

Supply and demand

Many experts are optimistic that Brisbane will weather the recent flooding catastrophe due to the tight supply and demand dynamic in the city’s market, as strong interstate and international demand, coupled with the low number of properties available to buyers, is seen to underpin the city’s growth.

SQM Research’s data showed total listing volumes in the city rose by 4.7 per cent in February to 16,804 from 16,057 in the previous month.

Despite the monthly increase, Brisbane was the biggest decliner in total stocks among capital cities at an annual rate. Compared to 12 months ago, total listings have fallen by 31.8 percent.

Brisbane’s new listings (or properties that have been on the market less than 30 days) saw a 51.8 per cent increase over the month from 5,137 to 7,796. Year on year, new listings in the city are down by 8.4 per cent.

Meanwhile, data revealed that old listings or property listings over 180 days also fell by 2.3 per cent from 2,262 in January to 2,211 in February. On an annual basis, old listings in the city have fallen by 62.8 per cent, the steepest annual decline among capital markets.

According to CoreLogic, the advertised inventory levels help explain the divergence in housing growth trends across capital cities.

CoreLogic’s research director Tim Lawless pointed out that Brisbane and Adelaide are the two capital cities with the lowest total supply right now, whereas Sydney and Melbourne have returned to more normal supply levels.

“The cities where housing values are rising more rapidly continue to show a clear lack of available properties to purchase,” Mr Lawless explained.

He further expounded: “Total listings across Brisbane and Adelaide remain more than 20 per cent lower than a year ago and more than 40 per cent below the previous five-year average.”

In terms of demand, the flood naturally sparked many prospective buyers’ fears about purchasing properties in the city. In the immediate aftermath of the latest floods, agents reported a decline in inspection numbers while buyer concerns escalated.

But local experts say that it will take more than rain to dampen demand in the city. Real estate agents have also revealed that the influx of interstate and international clients looking to buy Queensland properties since last year has not stopped when the floods hit the region.

Melinda Jennison, the managing director of Streamline Property Buyers, said that while it is “too early to tell” how the market will shape up, the local expert forecast that some buyers would wait on the sidelines to see the full impact of the recent flooding on property values.

“In terms of demand, it is possible that the buyers who are already in the market will be more focused on non-flood impacted properties, and we could possibly see a heightened level of demand for these locations as buyers become more concentrated to higher areas within a suburb,” she said.

“Events like this can often affect confidence levels in buyers, especially for those who may not know the local areas well or not understand how to conduct all of the necessary due diligence,” she conceded.

But the local expert remains optimistic that compelling market dynamics in Brisbane will drive demand for the city’s housing market.

“Now with international borders open, we are also able to see international migration, which means more people will need somewhere to rent or buy,” she explained.

Additionally, she underlined that the 2032 Brisbane Olympics would be an enduring factor in long-term housing market confidence.

Ms Jennison also highlighted Brisbane’s greatest trump card: the city’s affordability. “We are still one of the most affordable cities to live in within Australia, and our climate and lifestyle [remain] one of the most sought after in the country.

“There are still a lot of reasons to believe that the demand for Brisbane property, especially flood-free property, will remain strong through the months ahead,” she concluded.

Auction markets

CoreLogic reported that over February, a total of 828 properties went under the hammer in Brisbane, with a final average clearance rate of 67.75 per cent.

Over the period, CoreLogic revealed that Brisbane held the title of busiest smaller capital for four consecutive weeks, seeing a weekly average of more than 200 auctions.

Meanwhile, Ms Jennison reported that competition at the top level remains fierce and that the depth of buyers competing for quality family homes in blue-chip locations remains high.

“At the top end of the market, most properties are selling by auction with multiple registered bidders. Properties in the middle and lower end of the market in Brisbane are still being sold with multiple offers across the areas in Brisbane,” she said.

Ms Jennison added that even properties that are not listed on the main real estate portals (or are transacting off-market) had received multiple offers.

“The market conditions are still in favour of the seller, with more than one buyer for every property that becomes available,” she commented.

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.

