As Sydney and Melbourne continue to soften, Brisbane has been tagged as the next best hotspot for property investment. How good a value does the Queensland capital actually represent today?
Realestate.com.auâ€™s Life in Australia Index report found that Brisbane stands as the fourth most liveable city in Australia based on safety, health services, housing affordability, job prospects and public transport. The capital city follows Canberra, Perth and Adelaide and precedes Hobart, Melbourne, Sydney, and Darwin.
While most capital cities did not rank highly in terms of housing affordability, Brisbane boasts a rating of 5.3 out of 10, following Adelaide and Perth with 5.6.
However, despite the opportunities in the Queensland capital, some experts deem it â€˜not too interestingâ€™ in terms of wealth-creation potential.
According to the Housing Industry Associationâ€™s Tim Reardon, the past seven years saw no significant movement in the Brisbane property market as it cycles through boom/bust cycles, particularly in its apartment market.
Even the market for detached housing remains equally uninteresting, particularly in South-East Queensland where the market is labelled â€˜strong but not remarkableâ€™.
â€œTheyâ€™ll go again, their apartments are clearing the market, thereâ€™ll be another suite of apartments built in Brisbane in the near-future.â€
â€œTheir pipeline of work has relatively short, and at the end of last year, it tightened up extremely quickly [with a] 20 per cent drop off in approvals, and a reasonable share of those were builders volunteering spec homes into the market, so itâ€™s one weâ€™re a little pessimistic about.â€
Still, Brisbane, as well as most part of the state of Queensland, offers stronger capital growth prospects compared to other capital cities across Australia, Mr Reardon highlighted.
â€œWith still the strong population growth, they should be achieving better outcomes than what they are â€“ that there is our forecast for Queensland for the next couple of years.â€
During the final week of March, most capital cities saw a decline in dwelling values, with Melbourne leading at a decline of 0.2 of a percentage point, followed by Sydney and Brisbane, which both saw a decline of 0.1 of a percentage point. Perth and Adelaide, on the other hand, saw no value changes over the week.
While the cash rate is expected to remain stable, Market Economicsâ€™ Stephen Koukoulas believes that there could be a significant decline in the near future.
â€œThe economy has slowed, with the per capita GDP recession in the second half of last year probably continuing into 2019. Inflation is low and with the household sector under pressure from falling house prices, some policy stimulus is needed.â€
REA Groupâ€™s Nerida Conisbee also believes that a rate cut is possible within the year based on the five indicators of economic sentiment tracker namely: housing affordability, employment, wage growth, cost of living and household debt.
â€œIf economic data continues to deteriorate, then we will likely see movement in the second half of the year,â€ she said.
If the rate cuts happen in 2019, prices could decline significantly across capital cities.
Houses and units in Brisbane may see declines ranging from $48,947 to $7,345, along with properties in Melbourne, Perth and Adelaide.
Of all the capital cities, only Hobart is expected to see prices rise in the event that the rate cuts happen.
Finderâ€™s Graham Cooke said: â€œRight now, thereâ€™s no need to jump on the first property you like. Use this time to save for your upfront costs. Look for value before you plunk down your deposit. Buying at the right time could potentially save you tens of thousands.â€
While growth in property values remain lackluster, the residential land market of Brisbane has seen â€˜minorâ€™ success since the latest official valuation, with select areas continuing to witness signs of strength even after the Queensland Treasury said that dwelling investment has entered a recovery phase following a 4.8 percent decline in 2017-18.
Land values in Brisbane rose by 6.8 per cent since the last valuation in 2018, with residential land rising between five to 15 per cent. To date, residential land is considered the largest market sector in Brisbane.
Across the capital city, 126 suburbs saw their value rise by 15 per cent, with 16 rising by more than 15 per cent, while 37 suburbs saw values held steady.
The inner city suburbs with the largest median value rises were Auchenflower, Woolloongabba, Milton and Paddington. Other well-performing suburbs includeCarseldine, Boondall and Rocklea, as well as Sinnamon Park, Jindalee and Kenmore.
In the Greater Brisbane region, the Redland City Council emerged as one of the most improved areas in terms of land value, with a notable increase in Alexandra Hills, Logan Central, Woodridge, Kingston and Jimboomba.
The Ipswich City Council also saw increased demand for new development land, while the Moreton Bay Regional Council saw a rise in land values
Supply and demand
As prices declined, listing volumes fluctuated across capital cities, with Sydney, Melbourne, Brisbane and Perth declined while Canberra, Darwin, Adelaide and Hobart increased.
