Two unexpected regions are set to emerge as price growth leaders next year, as investors look beyond Sydney, Melbourne and Brisbane.
Newcastle, approximately 160 kilometres north of Sydney, has lagged the NSW capital in terms of price growth and is set for a significant turnaround, according to managing director of BIS Shrapnel Robert Mellor.
Mr Mellor said the Newcastle region had recovered from mining-related slowdowns and company closures of the past decade and was now in “reasonable shape”.
Newcastle will also benefit from the flow-on effects from Sydney’s recent and ongoing price surge, he said. In addition, the region will attract retirees and downsizers “trading out of the Sydney market”.
BIS Shrapnel forecasts put Newcastle’s growth over the three years to 2017-18 at 15 per cent – compared to Sydney’s two per cent.
“The Sydney figure doesn’t look particularly spectacular,” he explained. “That’s because there’s growth in the first year  and then some small declines as you’ll see investors being more cautious and exiting the market.”
Mr Mellor said Sydney was moving into “over-value territory” so it is due for a slowdown.
The other region set to outperform in the coming years is the Gold Coast – with aggregate growth over the next three years forecast a 14 per cent, according to Mr Mellor and BIS Shrapnel.
“[The Gold and Sunshine Coasts] have been very subdued and again the underlying fundamentals of undersupply have started to catch up there and that will drive stronger price growth,” he said.
“In fact, if I was an investor I’d be more likely to want to buy in the Gold Coast or Sunshine Coast than I would in inner Brisbane.”
Mr Mellor said investors would increasingly scout out these alternatives as Sydney reaches the “limit” of its price growth and affordability, and Brisbane looks down the barrel of oversupply.
“Our real big concern at the moment and the one that we’ve really highlighted over the last few months is this turnaround in Brisbane because there has just been so much supply coming through in apartments,” he said.
“We always knew about [oversupply in] Melbourne and this is going to start to bite as we move into 2016 and 2017. The question is then, how big will the decline be in prices?
“If we don’t see construction ease back in the next 12 to 18 months [in Brisbane], then the decline will probably be bigger than we’re forecasting in apartment prices in 2018 and even through to 2019.”
Mr Mellor said the lower Australian dollar, tourism increases, infrastructure investment and the 2018 Commonwealth Games would help to solidify the Gold Coast’s property market.
Source: Smart Property Investment
Regional Queensland now a national property market leader: Hotspotting’s Terry Ryder
Regional Queensland is becoming one of the nation’s most compelling markets. Rising numbers of locations have growth symptoms, both in terms of sales activity and price movements. Over 60% of Regional Queensland markets have median prices higher than a year ago, with apartment markets a standout.
The Sunshine Coast remains the No.1 market in the state, but other growth markets are emerging. Increasingly we are seeing recovery signs in places that were previously in downturn, including the long-suffering Gladstone market.
The one major contradiction to the overall growth scenario is the Gold Coast, which had some uplift in the lead-up to the Commonwealth Games but has faded since. In Hotspotting’s Winter survey of sales activity, we can’t find any growth momentum in Gold Coast locations – most suburbs are “plateau” markets and there is a growing number of suburbs ranked as “decline” markets.
The Sunshine Coast stands in stark contrast to the Gold Coast. The Sunshine Coast has one of the nation’s leading growth economies and its real estate market is thriving as a result.
In our previous (Autumn 2019) quarterly survey, we observed that Mackay was challenging the Sunshine Coast as the leading Regional Queensland market. That situation has re-adjusted in this latest survey, with the Sunshine Coast still entrenched as the state leader and Mackay not as prominent.
Emerging centres with improvement in their markets include Cairns, Rockhampton and the Fraser Coast, while major regional cities like Toowoomba and Townsville may be on the cusp of new growth phases.
The number of growth markets in Regional Queensland has trended higher in the past 18 months. This is despite the decline of the Gold Coast. Recovery in resources-related regional centres like Mackay, Emerald and Rockhampton is helping, while Gladstone is now showing increasing signs of improvement, with some of its suburbs rising.
Regional Queensland markets collectively have improved in the past year or so: in the past six quarterly surveys, the number of locations with growing demand has been 30, 36, 40, 45, 48 and 45. The number of growth markets had decreased sharply in the late 2017 survey but showed steady improvement in 2018 and this has continued into 2019.
