Brisbane Property Market Update July 2020

Brisbane Property Market Update July 2020

What has been happening to the Property Market in Brisbane in July 2020?

This is the question that a lot of people ask when we first speak. There is so much variation in what is going on around Australia. We know, it is hard to keep up with information that is relevant to a specific region.

That’s how we can help!  We not only look at the data, but we also understand what is going on by being “on the ground.”  We can assess real-time demand around certain suburbs.

How do we do this?

We can monitor how many people are attending open homes in Brisbane.

We find out how many people are putting in offers for a property that is listed for sale.

AND, we see how many people are attending and bidding at auction in several suburbs around our city.

Let’s take a look at some the data and some of our real time observations, to summaries what is happening in the Brisbane housing market and also the Brisbane unit market right now.

Brisbane Property Market Prices

Brisbane Property Market Summary of Data

According to the latest Hedonic Home Value Index data by Corelogic, dwelling values in Brisbane saw a -0.4% decline in value over the month of July 2020.

 

In a recent announcement, Corelogic’s Head of Research, Tim Lawless, made the following statement:

“Record low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn. Advertised supply levels have remained tight, with the total number of properties for sale falling a further 4.3% in the 4 weeks to July 27th , sitting 15.2% below where they were this time last year. Additionally, increased demand driven by housing specific incentives from both federal and state governments, especially for first home buyers, have become more substantial.”

In the Brisbane Housing Market, we saw median values for the greater Brisbane region fall -0.3% across the month of July 2020. The current median value for a Brisbane house is now $555,284.

brisbane housing market price growth

The Unit Market in Brisbane saw a slightly higher median value decline of -0.5% for the month of July 2020. The current unit price in Brisbane is now $384,681.

unit market in brisbane price growth

What is happening in the Rental market in Brisbane?

At a city level, the rental market in Brisbane has definitely recovered, although there are still some at risk markets around our city.  For an in-depth review of the current state of the rental market the Brisbane Property Podcast provides a comprehensive review. Click HERE to access.

In short, the vacancy rate in many locations is trending down and is very tight. The areas where this trend is not happening are in the Brisbane CBD and locations immediately surrounding this and also in areas where there are a lot of higher density unit developments. In these locations, vacancy is still a big problem. Therefore these markets remain high risk.

Asking rents according to SQM Research across the city have also been trending higher, so this is also reassuring for property investors.

Rent index for Property Market in Brisbane

That said, Brisbane is not one property market and caution definitely needs to be taken when looking at a postcode level. You will see in the Brisbane CBD, for example, the situation is VERY different.

Rent index for Brisbane Property Market

What are we seeing on the ground across Brisbane?

In our opinion, the data above may be slightly misleading based on our on-the-ground observations. Despite the overall median data trend showing very slight falls in house values, we are in fact seeing quality housing in very high demand. Some open homes we have attended over the month of July have seen more than 30-40 groups through. This illustrates that buyers are still very active in the Brisbane property market.

Advertised properties that are listed for sale in desirable locations are being sold very quickly in Brisbane. Often the sale is a result of multiple offers being submitted on the property. If listed for sale by auction, they are achieving high prices with multiple registered bidders.

There are markets within markets and we are seeing strong prices being paid for quality properties in many regions around our City. In the most recent Herron Todd White Month in Review it states:

“The Coronavirus crisis has not resulted in a measurable fall in property prices across the Brisbane market generally and $700,000 is a solid value band. As such, don’t expect to score a bargain due to the pandemic. A lack of listings means buyer choice is limited. In addition, many properties are trading off-market.”

How does the Brisbane Property Market compare to other Capital Cities around Australia?

Melbourne and Sydney are leading the decline in capital city values. Melbourne recorded a -1.2% fall in dwelling values across the month, whereas Sydney saw a fall of -0.9% in dwelling values for July 2020.

This is certainly now surprising, given the recent second wave of coronavirus cases in Melbourne.  This has now resulted in Stage 4 Restrictions with the Victorian State Government’s recent announcement.

This has impacted on consumer sentiment with readings from the ANZ-Roy Morgan Consumer Confidence Rating weakening throughout July, despite the huge recovery from the April lows. This index shows a high correlation with HOUSING MARKET ACTIVITY (not prices). The recent downturn might therefore suggest that buyers and sellers may once again retreat to the sidelines.

In terms of changes in rent, Brisbane is doing well compared to other capital cities.  The weakest rental conditions are being experienced in Hobart (House rents down -2% and units down -4.5% since March), Sydney (house rents down -1.1% and units down -3.2%) and Melbourne (house rents down -0.7% and units down -3.1%).  It is important to mention that the weaker rental conditions are larger in the unit markets, compared to the housing markets in these cities.

Brisbane Property Market Rents

What’s going to happen to the Brisbane Property Market moving forward?

There is a lot of worry and concern about what might happen to property values across the country when the governments fiscal response starts to taper in October and repayment holidays expire at the end of March next year. Of course, we may see a rise in distressed properties coming to the market. What we do not know is if this will put any downward pressure on prices.  This is where I think the different property markets around Australia will each experience something slightly different.

According to the Commonwealth Bank Home Buying Spending Intentions Index, there was a 6% rise in home buying intentions nationally up to the end of June 2020. This index showed the index had returned back close to levels seen in March – after much weaker readings in April and May.

How Housing Index effects theProperty Market in Brisbane

We are definitely seeing this trend on the ground with a the current high volume of buyers in Brisbane.  Because of this, I’m sure we could see some moderate increase in new listings come to the market without any significant impact on the supply and demand balance.  Remember property prices will only fall when supply outstrips demand. 

With dwelling approvals now at the lowest level in 8 years, the future supply pipeline also looks tight.  The most recent Australian Bureau of Statistics Data data showed a decline of -10.9% in new detached house approvals in Queensland.