Brisbane saw the second longest average time on market for houses at 71 days, following Perth with 90 days and preceding Darwin with 51 days, as well as the longest average time on market for units at 76 days.
Vendor discounting was between 5.3 per cent and 8.3 per cent for houses across most capital cities, and between 6.2 per cent and 11 per cent for units, with Canberra as the low-end exception for both houses and units, Perth as the high-end exception for houses and Darwin as the high-end exception for units.
The release of 2019â€™s budget highlighted several projects focused on transport infrastructure, with $100 billion to be dedicated to the improvement of accessibility properties, job sites and delivery routes over the next decade.
Among the major projects lined up are the Melbourne to Brisbane Inland Rail, the Western Sydney International Airport and the Melbourne Airport Rail Link.
There will also be billions of funds dedicated to the Urban Congestion Fund and the Roads of Strategic Importance, as well as other projects in the states of NSW, Victoria, South Australia and Western Australia.
Fast rail business cases will be implemented across Sydney, Melbourne and Brisbane, particularly Brisbane to the regions of Moreton Bay and the Sunshine Coast and Brisbane to the Gold Coast.
As the government delivers the infrastructure projects, they also commit to a return to surplus. While the 2019/19 financial year will end in a deficit, a surplus is projected for the 2019-20 federal budget.
Still, despite the long list of projects lined up for the coming years, experts remind investors that these infrastructure projects are still merely plans and should not be the sole basis for investing in an area.
According to Property Investment Professionals of Australiaâ€™s Peter Koulizos: â€œYou need to be careful because these are just plans, and previous NSW governments have been unfortunately renowned for announcing plans but not going about it.â€
â€œWait until the first sod of soil is turned, and then you have more confidence about following up your analysis on infrastructure spending.â€
While Brisbane is doing arguably better than Sydney and Melbourne in terms of wealth-creation opportunities, experts remind investors that the ultimate outcome of an investment will vary from location to location.
Overall, Brisbane, like any other property market, has markets within markets that follow their own cycles.
â€œOverall, Brisbane is a split marketâ€¦ It usually comes down to supply and demand. Clearly, the property should be in a good location and it should have the elements of a good property investment,â€ according to Brisbane-based buyerâ€™s agent Melinda Jennison.
Ms Jennison encouraged investors to do their research and due diligence before committing to any investment property because, at the end of the day, it will be a long-term commitment.
As such, she also encouraged them to consider value-add opportunities through potential renovation or expansion as well as exit strategies before adding a property to their portfolio.
â€œProperty investment, certainly, is a long-term commitment for most people, so understanding long-term trends in property, thatâ€™s whatâ€™s most important.â€
â€œWeâ€™ll certainly recommend the types of properties that give them various exit strategies. We believe in understanding what the purpose of the property acquisition is at the outset, so we discuss exit strategies before we even start looking for a property for a client. Multiple exit strategies gives them more options.â€
â€œWe always discuss strategy with our clients because itâ€™s important to know upfront what the purpose of the investment is and to understand the timeframes that the investor has in mind. Thatâ€™s all part of their goal-setting and strategy development,â€ Ms Jennison highlighted.
Moreton Bay, could be offering a more significant value proposition considering the new infrastructure set to be built in and around the area, as well as the possibility of further rezoning in the near future.
Since it continuously secures strong housing demand through population growth and interstate migration, Moreton Bay has been declared as a priority development area by the state government, ultimately driving it towards becoming the highest-growing shires across Australia.
According to Ms Jennison: â€œIn property investment, it comes down to supply and demand, but on top of that, it also comes down to having locations where people can secure good jobs, high-paying jobs.â€
â€œWe feel that Moreton Bay will gentrify quite quickly with young university students moving in, so weâ€™ll see the types of accommodation gradually change over time to suit their preferences. Thereâ€™s lots of opportunities within the area and the region as a whole because of this gentrification.â€
Among the major projects in the region that are expected to contribute to property growth are the establishment of the new campus of the University of Sunshine Coast and the development of The Mill at Moreton Bay.â€
Apart from Moreton Bay, the regional city of Mackay, located 1,000 kilometres from Brisbane, has also been deemed as a strong economic performer in Northern Australia.
Knight Frankâ€™s Craig Stack said: â€œOpportunities are ripe for investors and developers across both the residential and commercial sectors, fuelled by rapidly forming demand.â€
â€œWith 12,000 more people employed in June 2018 than June 2015 the unemployment rate for the region fell to 2.7 per cent, and this has re-established an economic confidence across its business and residential community.
â€œThe end game for development sites can be understood once again after a long period of doubt about whether new product would be occupied.â€
Bianca Dabu, Smart Property Investment, 4 April 2019