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 Brisbane suburbs where house prices are higher than last year
The historic suburb of Windsor in Brisbane’s north has seen the biggest growth in median house prices in the last year, with a 17.2 per cent increase year-on-year.
New figures from Domain have revealed the top 10 suburbs whose median house price has risen the most year-on-year. Despite a largely flat market, there are still plenty of suburbs where prices are surging.
Windsor had the highest increase in median house price at 17.2 per cent year-on-year, followed in second place by the leafy inner-western suburb of Auchenflower which saw a 11.4 per cent increase.
Other suburbs in the top 10 include Queenslander paradise Newmarket (10.9 per cent increase), the massive blocks at Bridgeman Downs (9.8 per cent increase), and the outer-western suburb of Heathwood (8.3 per cent increase).
Ray White Wilston principal Allistair Macmillan said the massive increases in price at top performer Windsor were likely due to the suburb not always getting the recognition it deserved.
“For a long time Windsor has been slightly undervalued,” he said. “It’s so close to Wilston and Grange. [They’ve] always been supremely popular with families, I think Windsor was dragging the chain a little bit with those values.
“When you look at values in Windsor, they can vary quite a large degree depending on whereabouts in Windsor they are positioned. What we’ve found is that now the difference between the two sides of Gympie Road is nowhere near as prevalent as it once was.
“Of late, people have really come and been able to see the value Windsor does offer.”
Mr Macmillan said other contributing factors include the recent multimillion-dollar redevelopment of the Albion public transport exchange. Buyers on the eastern side of the suburb in particular have expressed interest in the plan.
The vast majority of buyers in the area are younger families who are looking to be in the Windsor State School catchment area, and are attracted to the many local parks, bikeways, and public transport options.
“Stock is incredibly tight,” Mr Macmillan said. “Generally speaking if you look at the volume of properties, there’s not a lot that are for sale in Windsor. It’s still a very tightly held suburb.”
Elsewhere, the northern suburb of Northgate also fared very well, with a median house price increase of 8.9 per cent year-on-year. Local agent Dwight Colbert at Ray White Aspley said the location and amenities were the big drawcards.
“[We’ve seen] popularity due to the proximity to the Brisbane CBD, Brisbane Airport, and also an array of public transport,” he said. “You are on the Northgate train line, which is the main one on the north side, and the hub.
“You’re between Nundah Village, you’ve got Banyo Village, you’ve got good access to the Gateway [Motorway], Toombul Road, Sandgate Road, Gympie Road. It’s quite a desirable locality to get in and out of everywhere.”
Mr Colbert said the area was traditionally seen as a haven for older buyers, but in recent years many young couples and professionals had taken the plunge.
“There is a lot of property development going on in Northgate as well,” he said. “So a lot of the older, bigger blocks are being subdivided. Which is also certainly going to help with the average house price.”
West Brisbane family-favourite Auchenflower pulled out a particularly impressive result, posting a 11.4 per cent increase in median house price year-on-year. This makes it the third-most expensive suburb in the city, up from 12th last year.
Place West principal Andrew Degn credits the suburb’s massive gains to the recent completion of major infrastructure in the area.
“Five or six years ago they finally finished gentrification of the old Milton tennis centre and turned it into a park called Frew Park, which is adjacent to [Milton State School], and the playground, and that goes through to the Rosalie village,” he said.
Auchenflower also features the Wesley Hospital, the recently upgraded Milton State School, and various inbound and outbound public transport options. Mr Degn was so passionate about the area he decided to buy and live there himself.
“Real estate people are supposed to know good real estate, and I live in Auchenflower,” he said with a laugh. “So there you go, I’m personally responsible for pushing the price up.”
Top 10 suburbs with the largest house price increase since last year
1. Windsor – 17.2%
2. Auchenflower – 11.4%
3. Newmarket – 10.9%
4. Yamanto – 9.9%
5. Northgate – 8.9%
6. Heathwood – 8.3%
7. Brassall – 8.1%
8. Toowong – 7.6%
9. St. Lucia – 7.4%
10. Hendra – 7.1%
11. Karana Downs – 7.1%
12. Indooroopilly – 6.9%
Five Australian Cities Make World’s Top 30 Luxury Residential Markets
Australia’s ultra-luxury residential market, largely unaffected by the impact of recent lending restrictions, has continued to record positive growth in the prestige sector of the market.
