AS PUBLISHED IN AUSTRALIAN PROPERTY INVESTOR MAGAZINE (CLICK HERE)
May has been an interesting Month in Brisbane property which, from being on the ground, can be described as a two-speed race. Prior to the Federal election on May 18, listing volumes were down, there were limited buyers actively in the market and it was generally flat and unexciting. But almost instantly following the election, the speed seems to have significantly changed. Our enquiry has picked up. People we have not spoken to for 2 or 3 months are saying they are now ready to buy. There are more buyers at open homes and Sales Agents have told us they are experiencing the same this so it seems to be across the board.
Why might that be? Well, the 2019 Federal Election results have removed the uncertainty surrounding changes to capital gains tax and negative gearing policy which should see some improved confidence for buyers looking to enter the market, especially investors.
No-one likes uncertainty – especially when the impact of potential change is unknown. But there have also been a variety of announcements since the election that are also likely to have a positive impact on housing market conditions.
We are now likely to see serviceability assessments reduced from 7.25% to a 2.5% buffer above the actual mortgage rate being offered, which is a more practical level of assessment of a borrower’s capacity to service a loan. This will potentially improve access to credit and enable some buyers to access more funds to purchase a property, therefore having a positive impact on housing demand. In saying that it is still tough to access credit because lenders are continuing to scrutinize expenses and borrowers’ income is also being investigated in more detail.
So… to the Brisbane property market performance … not surprisingly there was not a lot of change in May.
The Corelogic Hedonic Home Value Index recorded a slight fall in median dwelling values of -0.5% across the month which now shows an annual decline of -2.3%. In saying that. Other Data collated by SQM Research shows the 12 month change in Brisbane house prices is up 0.7%, so it depends on what data you wish to rely on.
At a national level, the rate of decline in dwelling values eased once again and in May, national values recorded the smallest month-on-month decline since May 2018. The broad nature of the housing downturn has now found half of the top ten best performing capital city sub-regions are actually reporting a slight negative annual result for housing value movements. In saying that, Brisbane still has three sub-regions in the top ten across capital cities throughout Australia (two regions in Moreton Bay and one in the western suburbs), thus demonstrating the resilience of some sub-regions over others in our capital city.
Gross yields in Brisbane are showing positive growth and according to the Corelogic Hedonic Rental Index they are currently sitting at 4.6%, which is above Sydney, Melbourne, Adelaide and Perth, but slightly behind ACT, Darwin and Hobart. The SQM Rents Index shows 12 month rent growth of 2.4% for Brisbane property investors. Vacancy Rates are also tight across the city at 2.6%, with some regions recording even tighter vacancy at less than 2%.
The development supply in the inner city has effectively come to a halt. Since 2016 we have seen an increase of approximately 70% of unit stock in inner city medium and high density buildings. Whilst there are a further 14,500+ units with development approval, a large number of those are on hold at present. This is likely to have an impact on shorter term supply.
The fundamentals have not changed in Brisbane over recent months. Our city still has accelerating population growth, enormous spending on new infrastructure and declining building commencements pushing the supply and demand ratio out of balance. This is likely to put upward pressure on prices. Already since the election we have seen some properties go under contract for prices higher than other comparative sales in the area. If this was a one off, we could discount its effect … but it is something we have seen on a few properties which may be reflective of renewed optimism and a greater appetite for quality property in our City. Now that a lot of the headwinds have lifted, we are certainly optimistic about the months ahead.