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Whats that about a Brisbane Property Bubble??

Michael Matsusik discussed the predictions of Harry Dent on Brisbane House Prices.

Brisbane Property BubbleOh Harry… what have you done now?

No, not Prince Harry and those Vegas pictures, but Harry Dent – The Doom & Gloom Extraordinaire – who recently wrote in Forbes Magazine, and I quote:

…the greatest housing bubble in developed-country cities starts with Brisbane, Australia…

Excuse me whilst I look around to check if we are talking about the same place.  There isn’t another Brisbane in Australia is there?

Read on peoples, it’s about to get personal!


But before we start, here is a fuller account of what Harry Dent said in Forbes:

Around the world, the greatest bubble by far occurred in Shanghai, up 525% since 2000, and in China in general.  Mumbai saw a 400% bubble, Dubai 300% and Seoul 205%.  The greatest bubble in developed-country cities starts with Brisbane, Australia at 210% followed by 180% in Miami, 170% in L.A. and 165% in Vancouver.  There are many cities that could see real estate drop 70% to 85%!

The only cities that had major bubbles and have already seen them fully erased in the U.S. are Phoenix, Las Vegas and Atlanta.  No other major bubbles have burst back to where home prices are affordable again, and major cities from Shanghai to London to Vancouver to Melbourne and Sydney, Australia, are still going up or very near their peaks.

These types of very strong areas always have the view that their bubble won’t burst because they are so special – but bubbles always burst.  The greater the bubble, the greater the burst — is also a very good general rule, even though the most attractive cities with the scarcest land for development typically are the last to peak.

The real estate bubble is like a popcorn popper with different markets frothing over and peaking at different times, but all will burst ultimately.  Given that real estate is so local, the best way to gauge the downside potential of your home or commercial real estate is to find out what it was worth at the beginning of 2000 at best and the beginning of 1996 at worst.  If you can’t take that much heat consider selling and renting for the next three years plus.

I mean really, does this guy truly believe what he says?  If Brisbane’s house values fell, say 70%, they would drop by over $300,000; and in 2000 the median Brisbane house cost $155,000 and in 1996 it was $130,000.  Today,Brisbane’s median price is around $435,000.

As at mid-October, the average Brisbane household pays just 22% of their household income towards their mortgage.  This is on par with the proportion paid in the early 2000s and mid-1990s.  Re-read Harry’s last paragraph as outlined above.

Even allowing for nominal price growth of 6% per annum (real price growth – minus inflation – of about 3%) over the next three years, the proportion of household wages needed to pay the average Brisbane mortgage in 2015 is anticipated to be about 27% or 28%.  Unaffordable?

Where is this bubble Harry?  What is going to cause it?

Rapidly rising interest rates?  A massive rise in unemployment?  Federal Labor re-election?  Well that just might!  But seriously, WHAT?  I know we live in uncertain times but really, give me a break!  70% to 85% falls in value!

What if you are wrong and someone takes your advice, like Dr. Steve Keen for example, and decides to sell and rent?  Only to pay more rent every year and have the pleasure of watching their previous home grow in value, and at the same time get increasingly priced out of the market.  I hope you don’t take your own advice!

This constant doom and gloom is far more damaging than most spruiks.  And it is catching.  Heck it must be, even the Rolling Stones have a new song titled Doom and Gloom…GRRR!

And for the record since 2000, according to the REIA, house prices in:

  • Sydney rose 91% (5.5% pa compound growth) from $337,000 in 2000 to $642,000 today
  • Melbourne rose 103% (6.1% pa) from $264,000 to $535,000
  • Brisbane rose 179% (8.9% pa) (you cannot even get your babble right!) from $155,000 to $433,000
  • Adelaide rose 193% (9.4% pa) from $135,000 to $395,000
  • Perth rose 201% (9.6% pa) from $158,000 to $475,000
  • Hobart rose 185% (9.1% pa) from $130,000 to $370,000
  • Canberra rose 168% (8.6% pa) from $184,000 to $494,000
  • Darwin rose $200% (9.6% pa) from $190,000 to $570,000

Most of these capital city markets saw their price growth curves peak in the early 2000s and have been largely growing well below long-term averages since then.  This has particularly been the case in recent years.  And why single out Brisbane?