Rental market

Over February, SQM Research reported that Brisbane’s asking rents grew by 1.10 per cent for houses to $562 per week, and 0.30 per cent for units, reaching $403 a week.

Compared to the same period in 2021, rents for houses and units in the city have risen by 18.20 per cent and 5.4 per cent, respectively.

SQM Research managing director Louis Christopher said that the rental price growth is expected to surge over the year due to “an acute shortage of rental properties”.

“[The] shortage has already been translating into large surges in weekly rents across the country. It is now very likely market rents will rise by over 10 per cent this year,” he stated.

Adding to the city’s rental supply conundrum, REIQ has also warned that the recent flooding crisis will add pressure on the state’s already strained rental market.

“The timing of this major flood event couldn’t be worse – It will displace tenants and owner-occupiers and diminish levels of rental stock at a time when we are experiencing incredibly tight vacancy rates across all corners of the state,” REIQ chief executive Antonia Mercorella said.

She said the recent catastrophe would worsen the state’s rental crisis and put an “enormous amount of stress” on tenants and on property managers who have already been facing difficulties caused by the pandemic and undersupply issues in the last two years.

For more information on how the flooding would affect NSW and Queensland’s rental market, read our related article: Floods worsen rental crunch.

Meanwhile, CoreLogic data showed that on an annual basis, both house and unit rents in the city rose by 11.3 per cent and 6.5 per cent, respectively.

With the pace of growth in housing values softening while rental growth holds reasonably firm, CoreLogic noted that the national level of gross rental yields stabilised during the month at 3.2 per cent.

Gross rental yields for dwellings across all of Brisbane, according to CoreLogic, stood at 3.6 per cent throughout February, unchanged from the previous month.

Vacancy rates

Brisbane remained a landlord’s market in February, as Domain reported that the Queensland capital’s vacancy rate further tightened from 1 to 0.8 per cent over the month.

The areas with the highest vacancy rates were Brisbane Inner (2.1 per cent), Sherwood – Indooroopilly (1.9 per cent), Brisbane Inner – West (1.7 per cent), Nathan (1.7 per cent), and Jimboomba (1.5 per cent).

Meanwhile, the areas with the lowest vacancy rates were Strathpine (0.1 per cent), Gold Coast – North (0.2 per cent), Nerang (0.2 per cent), Gold Coast Hinterland (0.2 per cent), and Bald Hills – Everton Park (0.2 per cent).

But with the city at its lowest recorded vacancy rate since 2017, the aftermath of floods across the city is set to tighten the screws further.

As Brisbane faces a growing rental crisis, REIQ has called for the release of investment properties onto the long-term rental market as the state reels from the devastation caused by the flood and homelessness soars.

Ms Mercorella revealed that there are approximately 200,000 properties currently in Queensland that are either vacant or used for short-term and holiday-letting purposes.

“As we have seen, the catastrophic floods have resulted in thousands of rental and owner-occupied properties impacted by the floods, further reducing rental stock,” she said.

“At the same time, displaced tenants and owner-occupiers are now hitting the market desperate for alternative accommodation, adding to the already unprecedented demand for long term rental accommodation.

“It is difficult to see any way that this wave of demand can be met without the support of property owners moving their properties to the long-term rental market.”

Commenting on Domain’s claim that the country is on the precipice of a “rental crisis”, Mr Christopher said that due to the very low vacancy rates and its declining trend over the last few months, rents across Australia are expected to continue rising.

“We could see rents in some areas rise between $3,000-6,000 per annum – which would be no small thing at all,” Mr Christopher said.

“It is not normal, and it is not healthy for six of our eight capital cities to have vacancy rates below 1 per cent – this indicates that Australia’s seeing a crisis for rental properties.”

Head of research and founder of InvestorKit Arjun Paliwal said this could be exacerbated by international borders opening.

“It’s going to be harder for people to find properties and also going to mean people are going to likely stretch themselves a bit more,” Mr Paliwal commented, adding: “It’s going to get worse before it gets better.”

Outlook for Brisbane’s market

So what lies ahead for Brisbane’s property market?

