Brisbane Property Market Update | Quarter 2, 2016
Metro property near Brisbane doing well
Although property prices across the nation have generally slowed, there are still bright spots within the Brisbane market. And the foundation of the Brisbane real estate market is owner-occupier property, including the suburbs 5 kilometres or less from the CBD.
Detached housing in particular has shown strong gains over the past year and a half, even though stronger gains earlier in 2016 in Brisbane have now joined the rest of Australia in stabilising. Having said that, the Australian Bureau of Statistics released figures that show 4.1% annual growth for Brisbane to March this year, stronger than Adelaide, Melbourne and Hobart.
And when looking beyond the CBD, the 5-10 kilometre band outside the city is showing a spike in property values, which is almost certainly due to what is called the ‘ripple effect’. That is when strong performing suburbs record ever-increasing prices, with that boost in demand then rippling out from one suburb to the next as buyers look for better prices.
In Brisbane, this ‘ripple effect’ is a consistent phenomenon, with buyers pushed out of their budget range in one suburb only to seek the next best thing in a nearby adjoining suburb. This then pushes prices up within that suburb, and so on. But even the ripple effect has been recording weaker values towards the middle of 2016, even though suburbs with strong infrastructure are still good performers.
Modest capital gains in Brisbane
Nonetheless, the supply of housing is still outstripping demand, and this subsequent cooling effect on the market is tipped to continue, resulting in modest capital gains. To understand the problems of oversupply, check out our detailed explanation about the repercussions here, and how expert property researchers like IPRG can help you avoid this investor trap.
The oversupply issue is particularly notable in Brisbane’s inner city, with the market for units struggling to the point that experts are worried about the foreseeable future. Many projects, and mainly those that rely on interstate or international investors, are in the planning and development phases and may suffer due to recent significant tightening in the lending sector. Big banks are putting up higher borrowing barriers to overseas buyers in particular, which is tipped to hurt the real estate market as a whole.
For that reason, when it comes to the inner city unit market, the strongest performers are the projects and developments that are targeting owner-occupiers.
Tenant demand stable in Brisbane
A fairly balanced market in Brisbane at present is rentals, with tenant demand quite stable. The latest figures show a vacancy rate of 2.5% for houses and 3.2% for units, with anything within the 2-3% band representing balance. Anything below 2% represents an under-supply of rental properties, while data over 3% indicates an oversupply, so the current situation indicates balance both in tenant demand and rental prices. Overall, unit vacancy increased by 0.3% for the year.
Rental yields are also quite steady, but the best news is that the current state of the Brisbane property market means the city is a good choice for renting. Brisbane has staved off the kind of house rental surges that have been seen in Melbourne, Adelaide, Hobart, Canberra and Sydney.
As for small subdivision land sales, it is still the investors that are leading the pack even though sales activity in the bigger residential estates like Springfield Lakes is still relatively strong. This is an indication that developers are easing off in terms of production.
It should also be noted that there has been a slight increase in mortgagee-in-possession sales, which can be alarming because it normally means owners have been overcome by their financial situation or let down by the market. But the Brisbane real estate market overall is quite stable and therefore the slight mortagee-in-possession increase is considered negligible.
In fact, Brisbane is often regarded as a star performer within Australia, as average house prices have been on a steady rise within the Queensland capital for many quarters in succession. Real Estate Institute of Queensland chief executive Antonia Mercorella said recently that “consistent, sustainable growth” like that seen in Brisbane is in fact better than any boom.
If Queensland is held back, it is because of the job market, with only South Australia recording higher unemployment within Australia. That stagnation of the economy affects confidence and leaves the real estate market in quite a static state.
But how the Brisbane market is consistently buoyed is by the headline price increases in Sydney and Melbourne. This phenomenon drives buyers struggling with affordability and weighing up lifestyle to Queensland, where they can get better properties for less money. That has translated into house price increases of almost 15% in Brisbane over the past five years, with typical four-bedroom homes often selling at prices higher than the new average.
Bucking the trends
Assessing the property market as a whole is always valuable, with factors like low vacancy rates, good median sales prices and strong demand often singling out a winner. But buying property is not always a mathematical equation, because snapping up real estate in areas that are off the boil can also be favoured by buyers, while there are usually ‘hotspot’ suburbs and streets in any property market that are shrouded by the more general trends.
- REIQ, 2016
- CoreLogic RP Data, 2016
- ABS, 2016.
This report is not intended to be comprehensive or render advice and neither IPRG Pty Ltd nor any persons involved in the preparation of this report, accepts any form of liability for its contents.