Real-time demand is still strong and Brisbane property buyers are being fuelled by the lowest ever interest rates, good levels of affordability and strong rental yields compared to many other state capitals.  This is good news for our local Brisbane property market and these factors will continue to support our property values into the future.

If you need help navigating the Brisbane Property Market, or if you are looking to purchase a home or an investment property in Brisbane in the future, please book a free discovery call to understand how we may be able to help.  You can also find out more about our services by clicking HERE.

7 Steps to Determine Where to Buy an Investment Property

7 Steps to Determine Where to Buy an Investment Property

Australia is a very big country, so it may be daunting to begin the process of understanding where to buy an investment property and where the right location to invest in property might be.

But it doesn’t have to be overwhelming.

With a few handy hints and a defined path, you should be able to decide for yourself where and what type of property investment might be right for you.

And not surprisingly, the best place to buy an investment will vary from one investor to the next because it depends on what you want to achieve, how much money you have and what your tolerance to risk may be.

Let’s explore in more detail how to find a location that will deliver the results you are after.

 

couple considering where to buy an investment property1. Define your Investment Goals

The very first step in determining where to buy an investment property, is actually quite simple, but often overlooked.

As an investor, you need to understand what your property investment goals are.

See, I said it was simple!  You already know where you are, but you need to define where you want to go and then put the steps in place to get there.

Some investors are looking to increase and supplement their income now, and others are looking to build long-term wealth for the future.  Some investors may also have the capacity to add extra value to a property through renovation or development.  The skills that you have may help with the steps to achieving your goals, so it is a good idea to understand what type of investor you are going to be. 

Our article on 3 Proven Ways to Make Money through Property Investment is a good place to start if you are unsure of what you are looking to do.

Goal setting is also important so that you understand what type of strategy will be required and therefore what locations might be best suited to your investment strategy.

The time frame and risk appetite of an investor for achieving those goals also matters because this helps to determine location and investment strategy.

For those needing help to set their goals, there are some useful resources available including Goal Setting Guides.

Property investing should never be a one size fits all approach, because there are a lot of variables that should be considered based on an individual investor’s personal circumstances, and different locations will be better suited to different investment strategies.

2. Understand what investment strategy you wish to implement

property investment strategy Once your goals are clearly defined, the next step is to understand the investment strategy that is right for you.

For low risk investors, the strategy might be a simple buy and hold approach.  

For others who may have more time available, or have some level of home improvement skills, a buy and renovate strategy may work.

And then, for those with a higher budget and a higher risk appetite, a buy and develop strategy might suit.  We have provided some ideas for Sophisticated Property Investment Strategies previously.

What ever the strategy ends up being, there are obviously some geographical constraints to some strategies – especially if you intend to get your hands dirty and do it yourself.  These all need to be factored in to selecting the location that will best work for you.

3. Understand the Supply and Demand for an Area to determine where to buy an investment property

The one thing fundamental to all property prices is supply and demand. You can get an idea of the supply of new dwellings by seeing how much land is available in an area that is yet to be developed.

To do this, simply check out google maps, enter the property details and select satellite image.  You will then see if there is a lot of land around the site that is not yet developed.   

Some suburbs are what we call “land banked” suburbs which simply means the only way the density of housing can be increased is by infill development as there is no spare land available.

So, new supply can come in the way of higher density development as well (think townhouses or multi-level unit developments).  Understanding the dwelling approvals and building commencements for an area may also help you to determine if the area you are considering may be impacted by new supply to the market in the foreseeable future.  This should definitely be considered before you determine where to buy an investment property.

Demand can also be influenced by a number of things.  Population growth to an area usually indicates increased demand as people need somewhere to live. 

New jobs created in an area, the development of infrastructure and an improving local economy is likely to also increase demand.

Suburbs that are gentrifying, as evidenced by a changing demographic, more cafes and lifestyle precincts are also more desirable and therefore likely to be in higher demand.

Studying the vacancy rate trends of a suburb can provide some insights into the underlying supply and demand for rental properties in an area and can uncover seasonal trends that can impact on the investment return for a particular location.  Often very low vacancy rates can also be a sign of very high demand in an area, and this can sometimes result in upward pressure on prices.

Having a good understanding of all of these drivers at a local level in the area you are looking to invest, will help you to determine if there are a lot of properties, but not enough buyers (which tends to result in prices stagnating or dropping).  

Alternatively if there are not enough properties available for buyers but an increasing number of buyers looking to live in an area (which tends to result in upward pressure on prices). 

These factors all need to be considered when you are working out where to buy an investment property.  

4. Study the ripple effect

where to buy and investment property ripple effectRiding the wave of the “ripple effect” in property can have its advantages in identifying a suburb that is likely to grow in value in the near future.

The way experienced investors identify these areas is by studying the suburbs that have already experienced a high level of growth, and then looking at the nearby suburbs that share many of the leading suburb’s characteristics.

Of course, this needs to be considered with caution, because the “ripple” suburbs need to have features like access to quality schools, leisure facilities, health care, transport and infrastructure that match as closely as possible the features of the suburb that has already experienced the superior capital growth.

Combined with the other tips, this can be a useful strategy to identify those suburbs that are likely to experience some superior capital growth in the years ahead.  When you buy an investment property, this type of research is critical to understand what the future performance of that asset might be.

5. Understand the demographics of a location

Identifying who lives in a certain location can help you as an investor to understand who your tenants are likely to be in a particular investment area.

Demographic data such as household income, median age and % of owner occupiers to renters can provide a snapshot of the area you are looking to invest into.  You can search this data using FREE online resources available on the property data websites

Here is a quick video on the important of checking the income growth in an area before you buy.

It is always important to understand, based on this type of information, who a suburb is made up of as this often helps to determine if the suburb is right for your strategy.  Again, this is another important part of the puzzle to research at a local level before you work out where to buy an investment property, regardless of the city or town you are considering.

