Cashflow versus Capital Growth in Brisbane

Cashflow versus Capital Growth in Brisbane

One of the areas in relation to property investing that is least understood is around the property investment strategy and cashflow versus Capital Growth.

In our role, we speak to so many property investors who do not understand what type of property is best suited for them based on their goals, risk appetite and their personal circumstances. Property investing should NEVER be a one-size-fits-all approach, and yet so many investors select a strategy that may have unintended consequences for them in the future.  The purpose of this article is to highlight the difference between a high capital growth and a high yield strategy when selecting an investment property here in Brisbane.

As a member and participant on a number of property investment facebook groups and online chat forums, I see many individuals seeking advice in relation to what is the best suburb in Brisbane to invest in for a specified budget.  It always amuses me when others jump in with their suggestions and recommendations, based purely on price.  This approach comes with so much risk, because there has been no thought given to the requirements for growth and yield for that individual. 

How to determine the right investment strategy for you

To get an understanding of what investment approach might be best for you there are a number of considerations that you need to make:

  1. What are your investment goals? That is, are you looking for more income now, or are you looking to create a future nest egg for yourself and your family?
  2. What is your current taxable income? Remember any income that you generate through investments owned in your own name now will be taxed at your marginal tax bracket so this needs to be considered before you buy.
  3. What is your exit strategy? Consideration must be given to whether you intend to hold the asset into retirement and live off the income it generates, or if you intend to sell at some stage in the future.  The tax implications associated with this must also be considered up front.
  4. At what stage in life are you now? The duration of the investment period that you have to work with can influence the type of property that you might target based on your specific needs at that time in life.
  5. What is your risk appetite? We all have our own comfort levels and these need to be considered so that you can sleep at night!

 

Let’s take a look at a high yield asset first

Brisbane is a higher-yielding city than the likes of Sydney and Melbourne, so many investors are attracted to our city because of this benefit.  Properties that return a higher yield are usually positively geared and are often cashflow positive properties as well.

A positively geared property means the property is producing income from a tax perspective.  A positive cash flow property is one that puts money in the bank each week, once you account for all holdings costs, interest on the loan, and any repayments that you may be making towards the principal of the loan.

Properties are more likely to be cashflow positive on interest only lending – especially in the current environment where interest rates are at record lows.  Fewer properties remain in a cashflow positive position once they convert to principal and interest loan repayments.

An investor can control the gearing and the cashflow position for an investment property through the finance structure that they implement for the purchase.  For example, paying a higher deposit through cash would mean that the interest charges are lower due to a lower loan-to-value ratio and therefore the property is more likely to be positively geared, or even cashflow positive.

Investors MUST keep in mind that high-yielding assets have lower growth when assessing assets over the longer term.  There is an inverse relationship between growth and yield.  As one goes up, the other goes down and vice versa. 

We can select an “example” high yielding suburb in Brisbane and determine the long-term performance of an asset based on historical data.  Whilst there is no guarantee that the past is a reflection of the future, we do know that the past is going to tell a story that investors need to consider.

Let’s assume that the property value is $500K. The example property has a gross weekly rent of $600 which provides a strong 6.12% yield.

These are the additional assumptions:

  • Annual Vacancy rate of 2%
  • Borrowing at 80% Loan-to-Value Ratio (ie: $400K loan on the $500K purchase)
  • Paying for the remaining 20% property value and purchase costs via cash
  • The Interest Rate of 3% pa remains unchanged over the investment period
  • Principal and Interest Lending
  • Rental expenses = 27.37% of Rental Income (this covers property management fees, rates, insurance, maintenance etc)
  • Inflation on rental expenses set at 2%

Being a high yielding location, the capital growth rate is set at 3.5%. This is representative of historical growth rates in suburbs within Greater Brisbane that achieve higher yields like this example. For this reason, the Rental Price growth is also set at 3.5% pa (in line with capital growth).

The two most important things to note in relation to the cashflow in this scenario are as follows:

  1. The pre-tax cashflow position is +$10,035 in the first year.
  2. By year 31 the annual pre-tax cashflow position is +$70,350

In relation to the FUTURE VALUE, based on the compounding growth rate of 3.5%, this property will look like this:

  1. By year 31 the value will be $1,453,000
  2. This is an INCREASE of $953,000 from the time of purchase.

Brisbane Property Podcast

 

Now let’s look at a high growth Asset as a comparison

Consider now that the location selected is a high growth location which is in most cases going to generate a LOWER yield. In this example, we will again assume that EVERYTHING remains the same as in the higher yielding example, however, we will switch the growth rate the yield around. Therefore, the growth rate is assumed to be 6.12% pa and the yield is assumed to be 3.5% (based on a weekly rent of $343 per week on a $500K purchase). We can also assume that the rental price growth will be similar to the capital growth because the more scarce locations will achieve higher rental returns over time due to limited supply and higher demand. This ensures that a rental yield of 3.5% is maintained over time based on the property value. All other variables in the modeling will be exactly the same.

The cashflows in this scenario are as follows:

  1. The pre-tax cashflow position is -$9,870 in the first year.
  2. By year 31 the annual pre-tax cashflow position is +$134,161.

In relation to the FUTURE VALUE, based on the compounding growth rate of 6.12%, this property will look like this:

  1. By year 31 the value will be $3,153,000
  2. This is an INCREASE of $2,653,000 from the time of purchase.

Cashflow versus Capital Growth in Brisbane

Of course, this example is provided purely to illustrate the difference that a small change in the compounding growth rate can make over many years.  TIME IN the market makes a huge difference when investing for capital gains for the future.

