It appears that property values around the nation have continued to trend higher in October and Brisbane certainly follows this positive month-on-month gain. But we are more excited about what we are seeing on the ground than what the overall median data trends are telling us, because buyer activity is really starting to push prices up in some pockets around our city, which is great news for those who already own property in Brisbane, and also those just getting into the market now.
The CoreLogic Home Value Index Results for October confirm a further 0.8% increase in Brisbane dwelling values, pushing the median price growth for the quarter up to 1.1%. Houses and units saw similar price growth this month with 0.9% and 0.8% respectively.
Relying on overall median price growth trends for an entire City can be somewhat misleading for investors and property owners who want to understand what may be happening at a more local level. AS we have said before, Brisbane is not one property market – there are markets within our City that are certainly performing a lot stronger than the overall median trends. Let me give a couple of examples.
In a northside suburb, about 15km from the CBD, we recently attended the first open home for a property listed for sale just 3 days prior. The listed price was $519,000 so the property was in an affordable location and appealed to a wide range of buyers including first home buyers, families, investors and downsizers. There were more than 30 groups through at the first inspection (indicating very high demand) and the property received multiple offers on the same day – 7 offers to be precise. This property was located in a suburb where new listings are few and far between, so the supply of homes available for sale is very limited. This puts an enormous mismatch between supply and demand and the result was that the price escalated and it ended up going under contract for just under $550,000 – about $30,000 more than the asking price.
In another example, we attended an auction in another Brisbane suburb last weekend, and there were 22 registered bidders who were keen to secure the property. When we performed our comparative sales analysis we knew similar properties in the area had sold for around $550,000. We also knew that these sales had taken place in a different market … either late in 2018 or early in 2019 before all of the current buyers entered the market created the renewed confidence that we are now experiencing. The property sold under the hammer for just under $650,000 – nearly $100,000 MORE than the last comparative sale in this area, which represents a shift of approximately 20%. So, there are 21 other buyers still looking to purchase in this area and every time they miss out, FOMO sets in and they often stretch their budget a little more. Again, this type of competitive pressure is representative of the current market in certain pockets around Brisbane.
Except for properties that we have been lucky to secure off market for our clients, every property that we have purchased that has been listed on the market over the last 2-3 months has been under multi-offer. This has included properties in many different suburbs across many different price points.
Like any data, it is important to understand what information contributes to the median value. CoreLogic Hedonic Home Value Indexes that we report on each month include sales from many areas of Greater Brisbane including the Brisbane local government area as well as Moreton Bay, Redlands, Ipswich, Logan and the Gold Coast. There are so many different markets across these regions and certainly many that we do not consider to be investment grade, so whilst the median price growth trends provide some certainty that our markets are heading in the right direction, it is important to get some further understanding of what we are seeing on the ground every single day around Brisbane.
In terms of rental markets, Brisbane was one of only two Capital Cities around Australia to record rent price growth this quarter – up 0.2% with median gross yield for Greater Brisbane now sitting at 4.6%. Again, this data includes many of the investment properties located outside of the Brisbane local government area. Gross yields typically decrease as you move closer to the CBD but even in our Blue Chip suburbs our rental return is comparatively a lot more attractive compared to the yields that can be achieved in the Melbourne and Sydney property markets.
With the average 3 year fixed rate investor mortgage now at 3.8%, more properties around Brisbane will be showing a positive cashflow for investors and therefore tenants may actually be better off buying their own property as opposed to renting. Understandably, not everyone qualifies for a mortgage and saving for a deposit can also be hard. But with the Federal Government’s incentives about to kick in in January 2020, now might be the perfect time for many to make a start on the property ownership ladder.
We are certain that, at a suburb level, we are seeing significant price growth in many pockets right now. The data is recorded based on settlements, so it is slightly delayed, and this must be considered as well. If you are relying purely on data to select your Brisbane Investment Property then you may have already missed the boat!