For the full Forbes article go here.

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Travel bans fuel Brisbane’s $30 million auction splurge


Expats and upgraders are splashing major cash on prestige properties across Brisbane with more than $30 million in real estate transacted from 38 auctions on Saturday.

The auction clearance rate was 81 per cent, compared with just 22 per cent this time last year.

Off the back of continued travel bans, property punters say buyers are continuing to pour millions into homes instead of holidays, and stranded Aussies are fuelling the prestige market from afar for fear if they don’t buy soon, they’ll miss out when borders open.

It’s a trend McGrath Estate Agents Cleveland agent Pamela Neilson said had spurred more than a handful of top sales in her area in the past few months, and one that helped her clock the city’s highest recorded auction on Saturday, after an upgrader forked out $4.35 million for a Raby Bay mansion.


11 Grenoble Place, Raby Bay QLD 4163

“I’m seeing more transactions now between $2 million and $3 million (than I have in a long time). We’re finding this market is just continuing to move and I can’t see it quietening down,” Ms Neilson said.

“The biggest thing is expats at the moment and I have clients from London to Chicago, all wanting to come home but they want to get into the market now.

“I sold two [sight unseen] to expats just last month.”


Marina views from 11 Grenoble Place, Raby Bay.

Although it was a local buyer who scored the winning bid on the sprawling Ray Bay home at 11 Grenoble Place, Ms Neilson said the incredible result was indicative of the sheer appetite for luxury homes in the Queensland capital, and also in Raby Bay, where high-end sales had surged in the past six months.

“We had 52 groups through the property and five offers prior to the auction. I think the massive land size of 2479 square metres [fuelled the interest] but also the big pontoon, the glorious views and the tennis court,” Ms Neilson said.

“It all needs updating, but it’s just so private, and after a renovation this property could be worth between $7 million and $8 million.

“The Raby bay area is also a lot stronger [than it has been in years]. The area is getting more attention now – people are finally waking up to it and the people trying to move in have probably missed out.”

Ms Neilson said it was only back in August the suburb price record was smashed with the $8.5 million sale of 1990s Aussie pop star Daniel Jones, of Savage Garden.

In the inner city, an old cottage on a tiny parcel of land clocked an incredible $1.55 million under the hammer on Saturday, after six registered bidders battled it out for a minuscule piece of dirt in “Brisbane’s best suburb”.


210 Arthur Street, Teneriffe QLD 4005

The green and yellow four-bedroom abode, at 210 Arthurs Street, Teneriffe, occupies just a 256-square-metre block but with houses frequently clocking more than $2 million in the chic neighbourhood, selling agent Brett Greensill, of McGrath New Farm, said the home was a little piece of gold.

“It´s a small slice of land but, of course, Teneriffe is the most expensive suburb in Brisbane so to get a little slice of the best suburb [is still fantastic],” Mr Greensill said.

“We had six registered bidders, and there was an excellent crowd. The lady who turned out to be the underbidder started off with a cheeky bid of $600,000 but then the next bid was about $1.1 million.

“The reserve was $1.5 million, so we sold it for just over, and five of the six bidders were local.

“I actually sold this house in 2013 for $815,000 when it was first renovated. Here we are not even 10 years later and it has almost doubled. And, in the past six months (alone) this house gained probably 10 per cent (in value).”

Mr Greensill said the sale was another top result in a booming market where houses in particular were streaking ahead of apartments amid insatiable buyer appetite.

“Brisbane has always had headwinds of varying degrees but since Christmas we’ve had tailwinds (in the housing market).

“We have also had lots of conversations with expats recently.”

Other high-end sales across the city included one of Highgate Hill’s original homesteads at 77 Hampstead Road, which sold for $2.6 million through Luke Croft, of Ray White South Brisbane.


UNDER CONTRACT 77 Hampstead Road Highgate Hill QLD 4101

Built about 1890, the seven-bedroom, five-bathroom home mixed modern chic with heritage touches after an incredible architecturally renovation.