The reality is that generally the higher growth assets are located in the more scarce locations and therefore they are already priced higher.  So it would not be realistic to expect that you can shop with the same budget and expect to choose between either high yield or high growth. 

The difficulty for investors comes, when they have higher investment budgets, and they are presented with a CHOICE.

Should I buy One Higher Growth Asset or Two Higher Yielding Assets?

We also often get inquiry where people may have a budget of more than $1M to spend in Brisbane, but they ask if it is “better” to buy two properties instead of one with this budget.  Again, the answer always depends on the unique circumstances of the individual.

If we look at the higher yielding asset and we consider buying two of these at $500K each, the numbers look like this:

  • Total Pre-Tax Cashflow for first year = +$20,070
  • By year 31 the annual pre-tax cashflow position is +$140,700
  • Total combined asset value = $2,906,000
  • Total INCREASE in value from time of purchase = $1,906,000

BUT … if you are a high-income earner, on the highest marginal tax bracket, then you would be paying tax of $4,770 in the first year for EACH property, which REDUCES your cash position from +$20,070 to +$10,530.

By year 31, assuming you were still paying tax at the highest marginal tax bracket, then your annual pre-tax income of +$140,700 would be reduced to $74,570 AFTER tax. 

Over the life of the 30-year loan on each property, you would have paid a total of $481,670 in TAX which works out to be $963,340 across the two properties of TAX PAYMENTS in this scenario!!!!!

The after-tax cashflow position over the 30 years would be a total of $143,145 for each property, which provides after-tax cashflow of $286,290 across the two properties over the 30 year period.

Therefore, the TOTAL return would be:

  • Total after-tax cashflow across 30 years = $286,290
  • Total Growth over 30 years = $1,906,000
  • TOTAL RETURN over 30 years = $2,192,290.

 

Now let’s look at the alternative – buying a single high growth asset with the total budget of $1M and therefore targeting a higher growth asset.

If we look at the higher capital growth asset and we consider buying just one of these at a purchase price of $1M, the numbers look like this:

  • Total Pre-Tax Cashflow for first year = -$23,415
  • By year 31 the annual pre-tax cashflow position is +$134,161
  • Total asset value = $6,305,000
  • TOTAL INCREASE in value from time of purchase = $5,305,000

AGAIN … every investor must consider the tax implications of their investment decisions.  Using the same examples, if you are a high-income earner, on the highest marginal tax bracket, then you would NOT be paying tax, in fact you would get a TAX REFUND of $3,155 in the first year.  This is because at this time the property is NEGATIVELY GEARED which means you will be paying a portion from your own funds to hold the asset because the costs associated with holding the property exceed the income from rent that is being achieved.

By year 31, assuming you were still paying tax at the highest marginal tax bracket, then your annual pre-tax income of +$134,161 would be reduced to $71,105 AFTER tax.  This is only $3,465 less than in the high yield example!

Over the life of the 30-year loan on the single property, you would have paid a total of $602,705 in TAX which works out to be $360,635 LESS TAX compared to the scenario of buying the two properties with the higher yielding returns.

The after-tax cashflow position over the 30 years in this high growth scenario would be -$120,353, mainly because the income from rent has not fully covered all costs as well as principal repayments for this property over the life of the loan. 

Therefore, the TOTAL return would be:

  • Total after-tax cashflow across 30 years = -$120,353
  • Total Growth over 30 years = $5,305,000
  • TOTAL RETURN over 30 years = $5,184,647.

When we compare the two scenarios, the difference in the TOTAL RETURN, puts the single high growth property ahead by a HUGE $2,992,357!!!

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So, which Strategy is better?

The answer to this question is still – It DEPENDS!

Of course, looking at the overall returns, targeting the high growth asset results in significantly higher levels of wealth after 30 years.  There is no doubt about that from the numbers above.

But, some would argue that having all your eggs in one basket presents as higher risk.  If the property is vacant, for example, you have no income at all.  But if you buy the RIGHT asset then the risk of vacancy is minimized.

Also, given you would have one high value asset instead of two lower valued assets after 30 years, some would argue that it is better to own two properties so you can sell just one if needed and still hold the other.  As I said previously, the exist strategy is very important to consider before you buy as these decisions need to be included in selecting the overall approach.

Finally, your own income levels and risk appetite will influence how much you have to spend and that may limit the type of strategy that you can afford to buy.

As we always say – the right strategy for an individual investor depends on individual circumstances.  We always need to consider the investment strategy alongside the tax strategy and the finance strategy.  There are so many moving parts to consider before an investor even starts to look at properties to buy.  It is so important to plan prior to executing!

I hope this article has helped you to understand that investment strategies need to be tailored.  Too many investors start off blind and make mistakes.  Getting professional advice can help you tailor the right mix of growth yield based on your unique circumstances.

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Get in touch if you would like to know how we can help you. You can make an enquiry with Streamline Property Buyers Team. We are the Most Qualified Team of Brisbane Buyers Agents.

Other blog titles you might find interesting:

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Brisbane Property Market Update August 2021

Brisbane Property Market Update August 2021

This article will update on the Brisbane Property Market during August 2021.

This month started with the short sharp lockdown throughout Brisbane, so buyer and seller activity stalled until the second week of the month.  Brisbane Property Market Update August 2021 saw a lot of Agents held back their new listings until the lockdown was over, but buyers were back out and active from the first weekend after lockdown was lifted and the backlog of new listings came through in the remaining weeks throughout August. The month has remained strong in terms of price growth in both the housing and unit sectors of the Brisbane market, despite nationwide headlines suggesting that property markets are losing steam.  This is simply not the case here in Brisbane.