6. Consider the Rental Yield before you buy an Investment Property

Achieving a high rental yield is obviously important if a cash flow strategy is going to help you achieve your property investment goals. But determining the rental yield of an area can also be a helpful indicator to determine where to buy an investment property for other strategies as well.

graph of rental yields to determine where to buy an investment propertyAreas with higher rental yields are often made up of a high proportion of investors, but not necessarily a lot of people looking to buy. 

The percentage of owner occupiers to renters is usually out of balance with the natural distribution of buyers in the market at any time.

 

This means that capital growth can often be compromised as the property value is not driven by owner occupiers (who tend to buy with more emotion) but rather by investors (who buy with a calculator).

This can result in higher risk when it comes time to sell, as it may take longer to offload a property when the size of the market is restricted when the dominate target market is limited to property investors.

 

7. Select an area you are confident will deliver results

When planning where to buy an investment property to add to your overall portfolio, location is the key to getting the results you desire.

The land component is the part of the purchase that usually appreciates over time, whereas the building component depreciates as we have previously outlined in detail.  The best advice I can give is don’t invest in a location, unless you understand all of the above indicators about that area. Then if that location matches your goals and strategy you can move forward with confidence. If not, don’t just jump in for the sake of it because you could be exposing yourself to risk.

For those looking to buy investment property data can provide some useful indicators.  For an in-depth review on the caution you should take when relying on investment property data alone, you can access our article on Relying Solely on Property Data for a complete summary.

Property Investment should involve a lot of research to ensure you achieve your desired results. If you don’t know what or how to find the location, get expert help. And even then, ask your advisor to provide a detailed description of why a particular location may have been recommended for you. Ultimately if you are spending the money to purchase an investment property, you should be confident that the location, and the property itself, will deliver the results you are after.

Melinda Jennison

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Brisbane Property Market Update June 2020

Brisbane Property Market Update June 2020

The real estate market in Brisbane continues to prove its resilience, despite the Coronavirus shock. The long awaited lift in the housing market throughout late 2019 and early into 2020 has definitely slowed down, but Brisbane still looks better placed to weather the storm in terms of fundamentals, compared to other capitals around the country.  This month’s Brisbane Property Market Update unpacks all of the latest data, as well as our on-the-ground update.

With Brisbane less exposed to the shock pause in international tourism, compared to its close coastal regions of Gold Coast and Sunshine Coast, downside risk is more limited. It is also expected that Queensland, as a whole, is more likely to be supported by a domestic tourism recovery in the near term future.

Brisbane also has a lower exposure to foreign education and migration, compared to Sydney and Melbourne. Since 2013, population flows into Queensland have been steadily rising, but obviously the impact of Covid-19 travel restrictions will see a large dent in this trend for the short term. With the highest level of residents from around the country preferring to relocate to Queensland, it is likely that interstate migration will continue to drive population growth once the state borders are reopened. Deloitte Access Economics forecast population growth to slip to 1% in 2020 and 0.8% in 2021, but it is encouraging that growth will still occur, just as a lower level. 

When we explore what has been happening at a local level in this Brisbane Property Market Update, the turnover in real estate was down 40% in Queensland in April, compared to 45% nationally according to Westpac Economics.  But sales activity has jumped 22% in May (Westpac Housing Pulse) which is positive for the local market. Despite this, sales volumes are still -30.2% lower than the equivalent period last year in Brisbane according to Corelogic which is contributing to the imbalance causing a strong seller’s market right now.

Buyer demand is strong, driven largely by owner occupiers and also first home buyers according to our Agent network. This is similar to what we reported last month.  We are also starting to see investor inquiry pick up, although this segment of buyers are still more cautious about the overall macroeconomic environment. Property search activity has increased more than 45% from a year ago according to REA Group … another positive sign that seems to be associated with more buyers on the ground at open homes across Brisbane.

Asking Prices for Brisbane houses are +0.4% higher for the month of June according to SQM Research, and 0.8% higher for units.  Asking rents based on SQM Data in Brisbane also look optimistic with growth of +1.5% in the housing market and +1% for units for the week ending 28 June 2020.

Price growth based on settled sales in Brisbane according to the Corelogic Hedonic Home Value Index at the end of June 2020 has moderated, rather than faltered. Over Greater Brisbane house prices are recording a -0.4% change compared to a softening in the unit market -0.8%. Given the macro-economic environment and the very low transaction volumes this is not alarming at all.

Vacancy Rates at a city level have recovered slightly from April to May, but there are some suburbs we consider to be at risk.  Rental vacancies have continued to escalate between March and May on a month by month basis in the CBD (currently at 13.3%), West End (9.1%), Newstead (7.7%) and Herston (7.7%). 

Rent discounting is also greater in some of these locations with Domain reporting 24% of rentals were discounted in May compared with 14.9% in February. Two other suburbs with high rates of rent discounting in Brisbane are East Brisbane (15.2% in May vs 8.5% in February) and Milton (32.7% in May vs 10.3% in February)

Property investors need to be aware that Brisbane is not one property market and it is important to understand location and product type before making any investment decisions.

Looking forward, Queensland unemployment has increased to 6.8% in April 2020 (JLL Research), but new payroll data released by the ABS shows jobs in Queensland fell 6.1% between March and May and total wages fell 4.6%, but this was less than the national average in both instances. This is reassuring for our local economy at this time.

With major infrastructure projects already underway, the Brisbane City council announcing further fast tracked projects including the construction of new river crossings and the federal government announcing that the inland high speed rail project linking Melbourne and Brisbane to be pushed forward, this is more good news for our region.

The supply pipeline still remains grim, as we have reported previously, with residential approvals across Brisbane continuing to decline.  New dwelling approvals fell -17.7% across greater Brisbane to the year ending March 2020 and now they are likely to decline further due to Covid-19. New completions for apartments are down from 2019 again this year and this trend is also likely to continue.

Brisbane offers affordability, livability, quality schools, great lifestyle and good future economic prospects. These factors all drive the demand for quality properties in our City.