Under the $1 million mark selling agent Bevin Powell, of Ray White Annerley, set an office record for registered bidders after 30 hungry home-hunters battled it out for a four-bedroom brick home at 3 Appleyard Crescent, Coopers Plains, which sold for $816,000.

“This was an amazing auction, the property market is still hot right now but having said that, I’m not sure we’ll have another auction like this one for a while. The winning bidder purchased the property for their parents,” Mr Powell said.


Ray White Queensland chief auctioneer Mitch Peereboom said across their Brisbane agencies top results were fetched alongside soaring clearance rates with the high-end sector swelling.

“The marketplace is particularly strong in the $800,000 to $1.5 million range. We know buyers are selling and then have been looking to upgrade and that bracket is performing excellently,” Mr Peereboom said.


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Property Industry Expects Interest Rate Rise

Property industry confidence levels are near record highs but there are rumblings that interest rates could to increase soon.

The ANZ/Property Council industry survey for the March quarter found confidence levels has improved drastically since the pandemic started, led by the residential sector.

The survey canvassed the views of more than 830 respondents—including, owners, developers, agents, managers, consultants and government—across all major industry sectors and regions.

The results revealed respondents also believe there will be an interest rate increase during the next 12 months.

This comes as the Reserve Bank of Australia closely watches the housing market as “cyclically low-interest rates and rising asset prices create a risk of excessive borrowing”.

According to the RBA financial stability review, this could lead to financial instability particularly if lending standards are weakened, which could expose lenders to large losses.

Interest rate changes

Property Industry

^Source: RBA 

For the meantime, the Reserve Bank decided to hold the official cash rate at 0.1 per cent for the fifth time in a row.

Despite expecting an interest rate rise, survey respondents were confident about work expectations, national growth and house prices in the next year.

Property Council of Australia chief executive Ken Morrison said the expectations for house prices were at the highest level in the survey’s 10-year history.

“When the property industry is confident it is exceptional news for the entire national economy because it employs so many people—more than 1.4-million Australians,” Morrison said.

“While the economy still faces significant challenges, the property industry is clearly buoyed by the speed of our turnaround and the strong demand they are seeing, particularly in the residential and industrial sectors.”

ANZ senior economist Felicity Emmett said that for now the combination of record low mortgage interest rates and targeted stimulus was clearly supporting the housing sector.

“Property sentiment has improved again, reflecting stellar economic performance, a large pipeline of work for the coming year and a strong outlook for property prices,” Emmett said

The survey also revealed an easing of concerns about the office sector as more CBD workers return to their work places.


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Property confidence stages remarkable comeback


The latest results from the ANZ/Property Council Survey reveal surging confidence levels in Queensland’s property sector, despite the slower than anticipated return of workers to major business precincts.

Property industry sentiment in Queensland bounced from 124 points in the December 2020 quarter, to 144 index points in the March 2021 quarter. The result shows that industry confidence has nearly tripled since the height of the COVID pandemic, when a low of 58 index points was recorded during the March 2020 quarter. A score of 100 is considered neutral.

Property Council Queensland Executive Director, Chris Mountford, said the results were nothing short of phenomenal, however, it was critical that the positivity was not taken for granted.

“The results highlight a remarkable recovery for Queensland’s property sector, which proved resilient throughout the challenges of last year and is now spearheading the State’s economic recovery,” said Mr Mountford.

“The industry has recorded strong results on most metrics of success, from crane counts to property clearance rates, to our own quarterly confidence surveys.

“However, we do need to maintain some degree of caution as these positive results were recorded prior to Brisbane’s most recent lockdown, and while the benefits of Government stimulus programs continue to be felt.

“It is well documented that these lockdowns cost our economy millions and impact on the confidence of employees to return to their places of work.

“Office occupancy within Brisbane CBD has stagnated at circa 63 per cent, showing the road to recovery for our city centres has clearly not been as smooth as in other property sectors.

“With the end of JobKeeper and the ever-present spectre of another lockdown, there is clearly a need to support our CBDs and the many businesses that rely on the daily visitation of workers, students and tourists to make ends meet.

“Over the coming months, the Property Council will be working with its members, Brisbane City Council and the Queensland Government, to implement a plan to support our city centre and ensure it continues to drive Queensland’s economy,” concluded Mr Mountford.


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