Transaction activity across Brisbane is strong. According to CoreLogic, sales volumes in Brisbane rose 47.5% in the year to July 2021, an annual change that reflects the heightened demand from buyers across the city.

Whist new listings have increased 5.3% in Brisbane compared with the equivalent period last year, total listings are down -29.1% according to CoreLogic.  What this means is that more buyers are making compromises and buying properties that may have been on the market for longer.

CoreLogic also tracks the number of sales that have taken place over a given period by the number of new listings added to the market over the same time. For the past decade, the ratio has averaged 0.9, suggesting that for each listing added to the market, there was just under one transaction that took place. Now, this ratio is tracking at 1.4 nationally over the three months to July 2021, and 1.3 in Brisbane.

Even auction clearance rates in Brisbane are tracking at record highs.  At the same time last year our clearance rates tracked between 35% and 58% throughout August, but this year the clearance rates during August according to Domain are tracking between 73% and 80% in Brisbane, which really is astonishing for our city.

Investors are making up 26.6% of all housing finance commitments in Queensland, which is slightly less than last month. This is indicative of a further lift in lending to owner occupiers, but not first home buyers whose lending commitments are also falling, comprising only 26.3% of all owner occupier housing commitments across the State.

It really is not a surprise that demand continues to grow given mortgage rates are so low. They have fallen by about 110 basis points since July 2019.  This means that housing interest payments as a percentage of household incomes have declined from a peak of 10.6% in 2008 to now just 4.7% across Australia. Mortgage stress is not something that a lot of households have to worry about at the moment.

Despite concerns that mortgage rates were tipped to increase due to the better-than-expected economic recovery at the beginning of 2021, this now looks less likely given the extended lockdowns throughout New South Wales, Victoria, and the Australian Capital Territory. Mortgage rates are one of the most important determinants of housing demand, so with the RBA likely to facilitate a low-rate environment for some time yet, buyer demand is unlikely to taper off in the near future.  This is especially true for Brisbane, and South-East Queensland as a whole, where we continue to see an influx of interstate migrants which is putting even more upward pressure on the demand for housing to rent and to buy.

Let’s take a deeper look into the performance of the Brisbane market throughout August 2021.

Brisbane Property Market Update August 2021 –  Prices

The latest Hedonic Home Value Index data by CoreLogic released on 31 August 2021, has confirmed that the median dwelling value in Brisbane increased a further +2.0% over the month of August.  This is equivalent to the dwelling growth that was experienced in Brisbane throughout July, so there is no change in the momentum of price growth across the city.  The current median value for dwellings across Greater Brisbane is $612,377 which is $13,672 higher than just one month ago.

The quarterly growth in dwelling values across Greater Brisbane is now 6.1%, suggesting a slight pick up again since last month, and annual growth for the last 12 months is now 18.3%.

Brisbane Property Market Update August 2020

The top end of the Brisbane Market is still driving the growth as you can see in the CoreLogic Data below.  This shows that the strongest growth in dwelling values occurred in the top 25% of values in the three months to July 2021, with 6.9% growth in that market segment (up from 6.4% since the end of June) compared to 4.3% growth in the lowest 25% of values across the city (up from 3.8% last month).  Whilst both the highest value and lowest value segments of the market continue to show growth over the last 3 months, the rate of growth at the top end continues to outperform when comparing the month-on-month trends.

Brisbane Property market Update August 2021

Brisbane Property Market Update August 2021 – House Prices

In the Brisbane Housing Market, we saw median values for the greater Brisbane region increase 2.1% across the month of August 2021 which is just below the growth that we have been experiencing in the housing sector throughout Greater Brisbane for the last 3 months.  Monthly growth has been trending at 2.2%, so there has been a slight reduction in August compared to the preceding 3 months. The 12 month change in Brisbane house prices has been 20.2%.  The current median value for a house in Greater Brisbane is $691,214, the highest it has ever been. This is $16,476 MORE than one month ago!

Brisbane Property Market Update August 2021

Brisbane Property Market Update August 2021 – Unit Prices

The Unit Market in Brisbane saw further positive growth in the median value this month, and a further pick up in the momentum of that growth also.  July saw an increase of +1.4% growth for units in Greater Brisbane, compared to +0.8% last month. The 12 month growth for units across Brisbane is now +8.9%. The current median unit price in Brisbane is $425,777, which is $6,635 more than one month ago.

Brisbane Property Market Update August 2021

Summary of Price Growth in Brisbane for the Year to Date

The graph below charts the % change in property values for Houses and Units since January 2020 for both houses and units in Greater Brisbane.

Brisbane Property Market Update August 2021

The trendlines here show clearly that the housing sector has outperformed the unit sector every month since October 2020.  Whilst the unit sector saw a loss of price growth momentum between May and June, this seems to have recovered throughout July and August. 

Below we have charted the actual median values for Houses and Units across Greater Brisbane since January 2021.  You can see Houses have outperformed Units when breaking the growth down into different asset types in Brisbane.

Property Buyers Brisbane

Brisbane Property Market Update August 2021 – Rental Property and Movements

Vacancy Rates at a city-wide level in Brisbane remained unchanged between June and July, staying at 1.3%.  The table below highlights where vacancy rates across Brisbane sit at the end of July 2021.