With the current imbalance between supply and demand, the future does look bright despite what is going on around us. For those with a long term horizon, it might be time to think about preparing to get into the market.

We hope you have enjoyed this month’s Brisbane Property Market Update.  If you would like to get in touch to find out more, please contact us TODAY!

Brisbane Property Market Update May 2020

Brisbane Property Market Update May 2020

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.  In this month’s Brisbane Property Market Update we 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 in a previous Brisbane Property Market Update 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 Brisbane property market 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.

Why a Tax Depreciation Schedule is Beneficial

Why a Tax Depreciation Schedule is Beneficial

A lot of property investors fail to understand the value that a Tax Depreciation Schedule can add to an investment strategy.  This article will explore why property investors should consider if a tax depreciation schedule will be of benefit to them and what advantages a tax depreciation schedule can bring.

A tax depreciation schedule, for those who don’t already know, is a comprehensive report which identifies depreciation allowances for an investment property.  It is a document that tells your accountant how much depreciation to claim for several parts of a property, which is basically the amount you can be compensated for wear and tear over a period of up to 40 years.

The benefits of a tax depreciation schedule can be far reaching.  Depreciation deductions can significantly reduce your taxable income and help your property return a positive cash flow sooner. Basing your purchasing decision purely on tax depreciation benefits, however, is a mistake because it fails to consider the long term goals as to why an individual is investing in the property market. A more holistic approach needs to be considered.

In order to complete a tax depreciation report for a specific property, an investor would need to engage a Quantity Surveyor. They will arrange a physical inspection of the property to determine what tax depreciation’s are applicable.

MCG Quantity Surveyors recently completed an analysis of the data that they collect, as a result of completing these tax depreciation reports for property investors. This report is available for download HERE.   

The results demonstrated that the trend in buying behaviour since 2016 indicates investors are increasingly moving towards new/off-the-plan units and townhouses and new house-and-land package holdings rather than investing in existing homes. The four year increase in the percentage of investors buying new property was 107.53% according to this report.  I caution investors to review a previous Blog Post of ours HERE before considering a brand new investment property purchase.

Of interest, this report also showed that townhouses have provided the most tax effective investment type, with the highest total deductions as compared to detached houses and units.

The most alarming figure in this report was the fact that Australian investors who’ve delayed ordering a tax depreciation schedule have potentially missed out on $2.9 billion in deductions!  On average this equals approximately $20,537 in depreciable benefits for an individual investor.  These missed tax deductions due to inaction are at epidemic proportions!

In closing, it is evident that property investors are becoming more aware of the benefits of obtaining a tax depreciation schedule. This type of report allows investors to minimize their tax and ensure investors can keep more of their gains, therefore bringing the dream of retirement a little closer than otherwise might be the case.

Our Buyers Agent services include recommendations for property investors when a Tax Depreciation Schedule is needed.  For more information about arranging a tax depreciation schedule for a property please visit MCG Quantity Surveyors.

The Brisbane Suburbs At Risk due to COVID-19

The Brisbane Suburbs At Risk due to COVID-19

With National News Headlines stating CBD’s have been hit hard by Covid-19 lockdowns, with rental vacancies surging, I thought it would be an interesting exercise to dive deeper into the data for Brisbane to investigate the Brisbane suburbs at risk due to Covid-19.

The latest SQM Research found that the national rental vacancy rate recorded a one month jump from 2.0% in March to 2.6% in April, but certain areas around the country fared better than others.

In Brisbane’s CBD, a sharp rise in residential vacancies was observed from 5.3% in March to 11.3% in April 2020.  By all accounts, the vacancy rate in March was already higher than what we would allow for when selecting an investment grade location, but let’s explore this a little further.

A Vacancy Rate helps us understand the number of rental properties in a location or market that are currently vacant or without a tenant, at a particular point in time. It is the opposite of an occupancy rate. The vacancy rate is expressed at a percentage.  For example, if there are 100 rental properties in a suburb, and 10 of them are vacant, then the vacancy rate would be 10%.

A low vacancy rate means more confidence in a market, more security of income for an investor and a better net yield. A wise investor should know the vacancy rate before buying into a particular market. It should also be represented in the projected cash flow to ensure that an investor can afford to be without the rental income for the number of weeks as indicated by a locations’ vacancy rate.

Vacancy Rates can also be a growth indicator because a location with a low vacancy rate often correlates with a low supply of properties and a high demand for those properties. Remember, the balance between supply and demand is what drives property values.

That said, the Australian National Average Vacancy Rate is 2.5% and some commentators suggest that a vacancy rate of 3% indicates a balanced market where there is an equal number of properties available for rent and tenants looking for those properties. Anything higher than 3% might indicate there is a risk that a property will remain vacant for longer, and therefore for an investor this presents a cash flow risk. Anything lower minimizes the vacancy risk for an investor.

We have analysed every postcode in Brisbane to determine the most “at-risk” suburbs in the Brisbane City Council Region (excluding Ipswich, Logan, Redlands and Moreton Bay) based on the most recent SQM Research as at the end of April 2020.

See below a table of those suburbs in Brisbane which have a current vacancy rate above 4% at the end of April 2020 and that have also experienced the largest spike in vacancies between March 2020 and April 2020.

Suburb Current Vacancy Rate as at April 2020 Increase between March and April 2020
Brisbane CBD

Petrie Terrace

Spring Hill

11.3% +6%
Herston 6.8% +3.4%
Albion 4.8% +1.9%
Red Hill

Kelvin Grove

4.4% +1.5%
Toowong

Auchenflower

5.2% +1.4%
West End

Highgate Hill

8.1% +4%
Woolloongabba

Dutton Park

5.4% +3.3%
Rocklea 4.5% +0.8%
Coopers Plains 5.5% +1.2%
Sunnybank

Sunnybank Hills

5.5% +0.7%
Eight Mile Plains 4.2% +1%

What we can draw from this data is that the majority of these suburbs have higher density dwellings (investor type units for example), or are located in university precincts where there may be lower rental demand from students at the moment – particularly international students.

