While other capital cities saw home values decline consistently in the past months, Brisbane stood strong and displayed admirable resilience â€” “buoyed by steady population growth driving demand and underpinned by good economic fundamentals”. How can investors maximise opportunities in Queensland’s capital?
Home values nationwide declined by 0.2 of a percentage point in June and are down by 0.8 of a percentage point over the past year due to tighter finance conditions and less investment activity, according to the latest CoreLogic Home Value Index.
Despite the national decline, Brisbane came out as a winner with 0.2 of a percentage point increase, preceded only by Adelaide and Hobart, which saw 0.3 of a percentage point increase.
Like in most capital cities, long-term values at the more affordable end of the city’s housing market increased faster than the more expensive properties.
In fact, the most expensive 10 per cent of properties in the capital city saw only 0.5 of a percentage point increase in home value while the most affordable 10 per cent saw values up by 1.1 per cent.
At the moment, the median house price in Brisbane sits at $515,000, up by 2 per cent over the last year.
Meanwhile, the city’s units are considered the most affordable in price-to-income ratio among all major capital cities. In over 12 months, the annual median price for units declined by 1.8 per cent to $442,000.
Supply and demand
Capital cities across Australia saw a combined decline of 7.5 per cent in listings, while vendor discounting was between 3.6 per cent and 7.6 per cent for houses and between 4.9 per cent and 9.0 per cent for units.
While the supply is abundant, clearance rates in Brisbane are down. In fact, the city is among the worst performers for houses, recording an average of 64 days in the market.
Settled transactions decline by 12.1 per cent over the past year while monthly sales volume are down when compared to the decade average. While the volumes are expected to move over the next few years, no significant rise is predicted by experts.
In the rental market, median rents for three-bedroom houses in Brisbane are up by 2.6 per cent to $390 a week after vacancy rate rose by 0.1 of a percentage point to 2.7 per cent over the quarter.
While this paints an unsatisfactory picture of Brisbane’s unit market, REIQ media and communications manager Felicity Moore said that the rising demand for units will certainly absorb excess stock in the marketâ€”it’s only a matter of time.
“Queensland has become the number-one destination for internal migration, taking over from Victoria in the latest ABS Census data. Our overseas migration is at its highest level in years, which means demand for accommodation will continue,” she highlighted.
Property sellers are advised to be willing to find a compromise of price to avoid having their property stay in the market for a longer period. A finely-tuned marketing strategy will also help investors sell at an appropriate price.
While far from perfect, Brisbane’s property market is expected to continue thriving over the next years. Investors may look forward to the improvement of their portfolio’s profitability following the Queensland government’s increased expenditureon infrastructure and capital grants.
A total of $139.7 million will be used for the First Home Owners’ Grant in all of Queensland to assist first home buyers who wish to enter the housing market.
Meanwhile, over $4 billion will be dedicated to improving transports and roads in Queensland during financial year 2018â€“19. Queensland Rail will receive over $500 million in funding, contributing to major projects such as the Brisbane Central station and upgrades between Brisbane and Toowoomba.
Despite the big expenditure on infrastructure and capital grants, the biggest opportunity for Queensland remains in the tourism sector, according to Propertyology’s Simon Pressley.
He explained: “Generally speaking, for every one job at the coalface in central Queensland, there are nine managerial and administration jobs in Brisbane’s CBD. The mining sector is starting to expand again now and that’s great for the broader economy and property markets all over the state.”
The potential for major economic growth in the state will be realised once the government sets a solid tourism plan and marketing strategy and increases investment in tourism-related projects, the property professional said.
Right now, the Queensland government plans to spend $34.7 million on tourism and the Commonwealth Games projects, including upgrades on the Carrara Stadium, the Great Barrier Reef Island Rejuvenation Package, Great Keppel Island Recovery Package, Mount Inkerman Nature Tourism Development, Mackay Tourism Visitor Information Centre and many more.
The state government will also be dedicating $91 million on natural resources, mines and energy, which is expected to play a vital role for the improvement of Queensland’s economy.
When looking to invest in Brisbane, the Property Investment Professionals of Australia (PIPA) recommended considering four demographic factors, which signals an early stage of gentrification.
These factors include:
- a decrease of people 18 years old and under that is lower than the state average;
- an increase of couples with children that is larger than the state average;
- an increase of those who lived at a different address five years ago that is larger than the state average; and
- an increase of females working in professional occupations.
PIPA’s Peter Koulizos said: “Identifying areas undergoing the early stages of gentrification is just one way that property investors can get above-average returns on their assets.”
“The secret is to get in early before everyone else realises what is going on,” he highlighted.
Among the suburbs in the capital city that are showing signs of gentrification are Annerley, Lutwyche and Woolloongabba.
It’s also worth looking at suburbs with a significant rise in sales activity, declining time on market, low vacancy rates, greater affordability and good economic fundamentals.
Ipswich City offers strong population growth and the development of large tracts of vacant land. Moreover, major national companies and government departments have moved in the area over the recent years, leading to job and wage growth.
Due to the investment activity in the area, it has recently been named as one of the fastest-growing real estate markets in Australia.
Despite the good growth potential in its market, Ipswich remains as one of the most affordable suburbs in the Brisbane metropolitan area, with median prices at around $200,000.
Aside from Ipswich, the Moreton Bay region also offers affordable housing, with a median price of around $390,000, and good rail and road links to Brisbane and the Sunshine Coast.
It is considered the most active market in the Brisbane metropolitan area, with five of its core suburbs selling over 400 houses in the past 12 months. A new university campus is also expected to boost economic activity as well as the demand for dwellings.
Finally, the Redcliffe Peninsula market quickly responded to the establishment of the transport link which provided rail connection from Kippa-Ring to Petrie and onwards to the Brisbane central business district.
Some suburbs in the area delivered strong price growth in the past 12 months, with median house prices sitting at around $400,000.
Bianca Dabu, Smart Property Investment, 2 July 2018