Amid the decline experienced by the property markets of Sydney and Melbourne, Brisbane has remained resilient, ultimately becoming increasingly popular among investors. How can they maximise wealth-creation opportunities in the Sunshine State?
Following the conclusion of the federal election, the property market has regained stability as a result of the securing of negative gearing and capital gains tax, the Reserve Bank slashing interest rates to its lowest ever levels and the Australian Prudential Regulation Authority (APRA) removing the serviceability buffer for borrowers.
With consumer confidence rising, experts believe that the worst is over for the Australian property market and, by 2020, property prices are likely to show considerable growth.
Through the turbulence in some major capital city markets, Brisbane managed to power through, remaining slow and steady in terms of property price growth, according to experts.
Patrick Leo’s managing director James Nihill: “(Brisbane’s) affordable housing market allowed the city to bypass the impact of the restrictive lending criteria that other major capital cities felt.”
CoreLogic’s data showed that the capital city’s property market saw dwelling prices rising by 0.3 of a percentage point for the year to November and by 0.1 of a percentage point over the past three months.
Over the next three years, Brisbane could be looking at up to 20 per cent growth as a result of high levels of interstate migration, steady population growth and major infrastructure projects, including the new Queen’s Wharf and the construction of Brisbane’s second airport runway, BIS Oxford Economics predicted.
“The July home value index results provide further confirmation that the housing market has reacted positively to the recent stimulus of lower mortgage rates and improved credit availability; however, the response to date has been relatively mild,” CoreLogic’s head of research Tim Lawless highlighted.
However, the property expert doesn’t foresee a fast recovery for the overall property market. As a result, Brisbane may continue its slow and steady ascent, with significant growth far off in the future.
According to Mr Lawless: “Housing credit policies remain much tougher than they were prior to the [banking] royal commission as lenders continue to move away from the Household Expenditure Measure and examine borrower spending behaviours and expenses more closely.”
“The ongoing tightness in housing credit is expected to keep a rapid rebound in housing values at bay, despite the lowest mortgage rates since the 1950s.”
Over the past year, property markets have collectively shown signs of recovery, with five of the major capital cities showing price jumps, according to CoreLogic.
The home value index showed the dwelling prices rose in Melbourne, Sydney, Brisbane, Darwin and Hobart. Combined, the rise is modest at 0.1 per cent, but nonetheless represents a turnaround to the consecutive months of falls.
Meanwhile, in the past month, Darwin recorded the sharpest monthly increase, with values rising 0.4 per cent. This was followed by Hobart, where values increased 0.3 per cent, then Sydney, Melbourne and Brisbane, each recording monthly spikes of 0.2 per cent.
On the other hand, dwelling values decrease in, Adelaide and Canberra by 0.5 per cent, 0.3 per cent and 0.2 per cent, respectively.
Over the quarter, Brisbane, in particular, continued to fall with a 1.4 per cent drop in median house prices and a 3.1 per cent drop for unit prices.
According to Domain’s latest House Price Report, tighter lending conditions and the apartment construction boom have weighed down on property prices for the city, but strong population growth has meant the correction in unit prices was not as severe as predicted.
The share of Brisbane suburbs with a median house value under $500,000 declined by 12.1 per cent—that is, from 52.4 per cent in 2014 to 40.3 per cent in 2019, based on data from CoreLogic.
Additionally, 12.5 per cent of Brisbane suburbs have a current median unit value in excess of $500,000—up from 8 per cent of suburbs five years prior.
Supply and demand
CoreLogic data showed that, over the second weekend of July, 854 homes were taken to auction across all capital cities over the weekend, returning a preliminary clearance rate figure of 69 per cent.
The weekend result comes after the previous weekend recorded “the highest final clearance rate since April last year” when 953 homes were taken to auction with a final clearance rate sitting at 64 per cent.
However, a state-by-state breakdown showed a mixed result across the country’s capital cities.
Brisbane, in particular, found buyers for only 30 per cent of the 70 houses and 7 units sold at auctions over the said weekend.
Based on the data, the city’s auction clearance rate was recorded as lower than the same weekend in 2018, when 70 properties returned a 37.9 per cent clearance rate.
During that time, the median house price in the Queensland capital sits at $720,000.
Further softening the demand for housing in Brisbane is the losses to internal migration, according to a new analysis from Propertyology.
Based on data from the Australian Bureau of Statistics (ABS), only 10 per cent of all internal migrants to Queensland settled in Brisbane.
Propertyology managing director Simon Pressley suggested that the Brisbane labour market “will need to improve for it to be a major beneficiary of Sydney and Melbourne’s housing affordability squeeze”.
While Mr Pressley believes that examining where Australians are choosing to move and settle is a good indicator for where growth is to be expected, he argued that population growth is not the sole factor that drives growth into property markets.
“Far too much emphasis is placed on the role population mass and population growth plays on property price fluctuations,” he said.
“Even if an individual town or city had zero population growth, there will still be between 3 to 5 per cent of dwelling stock that will change hands within a typical year. Depending on the volume of dwellings listed for sale in that year, property prices may still grow.”
In contrast with capital cities, ‘tier-2 and tier-3 cities’ saw significant boosts to internal migration, including the Gold Coast, theCoast, Geelong, and Port Macquarie—all of which also saw increased median house prices to match the growing demand.
The Sunshine Coast saw a median house price increase of 4.3 per cent in the year ending June 2018, while Geelong saw an increase of 11.9 per cent.
According to Mr Pressley, housing affordability and desirable lifestyle opportunities were key factors in the demand and growth of these areas.
Investors who are keen to take advantage of the housing affordability in Brisbane are encouraged to look into buying units or high-rise apartments in and around the CBD as the Brisbane unit market sits at a ‘point of equilibrium’, according to the director of Right Property Group, Steve Waters.