Of interest is that other suburbs in this list that do not have higher density dwellings, but still have such high vacancy, are suburbs where occupants are predominantly born outside of Australia and where there is a very large proportion of households where a non-English language is spoken at home. What this means, I don’t quite know but I thought it was an interesting trend as it tells us a bit more about the demographics of occupants in those locations.

Of course there are many suburbs across Brisbane that still have record low vacancy rates, despite Covid-19 and its related impacts.  It always comes back to the local drivers of supply and demand. If there is demand from tenants, it is safe to assume the location is a desirable area to live. Desirable areas attract renters and home buyers alike.

If a location becomes attractive to live in, tenants will move there before home owners. This is due to their mobility and ease of getting into the market. They will put downward pressure on the vacancy rate making the location appealing to an investor to buy there. If home buying and demand in an area increases, what typically follows is capital growth. 

This provides some insiders tips on one way you can select an investment grade location when purchasing an investment property. There are many things to consider and vacancy rates are definitely important to understand, among many other things. But be sure to understand how different property types and different locations can have different vacancy trends, because it is times like now where property investors who have purchased in high-risk locations will be feeling the pinch.

For more information about how we can help you with your investment purchase in Brisbane, please get in touch with our team.  We are here to help! 

Brisbane Property Market Update April 2020

Brisbane Property Market Update April 2020

We are not going to lie, as I write this Brisbane Property Market Update for April 2020, I realize that has been a very tough month for many of us and it feels like a long time ago that we wrote our last Market Update.  We have had to come to terms with a new way of living and we have spent a significant amount of time at home. For many of us we spent the Easter Holiday period at home, we are working from home and now we are juggling the supervision of our children’s school education from home.

It is probably fair to say that our home has become our cocoon for everything that we do!

There have been some scary headlines from journalists about property prices plummeting throughout the month. Admittedly, you do have to read into the story because the headline generally states the “worst possible” scenario based on a number of alternative possible outcomes in the months ahead. Also, most commentators are also suggesting the Sydney and Melbourne markets will be impacted more than others due to the much higher debt to income ratios in those capital cities, compared to elsewhere around Australia. Another reason to always be cautious about the information you are reading – Australia is NOT one property market!

Of course, predictions are just that and there is no certainty about them. A lot depends on how long Covid-19 impacts our lives and conditions are too uncertain to make any meaningful assessment. In saying that, Australia has done a great job of flattening that curve! In fact, we are excited that the Queensland Government is already easing restrictions the first step towards life returning to a “new normal.” With so few cases reported in Queensland since 5th April, we are optimistic that things will continue to open up and we can start to get our economy moving again.

According to SQM Research listing volumes are 10.1% lower in Brisbane than they were 12 months ago and in the last month alone (between March and April 2020) listing volumes were down a further 5.6% so we expect transactions volumes will remain low for some time yet, simply due to limited supply.

New Building Approval data released early in May from the ABS confirms that year on year new House approvals have fallen 3.4% in Queensland and year on year new unit approvals have plummeted 24.4%. Approvals are a leading indicator for future new housing supply so this shows the shortage of property may continue for some time yet. There have also been fewer sales across the city throughout April as well. With open homes banned and auctions having to move to digital platforms we all had to change the way we conduct our business.

There have been fewer buyers and fewer sellers throughout the majority of the month across Brisbane. Whilst there was a distinct shut down in the earlier part of April, since Easter we have definitely seen the optimism return (from a buyer’s perspective) so there is hope that this renewed optimism continues in the coming weeks. Even buyer search activity on realestate.com.au has increased 41% after a sharp decline at the end of March 2020, so people are starting to at least “think” about real estate after going into hibernation for a few weeks.

This month also saw the Queensland Government announce some very unfair proposed arrangements to be legislated between Landlords and Tenants, however after less than a week of intensive industry lobbying, what ended up being legislated is very fair and will now guide any hardship arrangements for Landlords and Tenants. For more information relating to these changes click HERE. Despite this, Property Managers in Brisbane are reporting less than 2% of all Tenants experiencing any Hardship or arrears as reported HERE and HERE.

In terms of property values if you already own property in Brisbane you will be pleased to know we have seen no noticeable drop in values and this is consistent with the feedback we are hearing from our Agent network across many parts of Brisbane. The latest Corelogic Hedonic Home Value Index showed an increase of 0.3% in dwelling values across the city in April 2020. This is reassuring given a typical settlement period is 30 days in Brisbane and the pandemic was declared on March 11, so this months’ figures would capture a lot of the contracts that were entered into throughout March when the number of coronavirus cases was rapidly escalating.

At the time of writing this Brisbane Property Market Update, there remains plenty of uncertainty about the immediate future. Whilst Australia has had a remarkable response to tackling the coronavirus, any longer term impact on housing (and specifically the Brisbane Property Market) will depend on factors that hinge on the timing and the extent of social distancing policies being lifted. Already we are seeing positive signs that the Government intends on opening up the economy gradually and this in turn will likely support consumer confidence, which in turn should see housing market activity pick up again. Of course what we don’t want to see is a second wave of coronavirus cases so let’s keep our distance and do what we can to stay safe and slowly kick start our economy again.

Brisbane Property during the Coronavirus Pandemic

Brisbane Property during the Coronavirus Pandemic

A lot of the news headlines around Australia in relation to what is happening in the property market during the coronavirus pandemic tend to focus on the larger cities of Sydney and Melbourne, so the purpose of this article is to provide a summary of what we are seeing at this time in Brisbane property during the coronavirus pandemic..

As we often say, Australia is not “One Property Market” and therefore references made in relation to what might happen to “the property market” can sometimes be misleading when considering local drivers of supply and demand at a city, or even at a suburb level.

