The trend in Brisbane house price growth remained positive throughout the month of March, despite the outbreak of the COVID-19 virus radically changing the way we now have to live over the last 2 weeks of the month. In this Brisbane Property Market Update, the latest Corelogic Hedonic Home Value Index data shows there was an overall increase in dwelling values in Brisbane of 0.6%, which can be divided into House price growth of 0.7% and Unit price growth of just 0.1%. Interestingly, according to the same data, overall dwelling values in the Brisbane sub-regions of Ipswich and Logan/Beaudesert edged lower this month, despite value growth across greater Brisbane as a whole providing concrete evidence that Brisbane is not “one property market”.
What comes next is uncertain, as it will largely depend on the length of time that the current health and economic crisis persists. But looking at SQM Asking Prices for Brisbane, for the week ending 31st March 2020, for all houses there is a -0.1% rolling month change and -0.5% for units. Of course, when we take that down to a suburb or postcode level the story is very different with some areas showing much more positive forward indicators than others. It is important to note that asking prices do not always equate to sales prices, but is it one indicator we can look at to determine seller expectations in these uncertain times. Despite the increased inquiry we have received in relation to a potential “fire sale,” there is no evidence of this at all in Brisbane right now.
Corelogic head of research, Tim Lawless said “Considering the temporary nature of this crisis, along with the unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record low interest rates, housing values are likely to be more insulated than sales activity.”
This provides some level of confidence for the residential property sector during the next 6 months whilst all of this support is in place. Property values are unlikely to be impacted when property owners can simply stall their repayments to the banks in the case of financial hardship. Of course, the uncertainty of low long this health crisis and associated economic disruption will last is unpredictable right now, so we hope to gain further insights into this in the coming days and weeks.
There are early indicators that listing volumes will fall substantially over the coming weeks. Corelogic have confirmed that reports generated through their online platform (used for pre-listing Real Estate sales packages) have more than halved in recent weeks and Agents are also reporting both buyer and seller inquiry has fallen by more than 50%. If sales volumes do fall significantly in the coming weeks and months, then the reliability of property data in the coming months may be compromised to some extent. I have previously discussed the importance of this HERE . It is times like now that local knowledge of what that data is made up of will be critical to understand true price movements based on comparable properties.
From a rental perspective in Brisbane, the overall trend in residential vacancy rates continues to decline with city wide vacancy rates recorded at 2.2% as the end of February 2020 . When we assess at a suburb level, there are several locations where vacancy rates have been much lower (even below 1%) due to a severe shortage of rental properties available.
In the last week, there have been reports of an increase in rental listings , especially for fully-furnished properties that are no longer being listed under short term accommodation sites such as Airbnb as owners seek a more stable income source and convert those properties onto the full-time rental market during these turbulent times. According to Domain there were 1420 new rental listings between March 16th and March 29th which equates to an increase of 53% compared with the previous 4 weeks. But to date, our feedback from Property Managers in Brisbane is that properties are still being rented quickly despite a drop off in tenant inquiry, because it appears that people who are inquiring are ready to move immediately.
Forward indicators for asking rents by SQM Research show for the week ending 28th March 2020, asking rents across all of Brisbane on all houses was down -0.5% and fur units this was -0.4%. This might indicate a flattening of rent price growth, however when we look at certain locations at a postcode level it again confirms that there are markets within markets, as there are still many suburbs where we have been purchasing properties for our investor clients where asking rents are still higher for the week, month and quarter. Again, this highlights the importance of local knowledge in these uncertain times.
Having reviewed what I wrote in last month’s Brisbane Property Market Update there have certainly been a lot of unprecedented changes over the last 4 weeks! But there have also been huge changes to support the residential property market during these difficult times including interest rate cuts, enormous government support announcements, and banks freezing interest and principal repayments (if necessary). The missing link right now is support for tenants and we expect an announcement by the State Governments in the coming days in this regard. That said, many of the fundamentals for Brisbane have not changed. Supply is still down. The Infrastructure is still underway. Right now demand has dropped, but once the virus is contained, we expect economic activity to improve quickly, therefore driving a turnaround in consumer sentiment. With record low interest rates and many neutrally or positively geared opportunities in the Brisbane Property Market, on the other side of COVID-19 (and yes there WILL be the other side) we expect the demand for property in our great City to be sky high.