With the Sydney and Melbourne property markets declining, the stability of the Brisbane property market has been welcomed by investors with open arms. Will the Queensland capital ultimately emerge as the next investment hotspot?
While Brisbane has yet to witness a stellar growth in its property market, the capital city has remained stable in the past few months as other major capital cities suffer continuous decline in property values.
As a result, a considerable number of investors are starting to flock into the Queensland capital, hoping to take advantage of the affordable entry points and consequently benefit from the eventual rise of its property market in the near future.
How exactly will the Brisbane property market be performing in the next five years?
Streamline Property Buying’s Melinda Jennison said that, in general, she’s optimistic about the Brisbane property market moving forward.
“We’ve certainly had a lot of headwinds as have all property markets now that the royal commission and the federal election are behind us, even though we still have tight lending – that’s going to continue into the foreseeable future, I think. With the second half of the year coming up, one or two rate cuts may provide further stimulus into the market.”
“Brisbane itself had a 38 per cent reduction in building commencements just in the last 12 months. We had an oversupply in the apartment market but that has been absorbed by the accelerating population growth. Vacancy rates are now declining in some of the inner city locations,” the buyer’s agent highlighted.
With good population growth and a decline in housing supply, the Brisbane property market only needs employment and wage growth to complete the ‘perfect recipe for upward pressure on prices’, according to Ms Jennison.
Where to invest
As there is no ‘one size fits all’ strategy for investing in property, Ms Jennison highlights the importance of understanding the investor’s personal goals before ultimately jumping into a purchase.
What type of results do they want—rental yield, capital growth, or a balance of both? How can they get their considering their personal and financial capabilities and limitations?
Moreover, investors are encouraged to study the fundamentals that will drive growth into their assets over the long-term.
Ms Jennison said: “We love trains and sub-train line locations, but Brisbane is very widespread and we don’t simply buy in all train line locations.”
“There are blue chip suburbs and the fringe suburbs just on the outer areas of those blue chip locations – the train lines there, that’s where we’re certainly looking at right now… Where there’s price disparity between one suburb and the next, there are certainly opportunities for investors there.”
Apart from train stations, investors are also advised to look out for ongoing and upcoming infrastructure projects in the area, which could ultimately spur growth for investment properties.
In Moreton Bay, for instance, the new campus of the University ofCoast is expected to improve the housing market conditions across The Mill at Moreton Bay, the new destination with the university at its core, and, ultimately, the entire Moreton Bay region.
Stage one of the campus, which will be located adjacent to the Petrie railway station, is set to be completed in time for the first semester of 2020.
“We feel that Moreton Bay will gentrify quite quickly with young university students moving in, so we’ll see the types of accommodation gradually change over time to suit their preferences. There’s lots of opportunities within the area and the region as a whole because of this gentrification.”
Finally, rezoning may also spur growth in certain property markets across Brisbane in the near future.
Local councils often rezone land to assist in the planning for future growth. Rezoning, therefore, typically occurs around growth corridors or areas where the population and infrastructure spending has been rapidly increasing.
“A lot of the land has been rezoned and we’re certainly still finding great opportunities in that region for investors that are in the $500,000-price point. If we were to categorise investors in Brisbane based on price point alone, that would definitely be our preferred location right now.”
“Were not going Logan or Ipswich for the simple reason that property investment is all about supply and demand—the availability of future supply of land in the Moreton Bay region is a lot more limited than it is when you go west towards Ipswich or when you go south towards the Gold Coast,” Ms Jennison explained.
At the moment, Brisbane is ripe with off-market opportunities, which puts investors who engage property professionals at an advantage.
Property professionals with local knowledge of the markets could serve as the perfect guide and ‘insider’ as investors try to navigate the real estate landscape, especially in changing markets such as Brisbane. Thus, investors are strongly encouraged to engage field experts, where appropriate.
“We’re certainly getting a lot of off-market opportunities presented to us as we get an influx of interstate investor activity… There’s some great buying opportunities across Brisbane, and we’re achieving yields of upwards of 5 per cent right now.. Even up to 5.5 or 6 per cent per annum,” she concluded.
Land developers call bottom of property market
Land developers AV Jennings and Villa World have called the bottom of the property cycle after a year of slumping sales and consumer caution blew a hole in their profits.
AV Jennings said the current property cycle has “bottomed” and that it will deliver a stronger result next financial year, after its profits were cut in half to $16.4 million by wary homebuyers steering clear of big commitments.
“General market sentiment is clearly beginning to improve … a modest uptick in visitor numbers to sales offices and online is evident and is expected to be sustained during FY20,” AV Jennings said.
Villa World chief executive Craig Treasure said soft consumer sentiment, tight credit conditions and the uncertainty caused by the federal election had created “difficult headwinds”.
“We are seeing that sales enquiries have started to improve across Villa World’s projects, however buyers remain cautious,” he said.
Villa World’s profit after tax of $23 million was also shredded compared to the previous year when it earned $43.6 million.
“This result is consistent with commentary disclosed to the market since December 2018 and reflects the decline in the Australian residential housing market and softer consumer sentiment,” Mr Treasure said.
Villa World’s land projects are concentrated in Queensland and Victoria.
All metrics for the group suffered: earnings per share were down 48 per cent to 18.2c, total revenue fell 11 per cent to $391.6 million, and sales numbers slumped to 870, down from 1788 the previous year.
The property pain was similar at AVJennings where turnover fell 20.3 per cent to $296.5 million and profits crashed by 48 per cent.
“The lower profit reflects softer market conditions, particularly in Melbourne and Sydney,” the company said.
It paid an interim dividend of 1c on 22 March and will pay another 1.5c dividend on 20 September this year.
Villa World has agreed to a takeover by AVID Property group for $2.345 per share. It will declare a fully franked dividend of 31c, as a portion of the total takeover price if it goes ahead.
Brisbane Prices Could Be Headed For Recovery
Brisbane prices are at their lowest level in the cycle, according to the latest national property clock from Herron Todd White (HTW).
The house values in Brisbane, Bundaberg, Ipswich, Rockhampton, and Toowoomba were at the bottom, according HTW.
Meanwhile, prices in Cairns, Gladstone, Mackay, Townsville, and the Whitsundays are starting to recover, the data showed.
There was momentum for the price growth in Brisbane, given that the capital city had been “bouncing along the bottom for some time now”, HTW Brisbane managing director Gavin Hulcombe told The Courier-Mail.
“I think it will be (a) steady rise, but my suspicion is in a couple of years’ time we might look back and think it (now) probably wasn’t a bad time to buy. Some areas are likely to perform better than others,” he said.
Brisbane units are also at the bottom of the price cycle, along with Bundaberg, Ipswich, Mackay, Rockhampton, Toowoomba, and the Whitsundays, according to HTW.
Apartment prices in Cairns, Emerald, Gladstone, and Townsville are already rising, the figures showed.
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