Sales Agents across Brisbane have consistently reported a significant decline in the number of buyers in the market at the moment, which is not a surprise to us. During the first 2 ½ months of 2020 we saw record buyer depth in Brisbane with quality properties almost always selling with high numbers of registered bidders at auction or with a high number of written offers under a multiple offer scenario for a property for sale by private treaty. 

More recently, since the Coronavirus changed the way in which we live and work, and impacted so many industries resulting to the closure of many business operations, the uncertainty around rising unemployment and the longer term economic impacts have caused many buyers to simply pause their property search. Most of these buyers are taking a wait and see approach.   Tammy Dale from Place at Bulimba in Brisbane’s inner East stated simply that “some buyers are sitting on their hands.” This has coincided with the drop in consumer confidence.

The majority of property investors who were looking to capitalize on the long-term opportunity that Brisbane may offer have backed off. Driven by fear and uncertainty, they have taken the safest option to wait.

But the market to date is still being strongly supported by Owner Occupiers, and this is something that has been a consistent theme across the city according to many Sales Agents. Furthermore, the quality of the buyers who are inspecting properties has increased and according to David Lazzarini of Ray White Lutwyche in Brisbane’s Inner North, “the ratio of buyers who inspect a property to those who subsequently make an offer has increased – indicating there is a strong core of quality buyers still actively searching for property right now.”

Another consistent theme across the board is that buyers initially went into shock and buyer activity immediately slowed down, but according to Craig Loudon from Tobin Real Estate in the Brisbane Eastern suburb of Carina “I’m seeing and I’m hearing reports from colleagues around me in my local area, that there has been a bit of an uplift over the last week or bit over a week of buyer activity.  It’s much like people have decided that everything is settling down from a pandemic point of view. Let’s go out and start looking again.”  This is consistent with reports from realestate.com whereby week on week searches in the Buy site section are up 10% in Queensland as at 23 April 2020 and searches in the Rent site section are up 12% week on week.

The other obvious trend right now across Brisbane is that sales volumes are falling rapidly. Craig Lea from McGrath in the Inner Northern suburb of Wilston has said “We are still selling properties, but the volume is not what it used to be. But the number of conversations we are having in order to list properties is about the same, so people are still wanting to talk to Agents to get a feel for what’s going on, which I feel is quite encouraging.”

New listing volumes have already plummeted according to Corelogic as nervous sellers hold off listing their properties for sale until the uncertainty passes.  Speaking to Veronica Royal who runs and online platform called Airlisting which connects buyers and sellers directly without Sales Agents, “For existing properties, we are seeing less sellers, selling without a real estate agent at the moment and from the people I’ve been speaking to, the reason they’re delaying selling is because they have a financial buffer there, so they’re able to hold off and they’re going to wait until the uncertainty is gone.”

And the question most people want to understand the answer to right now is “What’s happening to property prices?”  Whilst Tammy Dale commented that For some properties we are seeing a 5-10% softening in price, but other properties are staying fairly consistent,” other Agents have not experienced any noticeable price softening to date.  Across the board, most Agents we are communicating with have confirmed that prices remain relatively unchanged at this point in time. Craig Loudon said “Prices are remaining stable.”  We also spoke to Von Barnes of Pinnacle Properties who stated “when properties are presented well, priced appropriately and look great – they are still selling above expectations.” And finally, David Lazzarini summed it up nicely when he said “The gap has widened between buyers and sellers whereby some buyers are making offers based on where they ‘think’ the market might be headed. But with good information both buyers and sellers are able to make a better decision.”

From a rental perspective, we obtained some great insights from Jonathan Bell, managing director of Bell Estate Agents who are a boutique Property Management firm operating across many parts of Greater Brisbane. Jonathan said “From a Property Management perspective we’ve been pleasantly surprised as we were expecting a much greater impact than what we’ve seen. Whilst we have seen a reduction in the inquiry levels on a property, the people who are inquiring are definitely interested and they are ready to move. But in saying that we are having to be more aggressive with our pricing and if properties are priced well, they are definitely renting, and they are renting quickly.”

In terms of vacancy risk, it seems the location of properties has the greatest impact. According to Jonathan “Every day, if you are looking online, the market in the City (CBD) has been flooded with apartments for rent. I know that the short term letting Agents are not offering rental guarantees at the moment and those investors are definitely getting hit at the moment.”  Whereas properties that we purchased for Clients 30 to 60 days ago, that have been settling throughout the peak of the Covid-19 crisis, have all secured quality tenants in a short space of time.

And what about the risk of tenant defaults? According to Jonathan “There’s been so much noise about this and ultimately if you look at the hard facts in our rent roll we’ve only had 2% of our rent roll say they are in hardship and only 1% are actually in arrears. It is very minimal and the tenants are being reasonable, only asking for some small reductions for a short period of time.”

So most buyers who have been looking to buy in Brisbane recently have not actually left the market. There is definitely going to be some pent up demand as the pandemic outcome becomes more certain and this will be fueled by record low interest rates, strong gross yields that are achievable in Brisbane as well as huge government stimulus to get the economy moving again. The weeks and months ahead will uncover exactly where we are heading, but for now, based on our “on-the-ground” research the property market in Brisbane seems to be relatively stable.

How to Invest in Property during COVID-19

How to Invest in Property during COVID-19

For many people, thinking about their long term future may be difficult when the short term outlook can appear so bleak.  Yes the impact of COVID-19 is changing so much about the way we live and work, but for those who are able to focus beyond this pandemic to “the other side”, there can be a low risk way to move forward if you have been considering investing in property, and it is about quantifying the risk and taking a long term approach. This article explains how to invest in property during covid-19 … with minimal risk.

Firstly, as we focus solely on Brisbane Property Markets, the data that is referred to below is relevant to Brisbane only.  Remember there are many different property markets around our country, so it is important to understand local numbers and apply these to your investment strategy.

What we are seeing at the moment in Brisbane, is that there has been a significant decline in consumer sentiment which has resulted in a very large fall in real time buyer demand for property. This has occurred very quickly in the space of less than one month. Whilst there are still some home buyers in the market, many investors are sitting on the sidelines taking a “wait and see” approach.