PRD chief economist Dr Diaswati Mardiasmo has joined the chorus of experts that hypothesise the flood-induced downturn will be short-lived, based on what unfolded in 2011.

He said that while the floods might temporarily shake market confidence, Brisbane had seen extraordinary property price growth since the emergence of COVID-19 in the country, with even more to follow in the lead-up to the 2032 Olympics, which were awarded to Brisbane last year.

“Historical data suggests that even in the most flood-impacted suburbs, property prices have continued to trend upwards, with a dip only experienced in the year after the floods,” Dr Mardiasmo said.

Ahead of the most recent flooding, real estate research analyst Terry Ryder pointed out that Brisbane was leading the charge in annual property price growth across the country.

Prices rose 8.5 per cent in the quarter to 31 December 2021 – the strongest growth of all states and territories.

Mr Ryder said the disaster might have a “psychological impact” on those who were “poised to buy” in the city, but he also said it would recover quicker than it did following the 2011 floods.

“It will take time for the market to absorb the impact of this, but I think ultimately there will be recovery and Brisbane will march on. There was extraordinary momentum behind Brisbane as a city and as a property market leading into this,” he stated.

Mr Ryder said large spending by the government on infrastructure projects and associated projects coupled with the upcoming 2032 Olympic Games would likely encourage growth again, and the flooding could actually spark a “mini-boom” in the local economy.

“Ironically, it [a natural disaster] can precipitate an economic boom or a mini-boom, because people who are impacted receive the insurance payouts and spend money on recovery, renovation, and rebuilding,” he said.

The expert added that the government would be pouring more funds into the development of infrastructure projects and associated projects to help prevent and mitigate similar events from happening in the future.

Despite his generally positive outlook for the city, Mr Ryder said the recent flooding was likely to take some of the heat out of the property market.

“Brisbane had been incredibly competitive, with property selling very quickly for higher-than-expected prices,” he said.

“A little bit of that heat is going to be sucked out of the market because of what’s happened. That’s perhaps an opportunity for people who are planning to buy in Brisbane to buy with less competition.”

Meanwhile, there are also property experts that are more cautious in their pronouncements of the city’s long-term growth trajectory after the flood.

A recent report by CoreLogic showed Brisbane’s dwelling values took several years to recover after a price drop following the 2011 floods.

The report showed that Brisbane’s property values fell by 6.1 per cent between January 2011 and January 2012 and did not fully recover until March 2014.

CoreLogic’s Eliza Owen said it was difficult to isolate the impact of the 2011 disaster flooding on property values as they were already trending lower from the middle of 2010.

“This decline was triggered by a tightening in monetary policy amid a resources boom, and Australia’s recovery from the GFC (Global Financial Crisis),” Ms Owen highlighted.

The expert highlighted that the worst-affected suburbs’ property values took between three and nine years to recover.

After the 2011 floods, data showed that the steepest drops were reported in Chelmer, Rocklea, Graceville, Yeerongpilly, Fairfield, Fig Tree Pocket, Indooroopilly, and Kenmore.

Ms Owen pointed Chelmer took more than eight years to recover from a drop of almost 18 per cent, while Kenmore took around three years to bounce back from an 8.5 per cent fall.

“Most suburbs saw a recovery in prices within three to five years, with riverside precincts still attracting premium values over areas located further from the river,” she said.

Ms Owen said the short time frame between the 2011 floods and those experienced this year could shift buyer attitudes around housing in low-lying areas.

The expert also forecast that properties not affected by flooding could attract greater demand, and more broadly, the floods could result in higher insurance premiums and elevated repair and renovation costs in an already-stretched building industry.

For more information on the 2022 flooding and its impact on the property market, read our related articles: How to spot and stop scams in the wake of widespread flooding, Flooding won’t leave lasting imprint on market – experts say and Flooding decimates property across NSW and Qld – how it’s unfolding.

You can also tune in to our recent episode of the Smart Property Investment Show: Floods and rising risks – How investors can tread uncharted and uncertain waters. Be sure to check out other amazing series in our podcast network!

Also, make sure to head on to our News section for the latest property market reports, insights, news and useful tips and strategies for investors.

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