Sydney, Melbourne, Brisbane, the Gold Coast and Perth make up the five Australian cities which rank in the world’s top 30 cities for luxury residential price growth.
The major east coast cities of Sydney, Melbourne, Brisbane and the Gold Coast have now recorded 25 quarters, or more, of positive annual growth for luxury property, according to Knight Frank’s Prime Global Cities Index for the third quarter 2019.
Defined as the most desirable and expensive property in a given location, prime property is generally the top 5 per cent of each market, by value.
Sydney ranks 17th in the global rankings, with 2.6 per cent annual growth, Melbourne at 21st spot recording 2 per cent growth.
Brisbane followed closely ranking 22nd with 2 per cent growth, the Gold Coast which was included in the Index for the first time earlier this year moved up the rankings to 26 with a 1.3 per cent increase, and Perth ranked at 30th recording a 0.7 per cent rise.
Knight Frank’s Prime Global Cities Index
|City||12-Month Change (Q3 2018 -Q3 2019)|
|26. Gold Coast||1.3%|
Knight Frank’s head of prestige Residential Deborah Cullen says the top end of the market is showing more consideration and time in transacting.
“There is still strong interest from local and expat buyers for blue ribbon areas and for “best in class” assets, in particular the waterfront areas of Sydney,” Cullen said.
“Growth in prime property prices closely follows the performance on the stock exchange,” Knight Frank head of residential research Michelle Ciesielski said.
“And there have been some significant gains made on the Australian sharemarket in 2019.
“Collectively the Australian prime market has continued to see sustainable growth of 2 per cent in the year ending September 2019, whilst the sharemarket recorded a 7.7 per cent return,” Ciesielski said.
Slowdown gathers pace in top-tier cities
The global cities index increased by just 1.1 per cent in the year to September 2019, down from 3.4 per cent last year, with slower prime price growth attributable to mounting economic headwinds.
Despite a longer-than-expected period of loose monetary policy and steady wealth creation, the report notes that luxury sales volumes are at their weakest for several years in many of the first tier global cities.
“Slower global economic growth– the IMF lowered its 2019 forecast from 3.3 per cent to 3 per cent in October – along with escalating headwinds: US-China trade relations, Hong Kong’s political tensions, a US presidential election in 2020 and the Brexit conundrum are influencing buyer sentiment,” the index notes.
Moscow recorded the highest rate of growth with an 11 per cent increase over the year to September.
The report notes that Moscow leads the index largely due to strengthening demand and the completion of a number of high-end projects in prime areas like Ostozhenka and Tverskoy.
The prime global cities index is a valuation-based index that tracks the movement in prime residential prices in local currency, using data, across 40 cities.
Brisbane Plans CBD Riverfront Renewal
New plans to revitalise Brisbane’s CBD riverfront, a 1.2 kilometre stretch of river frontage from the City Botanic Gardens to Howard Smith Wharves, has been released.
New ferry and CityCat terminals are included in Brisbane City Council’s draft master-plan, which aims to improve river access and cement the CBD river frontage into “a world-class employment and lifestyle precinct”.
The draft plan includes an increase of the current pathway to an eight-metre-wide promenade which would span the riverfront, and includes an increase of green-space, trees, and public art.
“This is just one of the ways we are making the Brisbane of tomorrow even better than the Brisbane of today,” Brisbane City Council said of the draft plans released on Thursday.
The riverfront precinct is currently home to more than 30 dining destinations and 1.6 hectares of parkland.
The draft plan also includes a proposed new green bridge connection at Kangaroo Point.
“It’s part of our bigger plan to connect people and places,” City Planning Chair Matthew Bourke said.
Bourke says the draft plan took cues from well-known waterfronts, including the likes of San Francisco’s Fisherman’s Wharf and Singapore’s Marina Bay.
Property giant Dexus is under way on its $1.4 billion Waterfront project transforming Brisbane’s Eagle Street Pier.
Council’s draft masterplan for Brisbane’s riverfront will be open to public consultation from Monday 11 November through to early December.
The final masterplan will be released in 2020.
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