Region Vacancy Rate June 2021
(change from May 2021)
Beenleigh Corridor 0.6% (-)
Brisbane CBD 4.5% (+0.6%)
East Brisbane 1.3% (+0.1%)
Inner Brisbane 2.2% (+0.1%)
Ipswich 0.9% (+0.1%)
Northern Brisbane 0.7% (-)
South East Brisbane 0.7% (+0.1%)
Southern Brisbane
1.4% (-0.1%)
West Brisbane 1.2% (-)

Source: SQM Research

There was a small spike in vacancy this month in the Brisbane CBD, which contrasts with the trends we have been witnessing in previous months.  This is something we will be monitoring over the coming months.  Otherwise, vacancy remains tight across the city.  There simply are not enough investment properties in Brisbane at the moment for the number of tenants looking for somewhere to live.  This continues to put upward pressure on rent prices throughout the city.

Rental incomes in the unit market throughout Brisbane have seen an annual increase of 5.6%, up a full +1.0% compared to last month. 

Housing rents are still climbing too, with the annual increase in rents for Brisbane Houses now at 10.1% according to CoreLogic Data, which is +0.7% higher than a month ago.

The table below shows the changes in rents for All Houses in each region as well as the change in rents for 2 bedroom units. 

Region All Housing Rent Changes  Last 12 months 2 Bedroom Units Rent Changes Last 12 months
Beenleigh Corridor +12.6% +6.2%
Brisbane CBD +9.7% +5.9%
East Brisbane +15.1% +4.5%
Inner Brisbane +11.9% +4.5%
Ipswich +8.3% +7.3%
Northern Brisbane +12.2% +2.9%
South East Brisbane +6.4% +1.7%
Southern Brisbane
+10.7% +7.5%
West Brisbane +10.9% +9.4%

Source: SQM Research

Gross rental yields for dwellings across all of Greater Brisbane are compressing even further with escalating dwelling prices outpacing rent price growth.  According to CoreLogic, at a city-wide level, gross rents have dropped again this month to 3.9%, down a further -0.1% from last month.  This is a new record LOW for Brisbane. 

Property Advocate Brisbane

What did we see on the ground across Brisbane during August 2021?

During the lockdown at the beginning of the month, the Brisbane real estate market went quiet which is typical of what we have experienced in other lockdowns.  Whilst private inspections were still possible, these were not encouraged given the risks associated with the transmission of the Delta variant of Covid-19.

Once lockdown ended however, it was business and usual. Open homes on the weekends since that our team have attended have been popular. As expected, the demand returned to pre-lockdown levels almost immediately after Brisbane opened back up.
Everything we have purchased for clients that has been listed for sale has gone under contract with multiple buyers submitting offers.  In almost all instances this is also still after the first open home unless the Agent specifically sets a timeframe for when offers are closing which is sometimes a few days after.  Auctions have remained partly online, and others have been conducted in person once again.  But clearance rates remain high and prices achieved remain strong based on what we have been experiencing throughout the month. 

Buyers are becoming increasingly stressed and frustrated.  Many don’t understand the pace of the market and what they need to pay to secure a quality home or investment.  That sense of missing out becomes disheartening, especially when there is such a small number of options available for buyers to choose from.

 

Brisbane Property Market Update August 2021 – The months ahead …

Heading into Spring we expect conditions to remain unchanged throughout Brisbane.  Normally at this time of the year, we see new listing numbers starting to ramp up.  Whilst new listings are starting to show some more positive signs, there does not seem to be enough properties available for the number of buyers in the market right now.

We still see Brisbane property values climbing substantially in the immediate future based on the real-time indicators we are assessing each week. 

Time will tell how long this boom lasts. But we have waited a long time for this in Brisbane and it is finally here!

 

Would you like to understand more about working with a Buyers Agent in Brisbane?
Make an enquiry with Streamline Property Buyers.
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Start an investment portfolio in Brisbane and how the current market conditions could help you

Start an investment portfolio in Brisbane and how the current market conditions could help you

It is not a surprise to most of us that the Brisbane Property Market has seen strong growth over the last 12 months. We have seen this in the news headlines for months.  There have been a lot of buyers in the market, and very few sellers, and this is putting strong upward pressure on prices.  So how can you start an investment portfolio in Brisbane if you have not been able to save a deposit for another purchase?

If you already own a property in Brisbane, this means that you might have some strong equity growth in your property!  In the last 12 months alone, according to CoreLogic Data, the median value of Brisbane house prices increased 17.7% and unit prices increased 7%.

Let’s quantify what this might look like for you.  See below a table of previous values and current values based on the median price growth for Brisbane in the housing sector.  We have also included a column for the growth that might have been achieved over the last 12 months based on the median rate of growth for the city.

August 2020 Value August 2021 Value Growth
$500,000 $588,500 $88,500
$750,000 $882,750 $132,750
$1,000,000 $1,177,000 $177,000
$1,250,000 $1,471,250 $221,250
$1,500,000 $1,765,500 $265,500

 

This growth in property values over the short term, is not something most property owners think about.  But the fact is, being able to leverage from this growth is what can enable any property owner to kick start an investment portfolio themselves.

When looking to invest in property, most individuals are seeking either a boost to their current cashflow position, or longer-term growth which contributes to wealth creation.  The balance between income now (ie: investment yield) and growth in the future (ie: equity) will always depend on an investor’s unique circumstances. 

Regardless of the investment strategy (ie: the balance between capital growth and yield), it is always better to maximize investment debt when you also have personal debt (ie: a home loan that you are paying off).  This is where a clever finance strategy can ensure you get the best tax advantages associated with your investment properties as well.  These three factors must ALL be considered based on an individual’s personal circumstances when you start an investment portfolio for your future.

Start an investment portfolio

For many property investors, the hardest part is actually saving the deposit to get started.  A lot of investors think that you need to set aside additional cash until you have enough to cover the contributions towards a deposit, as well as purchase costs for a property purchase.