The other key feature is the number of Regional Queensland markets with price growth. Hotspotting analysed price movements in 293 markets and found 179 (61%) have median prices higher than a year ago. Of the 179 growth markets, 77 have recorded median price growth of 5% or more, while another 102 markets have increased by less than 5%.
Of the higher growth markets, 21 have increased by more than 10%, headed by the Central Queensland mining-related centre of Emerald (up 27%). But the No.1 centre for house price growth is the Sunshine Coast: 10 of the 21 locations up by 10%-plus are Sunshine Coast suburbs, led by Eumundi (28%), Sunshine Beach (15%), Twin Waters (15%) and Wurtulla (15%).
Apartment markets overall are doing particularly well in Regional Queensland. Two-thirds of unit markets have median prices higher than a year ago, headed by Airlie Beach (up 31%), East Toowoomba (36%), Broadbeach Waters (25%) and Coolangatta (20%). The Sunshine Coast is prominent here as well – headed by the iconic Noosa market which is up 24%, while Noosaville has risen 15%. In the southern part of the Sunshine Coast, Golden Beach and Warana are both up 15%.
Our analysis of sales activity confirms the status of the Sunshine Coast: 10 suburbs have rising buyer demand, while another 13 have consistent sales activity.
Cairns (pictured top) has six growth suburbs and plenty of steady performers, while Mackay has five growth markets and the Fraser Coast four. Rockhampton has emerged for the first time in several years, with five of its suburbs notable for their rising buyer activity – including Norman Gardens, Berserker and Yeppoon.
There’s further evidence of revival in Gladstone, which we first noted in the two previous (Summer 2019 and Autumn 2019) quarterly surveys. But the situation remains patchy: our ranking of Gladstone suburbs include four rising, three plateau, one consistency, two decline and three danger.
We’ve been watching the Toowoomba market for growth signs, because this is one of Australia’s largest inland regional cities and it has been a growth market in the past. The early signs of uplift are now emerging, with Newtown lifting quarterly sales from 67-82-82-91-95 over the past year or so, and Centenary Heights showing 40-40-42-52-55.
Townsville has suffered setbacks from the February floods but nevertheless has growth markets and will be boosted when work starts on significant infrastructure projects.
As we reported in previous editions, the post-Games boost predicted by some has not eventuated on the Gold Coast. This market was strong from 2015 to 2017 because of the pre-Commonwealth Games construction boom.
Since then the growth has subsided and there are now 40 suburbs classified as either plateau or consistency markets – and eight decline markets.
The price outcomes are also mixed for the Gold Coast: 51 markets have median prices higher than a year ago, but there are 31 with prices lower than last year.
Brisbane to see biggest house price rise nationally by 2022
Brisbane’s median house price is predicted to jump 20 per cent by 2022, far beyond any other capital city in the same period.
The BIS Oxford Economics property forecast predicts Brisbane will see the greatest national gains in house prices, but not for another couple of years as the remaining oversupply is consumed.
The median house price is expected to increase from $552,000 to $665,000 in Brisbane.
That percentage rise is the highest predicted for the capital cities nationally, well ahead of Sydney at 6 per cent and Melbourne at 7 per cent.
“A weak Queensland economy and high level of dwelling supply have dampened price growth in Brisbane in recent years,” the report notes.
“The result is that house prices in Brisbane are relatively affordable.
“With credit conditions easing and interest rates falling, improving affordability will be a catalyst for raising price growth as stronger economic growth returns and the market moves into a rising deficiency.”
Apartment supply is still high, according to the report, and the economy remains slow keeping price rises “modest” over the next 12 months before prices are predicted to jump in 2021-22.
While houses are predicted to see a big jump, apartment and unit prices are only expected to see a 14 per cent median rise in Brisbane.
The Gold Coast and Sunshine Coast, meanwhile, are benefiting from the high migration rates with house prices remaining high.
With low vacancy rates and supply now increasing, BIS Oxford Economics predicted slower price growth of nine per cent for the Gold Coast and seven per cent for the Sunshine Coast to June 2022.
Further north, Townsville’s house prices struggled as mining investment left the region but the city can still expect a 9 per cent house price rise over the coming two years.
Report author Angie Zigomanis said nationally housing supply was high.