Since the World Health Organisation declared that the novel coronavirus (COVID-19) outbreak became a global pandemic on March 11, 2020, the number of cases around the world rapidly increased.  On that date, Australia had a total of 127 confirmed cases which has since escalated to a total number of 6,444 cases as at 15th April 2020.  Across all of Queensland we had 2 cases on March 11, 2020 and as at 15th April 2020 we had a total of 999 cases.  More importantly though, is the fact that over the previous 11 days since 5th April 2020, Queensland saw only 92 additional cases, averaging just 8.3 new infected people per day across the entire State.  This looks very promising indeed.

But you may be wondering how to even consider an investment in property at this time – given the uncertainty that surrounds us. You may also be glued to the news headlines whereby journalists are consistently publishing articles about “Australian Property Markets set to lose value due to Coronavirus Impacts”. But is this true?  Will this really happen? And remember  Australia is not one property market!

It is almost certain we are heading into a recession here in Australia, so let’s examine what happened to property values during the last recession in our Country where we notched two consecutive quarters of negative GDP growth in 1990-1991.

Nationwide, house prices were fairly flat in the lead up to the recession, but even before the recession ended, house prices began to increase which demonstrates that the relationship between house prices and economic growth is not direct and simple.

Now, let’s look at Brisbane compared to Melbourne at that time.  Melbourne bore the brunt of the last recession with house prices falling more than 6% during the recession, whereas Brisbane did quite well over the same period.

 

So, the idea that housing markets around the country all react differently at different times, is not foreign and the data above shows that there are many different markets around our country and they all cycle in different ways – even during a recession.  Also, the cause of a recession is likely to hit different property markets in different ways and it is important to focus primarily on the underlying fundamentals for each investment area – even in times like now.

In Brisbane, we have been moving through a period of huge buyer demand since the start of 2020 and we were definitely seeing real time price growth in some suburbs due to the competitive seller’s market that we were in. Now the tide has turned, and we are seeing opportunities where we may be able to negotiate on quality properties without the depth of buyers creating such a high level of competition.

Of course, for an investment property, it is also important to understand the ability to secure a tenant to lock in your rental income as well. To date, we have seen continued rental demand from tenants and although there has been a softening of rent prices achieved according to local Property Managers, this can be quantified, accounted for and therefore planned as part of an investment strategy.

Say, for example, 2 months ago the rent that could be achieved on a property was $500 per week and now that same property might be able to secure a stable tenant for just $450 per week. We can quantify that difference to be $1,300 over a 6 month period.

However, imagine being able to secure a property for $10,000 less than what we might have had to pay when competition was so tough just a few weeks ago? I’m not suggesting that property prices are falling here in Brisbane, as we have seen no evidence of this to date. But we are seeing some motivated sellers and a lot less buyers, so it gives people more scope to negotiate!

We must all remember that COVID-19 will come and go. There is no denying that. We also know that Australia, and especially Queensland, is doing so well. Commentators around Australia are reporting a “V” Shaped recovery for the economy once we get through this health crisis and then the Brisbane property market is going to be driven by record low interest rates, pent up demand and underlying fundamentals where there is a shortage of supply and a growing population needing housing. We will also have a huge number of properties that will be either cash flow neutral or positively geared due to our relatively high gross rental yields compared to Sydney and Melbourne.  Our Company have been receiving new inquiry from investors wanting to move “once things improve”. The hardest part for those sitting on the sidelines right now will be trying to determine when the “right” time to buy will be. How can we determine the perfect time to enter the market right now?

What we do know is that when the majority of buyers determine that “things are better” the competition will be fierce and we will return to a seller’s market very quickly where the extent of the buyer demand determines the purchase price. The opportunity is between now and then for those that want to go against the majority and focus on the long term opportunity, whilst safely quantifying the short term risk. Providing your income is secure and you have adequate financial buffers in place there may never be a better time to secure an a-grade investment property here in Brisbane!

 

Brisbane Property Market Update March 2020

Brisbane Property Market Update March 2020

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.

Impact of Coronavirus on the Brisbane Property Market

Impact of Coronavirus on the Brisbane Property Market

With the continuing threat of the Coronavirus outbreak causing panic in countries throughout the world, it is important to consider what is the likely impact of coronavirus on the Brisbane Property Market.  We have had a number of people contact us asking what our thoughts are on this topic, so the purpose of this article is to provide our best response.  Of course, at the time of writing (March 12 2020) it is too uncertain to assess the impact in the months ahead, and therefore this summary is based on the information available to us at this point in time.

It is being reported that the virus will have a material economic impact on the economy, but it is not clear how large that will be. What we do know is that the combined effect of monetary and fiscal policy should help all of us navigate any difficult period that may lie ahead.

In terms of property, it is important to note that the fundamentals for Brisbane have not changed at all.  We still have a huge supply shortage, driven by lower listing volumes as well as a reduction in construction completions.  In fact disruption to the supply chain caused by the coronavirus is already causing delays to some projects, further reducing the future supply of new dwellings that are needed to account for the ever increasing population growth that our region is experiencing.

Demand for property is still stronger than ever.  On the ground we have seen no slow down in terms of the number of people at open homes, the number of registered bidders at auctions or the number of offers on properties listed for sale by private treaty.  Across the board we are still seeing extremely high demand for quality properties in well located pockets within Brisbane.

Additionally, Australia is not one property market.  There are markets within Markets and the Brisbane Property Market is actually quite different right now to the other major cities of Sydney and Melbourne.

According to Corelogic Data, our median house price as at 29 February 2020 was $503,265 compared with $872,934 in Sydney (73% higher) and $689,088 in Melbourne (36% higher).  Layer that with the average income in Brisbane which is $2,231 per week compared with $2,867 in Sydney (28% higher) and $2,413 in Melbourne (8% higher) (ABS).  The proportion of household debt to incomes is therefore a lot greater in Sydney and Melbourne, than it is in Brisbane which provides strong support for our local market in the event of an economic downturn as homeowners are in a much stronger position to be able to afford to meet the repayments on their loans. 