 

But in actual fact, this is not the case when you are already a property owner.  Whether you already own a home or another investment property, you can use the equity growth in that property to start an investment portfolio!  Here’s how …

The equity is simply the difference between the current value of a property, and the amount owing on that property (eg: the mortgage amount).  The equity position can be increased either by paying off the debt (ie: through repayments) or through growth in the asset value (Ie: capital growth). 

Generally, a bank will allow you to borrow up to 80% of the value of a residential property without needing to take out Lenders Mortgage Insurance (LMI), subject to their assessment criteria of course.  LMI only applies when the amount of borrowed funds exceeds 80% of the value of the property.  What this means is that you can potentially tap into the additional funds that sit in your home as equity.  This is especially exciting because, with recent market growth in Brisbane, the market itself has done a lot of the hard work in creating the equity!

 

So how can you take advantage of this increased equity in your property to start an investment portfolio?

It is really quite simple!

1. Get in contact with your Mortgage Broker today so that they can provide a valuation estimate on your existing property to determine its current value. Your Mortgage Broker will also help you calculate your available equity.

2. Perform an assessment of your borrowing capacity for another property purchase.

3. Re-mortgage or re-finance your existing facility to draw out the equity as an equity loan which you can use as a deposit for the next property purchase (again your mortgage broker can assist with this process).

4. Ensure you can afford the investment as well as any additional repayments that may be necessary to hold that investment property.

Once you understand how much you can afford to pay for an investment property, then you can start your research in terms of where to buy and what to buy so that your investment purchase achieves the goals you have set for yourself and your family.  We encourage all investors to seek professional assistance if they are unsure of what type of property might be best for their unique circumstances.

 

In terms of Brisbane as a location for your investment, there are a few things that make our city a great pick!

1. Brisbane is a very affordable market. Our median dwelling value is $598,615 according to CoreLogic Data at the end of July 2021. Compare this to other capital city median values below.

Capital City Median Value as at July 2021
Brisbane $598,615
Sydney $1,017,692
Melbourne $762,068
Canberra $793,872
Hobart $621,102

 

2. Brisbane offers strong gross rental yields of 4.0% compared to Sydney at 2.5% and Melbourne at 2.8%.

3. Brisbane has experienced positive net migration due to interstate migration over the last 12 months which means more people are moving to the great South East, and therefore more people need somewhere to live.

4. Brisbane also has a rental crisis right now, with the city-wide vacancy rate sitting at 1.3%. Rents in the housing sector have increased 9.4% over the last 12 months.

5. Brisbane’s response to the covid-19 pandemic has been superior to other capital cities and we have the lifestyle that many Australians are seeking, which is why so many people are moving interstate.

6. A lot of infrastructure which will better connect south-east Queensland will be fast-tracked due to the announcement that Brisbane will host the 2032 Olympic Games. This will benefit our city both in the lead-up to the Games and for many years thereafter.

 

To find out more about what is happening in the Brisbane property market right now, visit the Streamline Property Buyers’ blog HERE where we provide monthly Brisbane property market updates.

The list of reasons why Brisbane is a great place to invest right now could be longer, but we have outlined just a few. If you want to set yourself up for a better future by using equity from your existing property as a deposit for an investment property – speak to your mortgage broker today. This is a great way to start an investment portfolio. Using this strategy and taking advantage of the recent growth in the Brisbane market, without having to save cash for a deposit is clever. It is a great way you can get ahead and potentially begin your property investment journey.

Get in touch if you would like to know how we can help you. You can book in for a FREE Discovery Call with Streamline Property Buyers. We are the Most Qualified Team of Brisbane Buyers Agents.

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Brisbane Property Market Update July 2021

Brisbane Property Market Update July 2021

In this Brisbane Property Market Update July 2021, we have some amazing news! Brisbane is now officially going to be an Olympic City and how exciting is that! The plans can finally be set in concrete for the transformation of our city, which will include the fast-tracking of important infrastructure which will benefit the residents for many years to come. This is an extremely exciting time for Brisbane and the city that it will now become in the years ahead.

From a property price movement perspective, Brisbane is bucking the national trend in terms of house price growth in recent months. Our city is one of few capital city markets in Australia that has maintained growth momentum in housing values. Whereas the larger markets of Sydney and Melbourne have seen price growth slowing in the last 3 months, this is not the case in Brisbane in the housing sector. Even though the rate of growth has eased in other markets, housing values are continuing to rise substantially faster than average so market conditions nationwide are still very good.

Research director of CoreLogic, Tim Lawless, has attributed the loss of steam in the Sydney and Melbourne markets since March to several factors, one of which is declining affordability. With Brisbane’s median dwelling values at $598,615, we remain a much more affordable market compared with Sydney’s median dwelling value of $1,017,692 and Melbourne’s median dwelling value of $762.068. Even Hobert and Canberra are more expensive markets than Brisbane with their respective median dwelling values being $621,102 and $793,872 according to the latest Corelogic data released on 2 August 2021.

Of course, there are also some negative impacts on consumer sentiment due to the extended lockdowns in Sydney, and this is something we all must consider in the months ahead as we deal with the Delta variant of COVID-19 within our communities. Even so, from our experience from past lockdowns throughout the country, we are seeing a trend whereby buyer and seller activity reduces during the event but recovers quickly to pre-lockdown levels once restrictions are lifted.

Any potential for interest rates to rise in the near future looks less likely now that the recent lockdowns have seen Australia’s economy slow down, and this is now likely to keep rates on hold for a longer period of time. Any lift in the cash rate seems extremely unlikely for at least the next 18 months, and according to the RBA the forecast is not to see any movement until 2024 at the earliest. This is going to ensure ongoing demand for housing given the low cost of money in the current economic environment.

