It is not surprising that the data reported for May in relation to the Brisbane Property Market supports our “on-the-ground” assessment of what we have been seeing for a number of weeks. In short, there has been no change in house values recorded across the month according to Corelogic Data. No increase and certainly no decrease in house values (ie: 0.0% change), despite what media reports might have led you to expect. In the unit market in Brisbane, prices have retracted -0.6%, reflecting less stability in this asset class across Greater Brisbane. Let’s dive into these results a little further.
Last month we reported improved optimism from buyer’s across Brisbane. This has continued throughout May, as open homes and auctions have re-emerged through the city, coinciding with significant gains in the 4 week moving average in consumer confidence as reported by the ANZ-Roy Morgan Index.
Whilst the unemployment level reached 6.2% in May, this has not yet had any material impact on the demand for property from buyers here in Brisbane. Whilst employment is critical, there is no data that backs up the claim that a spike in unemployment always leads to a fall in property values. The availability of credit seems to be a more significant driver of demand, because lower borrowing costs effectively allow borrowers to take on bigger mortgages and right now, interest rates are at their lowest level ever.
The demand for property is also driven to a large extent by population growth. Brisbane will be less impacted than Sydney and Melbourne by the cessation of international migration due to closed international borders, but we will be waiting eagerly to see what happens when the state borders are open again. This is because the largest portion of our population growth comes from interstate migration. It will be interesting to see if more people reflect on their circumstances as a result of the Covid-19 shut down, and as a result there may be a greater shift to locations that deliver a more affordable lifestyle. I wonder if South-East Queensland will see a spike in migrants from the southern states once the borders are again open? I guess time will tell.
But even with state borders still closed, there seems to be enough pent up demand from local home buyers and interstate investors who may have been in the market for months (even before the pandemic) and they are now actively searching again despite what has happened over the last 3 months.
It also seems that Listings are beginning to pick up as sellers also have renewed optimism about the market. According to Corelogic, pre listing activity is up 2% to the week ending 31st May 2020, but listing activity remains down compared with this time last year.
SQM Research have reported a +1.8% increase in total listings in Brisbane throughout May, but the yearly change is still -12.9% lower than the same time last year so we still have a severe supply shortage. This means that quality properties are very quick to sell with multiple buyers. Some properties are being measured by hours on market, not days on market in some popular pockets around Brisbane due to the depth of buyers, and lack of available properties for sale.
The longer term supply chain for new properties also looks set to slow down with apartment building work completed to the end of March down 57% in Queensland since December 2016 according to ABS Data. We expect the Government will announce an enormous amount of stimulus to encourage home buyers to buy, build and renovate properties to stimulate slowdown in the construction industry, as it is one of Australia’s largest employers.
Weekly rents across Brisbane are also higher across the month of May according to the SQM Research Weekly Rents Index, with houses reporting a +0.6% rolling monthly change. This is reassuring for property investors who have been nervous about falling rents, due to the effects of Covid-19. At this stage there appears to be stability in the rental returns within the Brisbane housing market.
Of course, there are some “at risk” suburbs in Brisbane where vacancy rates have spiked due to Covid-19, which means finding a tenant will be harder – thus impacting on rental yields. We have previously summarized these locations HERE. Suburbs most impacted by vacancy risk have more high-density unit developments, and most suburbs where lower density family homes are located have not been impacted across the city.
Much of the reported information in this update may come as a surprise to many who are reading the news headlines. We have been reporting for weeks that there is little correlation between the news headlines and what we are observing by being “on the-ground.” Property buyers need to be cautious in terms of what information they may be relying upon to make large financial decisions (like buying or selling a property) at this time because as the data shows, the Brisbane housing market is proving it’s resilience.