The economy is, however, being supported through interest rate cuts and the federal government’s $17.6 billion economic stimulus package announced today.  Due to Australia’s prudent economic management in recent years, we are now in a very strong position to support the economy with the necessary stimulus to help us through the months ahead.  With the Federal Government’s intention to support jobs, incomes, small business and investment, our national economy should be OK in this time of uncertainty.

These factors can work to ensure the demand for property remains strong and robust.  Lower interest rates provide more disposable income to the household sector that can be used for spending to boost the overall economic benefits. They also increase the borrowing capacity of buyers providing a further stimulus for people looking to enter the market.

The property market, especially residential property, is quite different to other markets (such as the sharemarket) because it is not dominated by investors.  It makes up approximately $6.2 Trillion worth of Australia’s Wealth being the largest asset class in our country behind Australian Superannuation at $2.7 Trillion and Australian Listed Stocks at $1.8 Trillion (Corelogic).  Approximately 65-70% of all residential property is occupied by home owners and we as Australian’s will cut out spending in a lot of other areas before we make the decision to sell our much-loved family homes.  Of course, the main purpose of residential property is to provide shelter, and this is a human necessity.  Because of the high transaction costs, we do not buy and sell property quickly (like shares) and therefore as an asset class it is less likely to experience price fluctuations in short periods of time.

Whilst this is a serious matter, it is important to remember that illnesses like influenza cause 3,500 deaths, about 18,000 hospitalizations and 300,000 GP consultations every year .  In relation to Coronavirus, according to the Australian Government Department of Health, as at 11 March 2020 Australia has 112 confirmed cases including 3 deaths .

Remember the effect of the virus will come to an end at some point.  Just like SARS (2002-3) and swine flu (2009-10), it is expected that the Coronovirus will come and go within a relatively short period of time.  According to the RBA deputy governor Guy Debelle, “Once we get beyond the effect of the virus, Australia’s economy would be supported by the low level of interest rates, the pick up in mining investment, infrastructure spending and an anticipated recovery in residential construction.”  So there is no need to panic, instead taking a common sense long term approach seems like a more logical approach.  The Brisbane market has been strong until now, and the fundamentals have not changed, so it is important to keep this all in context.  We got through the Global Financial Crisis – the biggest economic downturn in modern history – so we can get through this.

For professional assistance with navigating through these tough times, we are here to help.

Brisbane Property Market Update February 2020

Brisbane Property Market Update February 2020

Brisbane continues to show underlying strength in its property market with a new record median house price set in February 2020 of $503,265.  This month’s Brisbane Property Market Update can report another month of positive house price growth.  February demonstrated an increase in property values of 0.6% according to the Corelogic Hedonic Home Value Index across all areas of Greater Brisbane which is in line with the national trend for positive property price growth since June last year.  Of course several pockets within Brisbane are performing a lot better than others as we have explained in previous monthly updates.

Further support from the Valuer-General’s 2020 Property Market Movement Report showed that the residential median land value increased slightly in Brisbane from $455,000 to $460,000 over the last 12 months.

Brisbane’s upper quartile values are 2.2% higher over the last 12 months compared with the lower quartile, up just 1.3% so the trend shows stronger performance across premium markets.  This may be attributed to the dominance of owner occupiers during the last 12 months (rather than investors) and the geographical spread of properties included in the data whereby properties closer to Brisbane’s CBD in the higher price brackets are performing better than other properties much further out.

From a rental perspective, during February, gross rental yields compressed slightly from 4.6% to 4.5% in Brisbane according to Corelogic Data  This can possibly be attributed to house values rising slightly more rapidly than rental rates, but it may also be due to seasonal factors so we will be monitoring this in the coming months.

Keep in mind mortgage rates are also trending lower, with another rate cut announced on 3rd March 2020.  From our review some three year fixed rate loans now being offered for an investor for as low as 3.14%, so depending on an investor’s deposit amount and mortgage structure there are still a lot of neutrally geared or positively geared property investment opportunities in Brisbane.

Looking ahead, there are a few things we are monitoring to determine the potential future impact on property values in Brisbane.  Broadly speaking, the primary factors supporting the steady price growth in Brisbane remain in place.  These include the low cost of debt and improved borrowing capacity.  Additionally, Brisbane remains affordable with a median house price $369,669 cheaper than in Sydney and $185,823 cheaper than in Melbourne so affordability pressures are less likely in our City.  Furthermore, population growth is still 2.3% greater than the decade average, economic growth is up 21.2% above the ‘normal’ decade average level of output, jobs growth is trending higher and unemployment is reducing with the lowest trend jobless rate in 10 months according to the CommSec State of the States economic performance report (January 2020) .

Of course we can’t predict with certainty right now what impact the Coronovirus may have on property values, if any. There certainly may be supply chain issues for the construction industry, slowing down the delivery of an already lacklustre level of new housing supply due to falling construction commencements over the last 12 months.  Foreign Investment has already plunged by 58% year on year in the 2017/18 fiscal year to the lowest level in a decade so foreign buyers have already existed the market in years prior.  Perhaps there may be some impact to properties associated with tourism, (eg – hotels and motels) and also student accommodation, again it is too early to tell.  Of course we can’t estimate the impact that it may have on consumer confidence or economic growth, but looking back on the SARS outbreak in 2003, there was a sharp slowing of output growth in China for a few months, before a sharp bounce back as the outbreak was controlled and economic stimulus measures were introduced.

So whilst we are entering a period where some may see uncertainty, Brisbane is still poised to report robust growth based on the fundamentals outlined above.  With continued signs of strength across many locations in Brisbane is it a great time to secure your next home or investment property in Brisbane. We look forward to discovering what next month’s Brisbane Property Market Update will uncover.