We are still seeing more investors enter the market with lending data now showing 26.8% of all housing finance commitments in Queensland going to investors. Whilst this is still a smaller proportion, there is definitely a trend that is shifting higher.

Employment growth in Queensland is leading the nation with an additional 235,000 employment opportunities by June 2021 throughout the state according to ABS data. This may also be due to the lockdowns in both Sydney and Melbourne recently. With Brisbane also entering a new lockdown due to the Delta COVID-19 variant, we will be watching to see if this has any impact on these employment trends in the future.

Looking at the mismatch between demand and advertised supply, we can still see why Brisbane markets are strong. Sales volumes have increased 44% in Brisbane over the 12 month period leading up to June 2021, whereas total listing volumes had declined -25.9% across the same period according to CoreLogic. This provides some clarity as to why the pace of price growth has been so strong in recent months through the city.

Let’s take a closer look into the performance of the Brisbane Property Market Update July 2021.

 

Brisbane Property Market Update July 2021 – Price Growth

The latest Hedonic Home Value Index data by Corelogic released on 31 July 2021, has confirmed that the median dwelling value in Brisbane increased a further +2% over the month of July. This is back to the dwelling growth that was experienced in Brisbane throughout May, after only a very slight dip to +1.9% growth throughout June.  The current median value for dwellings across Greater Brisbane is $598,615 which is $12,473 higher than just one month ago, and $95,991 higher since the same Corelogic results were published 12 months ago.

The quarterly growth in dwelling values across Greater Brisbane is now 6.0%, suggesting a slight pick up again since last month, and annual growth for the last 12 months is now 15.9%.

Brisbane Property Market Update July 2021

The top end of the Brisbane Market is still driving the growth as you can see in the CoreLogic Data below.  This shows that the strongest growth in dwelling values occurred in the top 25% of values in the three months to June 2021, with 6.2% growth, compared to just 3.8% growth in the lowest 25% of values across the city.  

Brisbane Property Market Update july 2021

Interestingly, the number of people who are highly engaged with unit listings has been higher across Queensland compared with house listings. This is in contrast to what we have observed by being on the ground at inspections where anecdotally we are seeing more buyers attending open homes for houses than units – especially in Brisbane.

 

Brisbane Property Market Update July 2021 – House Prices

In the Brisbane Housing Market, we saw median values for the greater Brisbane region increase 2.2% across the month of July 2021 which is CONSISTENT with the growth that we experienced in the housing sector throughout Greater Brisbane for the last 2 months.  The 12 month change in Brisbane house prices has been 17.7%.   The current median value for a house in Greater Brisbane is $674,738, the highest it has ever been.  This is $17,187 MORE than one month ago and $98,400 more than at the beginning of 2021.

Brisbane Property Market Update July 2021

 

Brisbane Property Market Update July 2021 – Unit Prices

The Unit Market in Brisbane saw further positive growth in the median value this month, as well as a slight pick up in the momentum of that growth as well.  July saw an increase of +0.8% growth for units in Greater Brisbane, compared to +0.7% last month.  The 12 month growth for units across Brisbane is now +7%.   The current median unit price in Brisbane is $419,142, which is $3,607 more than one month ago and $28,357 more than at the beginning of 2021.

Brisbane Property Market Update July 2021

 

Summary of Price Growth in Brisbane for the Year to Date

The graph below charts the % change in property values for Houses and Units since January 2021 for both houses and units in Greater Brisbane.

The trendlines here show clearly that the housing sector has not yet seen any slow down in price growth over the past 4 months. The unit sector saw a loss of price growth momentum between May and June, which seems to have recovered in July.

Brisbane Property Market Update July 2021

Both sectors are still appreciating in value, but houses have shown more superior growth since the beginning of the year, compared to units.

Brisbane Property Market Update July 2021

 

Brisbane Property Market Update July 2021 – Rental Property and Movements

Vacancy Rates in Brisbane remained unchanged between May and June, staying at 1.3% city-wide. The table below highlights where vacancy rates across Brisbane sit at the end of June 2021.

Region Vacancy Rate June 2021
(change from May 2021)
Beenleigh Corridor 0.6% (-)
Brisbane CBD 3.9% (-)
East Brisbane 1.2% (+0.1%)
Inner Brisbane 2.1% (-0.1%)
Ipswich 0.8% (-)
Northern Brisbane 0.7% (-)
South East Brisbane 0.6% (-)
Southern Brisbane
1.5% (+0.1%)
West Brisbane 1.2% (-)

Source: SQM Research

The current vacancy rates in each region are extremely tight across the city.  Even the Brisbane CBD is seeing current vacancy rates back at levels seen in March 2020 before the pandemic.  Tight vacancy rates like this are putting upward pressure on rents as evidenced in the rental data below. 

Rental incomes in the unit market throughout Brisbane during July have seen an annual increase of 4.6%, up 0.8% compared to last month. 

Housing rents, are still climbing faster, with the annual increase in rents for Brisbane Houses now at 9.4% according to CoreLogic Data, which is 1% higher than a month ago.

Gross rental yields for dwellings across all of Greater Brisbane are compressing with escalating dwelling prices outpacing rent price growth.  At a city wide level, gross rents have dropped slightly to 4.0%in July, down -0.1% from last month.  This is still very attractive compared to Sydney at 2.5% and Melbourne at 2.8%.

Brisbane Property Market Update July 2021

 

What did we see on the ground across Brisbane during July 2021?