“Supply is running at record levels, with new dwelling completions having exceeded 200,000 in each of the past four years and expected to have peaked at a record of just under 227,000 dwellings in 2018-19,” Mr Zigomanis said.
“This compares with underlying demand for new dwellings averaging around 195,000 per annum in the same period, which in itself is a record.”
Mr Zigomanis said reductions in interest rates and lending policies becoming more relaxed were predicted to help stabilise residential markets this year and encourage price growth to start in 2020.
Investors in the box seat amid surprise surge in rental demand for Brisbane apartments
Surging tenant demand for Brisbane apartments, falling interest rates and rising rents are luring investors back to the market.
A SURPRISE surge in tenant demand for apartments combined with falling interest rates and rising rents looks set to lure property investors back to the Brisbane market after years in the doldrums.
The apartment rental squeeze is getting so tight some agents are now advising prospective tenants to submit applications before they have even inspected properties — or risk missing out.
At the same time rents are on the rise due to a combination of interstate migration, steady economic growth and a decline in new apartments coming to market.
A new report from independent consultancy Urbis has found tenant demand for new inner Brisbane apartments jumped in the first quarter of this year.
The survey revealed a vacancy rate of just 1.6 per cent across 22 apartment projects in inner Brisbane — tightening 0.6 per cent from the previous quarter.
The rebound in the rental market after years of apartment oversupply has even surprised experts, who say the level of demand is greater than expected.
Place Advisory director Lachlan Walker said it was a good time for investors to be researching the market and looking to buy.
“I’m surprised the rental market has recovered so fast, and even more surprised supply’s dried up so fast,” Mr Walker said.
“That’s the one thing that’s held Brisbane back these last three to four years — the high level of supply — but that is quickly disappearing.
“I think we’re in for a supply shortage over the next six to nine months … that’s why we’re seeing some rental growth and vacancy rates starting to drop.”
It comes at a time when borrowing money has never been cheaper, with interest rates being cut to an all-time low of 1 per cent this week.
Independent real estate group Position Property has a vacancy rate of less than 1 per cent on its 800 rental properties in the Brisbane region.
Position Property director Richard Lawrence said property managers in some areas were advising people to submit rental applications without waiting until they had seen the home.
“We are seeing a general tightening in the rental market across the board, including in locations previously reported as having excess new apartment stock available,” Mr Lawrence said.
“This is the case both in inner city locations such as South Brisbane and Newstead, and out to middle ring suburbs such as Chermside on Brisbane’s north side and Upper Mount Gravatt on the south side.”
Mr Lawrence said the situation was likely to intensify in the months ahead given the expected fall in the number of new apartment projects starting construction, leading to a reduction in availability of high quality apartments.
“Anyone currently renting should seriously consider purchasing a new apartment if they can afford it as they will likely be paying higher rents within the next 12 months,” he said.
“Similarly, local investors who may have been sitting on the sidelines can now buy with greater confidence knowing that there is an abundance of tenants available for the right property and rental yields are strengthening.”
The pipeline of new infrastructure coming to inner Brisbane, including Brisbane Metro, Queens Wharf and the proposed South Bank redevelopment, is encouraging new buyers to choose new apartments over established houses.
A new luxury apartment and townhouse development at Newstead, Newstead Series, has put up the no vacancy sign with leasing agent Jones Lang LaSalle reporting a waiting list of people seeking one and two bedroom apartments.
There is a waiting list for the luxury Newstead development, Lucent Gasworks, and in South Brisbane, the first stage of Pradella’s SkyNeedle Apartments also has a zero vacancy rate and a waiting list of prospective tenants.
“I believe we have reached a real turning point where the Brisbane property market is returning to normal supply and demand conditions,” Mr Lawrence said.
“Smart investors who purchase apartments in places where couples, young families and downsizers want to live will reap the rewards in terms of achieving higher rents, good quality tenants and low vacancy rates.
“New arrivals from interstate who might normally opt to rent for a few months to get a feel for their new city would also be well advised to consider buying instead to avoid the tougher rental market conditions ahead.”
Urbis property economics and research director Paul Riga also said interstate migration had played a part in the increase in demand for rentals.
“Anecdotal feedback from participants indicated that inquiries from interstate remained solid, and certainly up from the same time last year,” he said.
“Apartments provide these tenants the flexibility of being able to settle into employment and get to know the city and it’s different precincts.”
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