Simply, areas at a point of equilibrium have enough supply and enough demand, he said.
“We’re starting to see rents increase there – that’s a sure sign of where the demand is, and the supply for that matter.”.
“This has come off the back of being heavily oversupplied,” Mr Waters highlighted.
Apart from studying the level of current supply, the property expert also strongly advised investors to look into ‘what’s in the pipeline’ in order to get an understanding of the growth potential of the property market.
He said: “It’s not just a matter of what’s constructed now but what’s in the pipeline in terms of DAs or just beginning construction and what have you.”
“Investors who can identify those good areas with the right fundamentals and perhaps take advantage of a market now where not everybody is in should be able to set themselves up for the future.”
“But once again, buying in the correct area is paramount.”
‘The margin will never be this close again’: Brisbane’s waterfront secret where property is still affordable
Think “Brisbane waterfront” and Moreton Bay darlings Wynnum and Manly quickly spring to mind.
But only 30 kilometres northeast, on the other side of the airport and a similar distance to the CBD, another bay-front suburb, Sandgate, appears.
The photogenic village topped Domain’s best performing Brisbane suburb list in 2018 with 18.8 per cent median house price growth.
Despite this overall rise in housing value, data-savvy local agent Jacqui McKeering makes the case that Sandgate’s waterfront properties are still undervalued compared to southside bay designer homes.
Ms McKeering, of Jim McKeering Real Estate, says Sandgate waterfront still remains great value because family groups have to buy further back to get more features.
“When the price-to-rateable-land-value gap narrows, you are getting a bit of a bargain,” she says.
“A simple calculation to illustrate this point shows the market value of Sandgate waterfront properties not that much greater than the rateable land value; on average 32 per cent greater.
“In fact one waterfront property sale, back in 2017, sold for 15 per cent less than the rateable land value, yet one block back and without bay view properties have a greater gap of 42 per cent.
“One particular [non-waterfront] property sold as high as 66 per cent greater than the rateable land value.
“The outtake here is there is plenty of money to be made on Sandgate waterfront properties.
“I do believe the margin between waterfront properties and the neighbouring streets will never be this close again.”
Flinders Parade, which runs along the foreshore of Sandgate and into Brighton, plus Eagle Crescent and Shorncliffe Parade, are the waterfront property strips in focus.
Ms McKeering says a lot of people have been buying these older houses and renovating and that at the moment there is some choice in “real cheapies” from about $900,000 to about $1.35 million.
“I know someone who bought for $1.4 million in 2017 with a $1.8 million renovation budget,” she says.
“When you see that sort of money coming into an area, it tells me people are seeing long-term capital value in this area.”
Fellow Sandgate agent Tamara Wecker of RE/MAX agrees suburb 4017’s waterfront properties are priced and selling considerably under their comparable Brisbane market values.
“When compared to Wynnum and Manly,” Ms Wecker says, “absolutely; I mean you can live in the Taj Mahal in Sandgate for about $1.5 million.”
She is seeing buyer migration from Sydney and “a little bit from Perth” because of affordability, and thinks Sandgate’s strict rules, which prohibit multi-unit developments on its waterfront, is a further drawcard.
“People tend to think of Wynnum and Manly but here you can have a premium home and lifestyle only 30 minutes from the city,” Ms Wecker says.
“To be honest, it has been a bit of a secret because we are off the highway so you have to have a reason to come here, but that is changing in the past 18 months.
“We are getting more inquiries from people, even from Brisbane, who just did not know about us.”
Mark Crew has been selling Sandgate housing since 1990 and thinks people have woken up to how great a suburb it is in the past 18 months.
The Professionals’ agent has reported strong interest from Sydney buyers “looking for a better family lifestyle”.
He estimates 25 to 30 per cent of Sandgate buyers this year have come from the neighbouring suburbs of Shorncliffe, Deagon and Brighton; people who want to upgrade but stay in “the village”.
“It is 31 minutes to the CBD and you can be walking on the waterfront with your kids after work and we’ve got excellent schools too,” Mr Crew says.
Regarding Sandgate’s waterfront property market and its value, he says three factors should be considered.
“There are few waterfront properties for sale, land is scarce and over the past 20 years there has been a lot of change to the houses themselves, a lot of renovation and/or raising older three-bedroom cottages and transforming them into often substantial five-bedroom luxury houses,” he says.
“So these houses on their waterfront blocks are, quite rightly, going to fetch more in sale prices when they do one day return to the market; and that is showing.”
Cheap Units In Brisbane Suburbs
Twelve suburbs in Brisbane have a median unit price of just under $400,000, according to Domain’s June House Price Report.
Ten out of these 12 suburbs are in the inner city, the report said.
Bowen Hills, Fortitude Valley, Albion, and Spring Hills are all within three kilometres of the Brisbane CBD. The median unit prices in these suburbs are below $400,000, the figures showed.
East Brisbane, Coorparoo, Clayfield, Nundah, Taringa, and Kedron also offer some of Brisbane’s cheapest unit values, according to the report.
Bowen Hills is the cheapest suburb to buy a unit, with prices falling 13.7% in the past 12 months, the figures showed.
Here are Brisbane’s cheapest suburbs to buy units by median price, according to Domain:
|Suburb||Median price||YoY % growth||5-year % growth|
In Greater Brisbane, the median unit price fell 8.6% over the year to June, according to the report.
The capital city’s unit prices are “sitting at 2013 levels”—down from their peak in 2015, according to Domain research analyst Eliza Owen.
However, prices are expected to bottom out this year, with the end of the downturn in the unit segment in sight, Owen said.
“Unit listings are also moderating, which should reduce downward pressure on prices,” she said.
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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