Not much has changed on the ground throughout July, compared to June. The excitement of the Olympics announcement is evident for many residents, although this may take some time to filter through in terms of how it may shape our city in the years ahead.

Buyers have still been very active throughout July and open homes have been well attended, both on Saturdays and also mid-week.  With the most recent lockdown, we expect the momentum to pause, but we do not expect at this stage that the buyers will disappear. Like previous lockdowns, we expect the demand to match the pre-lockdown levels as soon as everything opens back up.

There is still not much selling without multiple buyers submitting offers, and most properties are still selling after the very first open home. The only exception is when there is an auction campaign in place, which usually involves a 3-4 week campaign, but recently we have seen auction campaigns reduce to as little as 7 days.

For buyers, it is a stressful and frustrating time. As prices escalate, buyers are having to either adjust their expectations or increase their budget every month if they intend to stay in the same areas. 

On the ground, it really is a frenzy in many locations across the city. There are simply too many buyers for the available stock that is coming to the market.  Buyers are paying a premium just to secure a decent property at the moment, but with the depth of buyers, this is not something we expect to see slowing down any time soon.

 

Brisbane Property Market Update July 2021 – The months ahead …

Our position remains the same as last month in that we do not expect any slow down in the momentum of Brisbane housing price growth in the foreseeable future.  Even with the temporary lockdown, we expect that the pent-up demand will continue as soon as things open back up throughout South East Queensland.  The current Delta outbreak in the city will not impact the fundamental imbalance that we have between supply and demand that is putting such strong upward pressure on prices.

Hold on for the ride everyone … Brisbane really is on fire.  It is a very exciting time for our City!

 

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Learn how to Manufacture Equity in Property

Learn how to Manufacture Equity in Property

The one unique thing about property as an investment class, when compared with other types of assets, is that you have the ability to Manufacture Equity in Property, and therefore, add more value to your investment portfolio. This is a powerful tool, used by some property investors, to increase a property’s value, and also to increase the potential rental income that can be achieved on a particular property.

Property is made up of a land component, as well as a building component, and in most instances, it is the value of the land that appreciates (or goes up in value), and the value of the building itself depreciates (or goes down in value).

This is why, as property investors, we are able to write off the value of the building through depreciation. When a property has a significant portion of its value in the land, and the building itself is somewhat run-down, then there can be huge upside potential for refurbishment, renovation or redevelopment, which are all methods that force more value into the property by increasing the value of the building component, therefore “manufacturing” additional equity into a site. But it is not as simple as it sounds. You need to be strategic about how you can use this strategy in your property investment portfolio so it delivers the results you desire.

1. Manufacture Equity in Property through Refurbishment

Refurbishment involves working within the existing building structure and updating or replacing areas in the property that add the most value to Manufacture Equity in Property.

Generally, this involves the kitchen and bathroom, although street appeal, paint and outdoor areas also have an impact. Many people can perform this work themselves, or with the help of basic trades such as painters, plumbers, tilers and cabinetmakers. This is usually lower cost building works, but the value uplift can be $2 for every $1 spent – sometimes more.

2. Manufacture Equity in Property through Renovation

Next is renovation, which often involves a refurbishment as well as a structural change to the property such as an extension or addition to the existing dwelling such as adding an extra bedroom or extending the living as a way to Manufacture Equity in Property

This is a lot more involved as generally you will need a plan of the work proposed (prepared by an architect or draftsman), building approval, and sometimes development approval from council, to undertake structural changes to a property. Unless you are a qualified tradesperson, it is advisable to use qualified builders who provide home warranty insurance cover for this type of work, in case something goes wrong in the process. Obviously, the cost of this type of work is greater than refurbishment, but structural additions can significantly improve the value of a property – providing it is in the right location and providing the property appeals to the right target market.

3. Manufacture Equity in Property through Development

The final way to manufacture equity in property is through development.

This is a strategy that carries the highest level of risk, involves the most work, but also comes with the highest potential reward. When you develop a property, it means you demolish the existing building and replace it with something new which is usually of a higher and better use. For example, you may demolish a house and replace it with a duplex or 3 townhouses. The site selection for this method of manufacturing equity is critical because you need to consider, among other things, location, market demand, council restrictions (such as zoning) and maximum allowable density. I have seen many “mum and dad” developers buy a property believing they can undertake a development, only to be told it is not possible. In this area, you need to work with an experienced team who can guide you and ensure that the project is possible and feasible so that your investment strategy is able to be implemented.

There are some fundamental steps involved in ensuring you can manufacture equity in property, regardless of whether you intend to add value through refurbishment, renovation or redevelopment, to ensure you lock in your returns. These are as follows:

1. Choose a location that has wide price disparity between unrenovated or old and renovated or new properties

2. Ensure the unimproved land value makes up a significant portion of the purchase price of a property and check council mapping to find out what you can and can’t do on a particular site.

3. The layout of the property should reflect the strategy you are following. If you are only refurbishing a property, ensure the layout is already suitable. If you are renovating a property, ensure you get professional advice on the existing structure, so you know what you are already working with.

4. Understand your costs. It is best to get professional advice on actual proposed costs before you start so that you do no overcapitalise and spend more than what the property will be worth upon completion.

5. Upon completion, it is always a good idea to get your property re-valued. This enables you to “lock in” the additional equity you have created, which can often then be used towards the deposit for your next investment property, depending of course on your individual circumstances.

So, don’t assume that all property investment strategies are a ‘set and forget’ type of investment. Look for opportunities in your existing property portfolio, or seek out properties that will deliver additional returns for you, with your next purchase. When you manufacture equity in property you supercharge your results.  The power that we have to unlock the hidden potential in many properties, provides enormous opportunities for those who wish to force more value into their portfolio, with a more aggressive property investment strategy.

Contact us today to discuss how we can help you achieve these results and learn more about how to Manufacture Equity in Property.

Brisbane Property Market Update June 2021

Brisbane Property Market Update June 2021

Activity throughout Brisbane in June remained high in the residential property market, which is not a surprise. Brisbane is now amongst the top ten most liveable cities in the world according to the Economist Intelligence Unit (EIU), and rightly so. Our city offers an amazing sub-tropical lifestyle where even in winter the sun shines and our outdoor lifestyles bustle. Keep reading to understand the Brisbane Property Market Update for June 2021.

It is no wonder that the demand for property across the city is still strong. At a national level, the headlines suggest that the momentum for property price growth is starting to slow, but in the Brisbane housing sector, this is not the case.

With net interstate migration into Queensland exceeding 30,000 in 2020 (the first time since 2005), this was by far the fastest population growth rate of all capital cities around Australia. Employment also surged to a record high in Queensland with the unemployment rate for the State now sitting at 5.4%. There are still some further improvements that we hope to see here in the coming months. With an increase in total job advertisements in Queensland of +154% over the year, there may be further uptake in the months ahead.

After seeing a spike in demand throughout February and March, the REA Insights Weekly Demand index has been fairly steady since April 2021 across Queensland. This Index measures the number of people who are highly engaged with buy listings on realestate.com.au compared to a baseline which is calculated as being the 52-week static average for the 2019 year.

Brisbane Property Market Update June 2021

Interestingly, the number of people who are highly engaged with unit listings has been higher across Queensland compared with house listings. This is in contrast to what we have observed by being on the ground at inspections where anecdotally we are seeing more buyers attending open homes for houses than units – especially in Brisbane.

In terms of apartment supply forecasts for Brisbane, the table below shows where we are in the pipeline of new developments.

Brisbane Property Market Update June 2021

With long time frames for planning, marketing, and construction for large apartment projects, the next wave of supply is still some time away for Brisbane. In the meantime, the market will tighten further, particularly after borders re-open and international migration resumes.

For property investors, the latest tax office figures have confirmed that there are fewer landlords who are negatively gearing their properties. This is because with interest rates so low, in many cases the rental income from the investment is sufficient to pay down the investment debt. This builds up the equity position in a property and provides a good buffer for any future potential increase in interest rates.

And with the Australian economy rebounding so quickly, there are now some economists who believe that interest rates could rise before 2024. Whilst there is no suggestion this is likely from the RBA, it is always a possibility. It does look like interest rates might have reached their lowest point.

So the outlook is definitely still bright for Brisbane. Let’s see how our local market performed over the last month.

 

Brisbane Property Market Prices

The latest Hedonic Home Value Index data by CoreLogic released on 30 June 2021, has confirmed that the median dwelling value in Brisbane increased 1.9% across June. This is just slightly lower than the dwelling growth in Brisbane throughout May (+2.0%) which some might assume means that the price growth is losing some momentum throughout Greater Brisbane. The current median value for dwellings across Greater Brisbane is $586,142 which is $11,570 higher than just one month ago, and $64,456 higher since the CoreLogic results were published at the beginning of the year on 4 January 2021. 

The quarterly growth in dwelling values across Greater Brisbane is now 5.7%, suggesting a slight slow down since last month, and annual growth for the last 12 months is now 13.2%.

However, it is important to always break down the dwelling data into the housing and unit sectors as each of these types of dwellings has performed differently over recent months.

Brisbane Property Market Update June 2021

 

Brisbane House Prices

In the Brisbane Housing Market, we saw median values for the greater Brisbane region increase 2.2% across June 2021 which is CONSISTENT with the growth that we experienced in the housing sector throughout Greater Brisbane last month. The twelve month change in Brisbane house prices has been 14.8%. The current median value for a house in Greater Brisbane is $657,551, the highest it has ever been. This is $15,824 MORE than one month ago and $154,403 more than 12 months ago.

Brisbane Property Market Update June 2021

The breakdown of the median data into the price segments of the market in Brisbane provides further insights into the price spread of houses around our City. The graph below shows house values for the 25th and 75th percentile prices in Brisbane, compared to other locations around Australia.  This shows a graphic representation of how affordable the Brisbane market still is compared to Sydney, Melbourne and ACT, with our 75th percentile value (ie: the top 25% of house prices) sitting BELOW the 50th percentile value (ie: overall median value) of Melbourne, and ACT and below the 25th percentile value of Sydney.

 

Brisbane Unit Prices

The Unit Market in Brisbane saw further positive growth in the median value this month, although a slow down in the momentum of that growth is evident within this sector. June saw an increase of 0.7% growth for units in Greater Brisbane. The twelve month growth for units across Brisbane is now 5.7%.  The current median unit price in Brisbane is $415,536, which is $3,782 more than one month ago and $28,116 more than 12 months ago.

Brisbane Unit Prices

When we compare the Unit prices in Brisbane with other capital cities we find that our median Unit price is equivalent to the lowest 25th percentile of unit values in ACT and Hobart, and much lower than the 25th percentile for Melbourne and Sydney. Again, this demonstrates how affordable Brisbane units are compared to units throughout other capital cities around Australia.

Unit Affordability in Brisbane

 

Summary of Price Growth in Brisbane for the Year to Date

The graph below charts the % change in property values for Houses and Units since January 2021 for both houses and units in Greater Brisbane.

The trendlines here show clearly that the housing sector has not yet seen any slow down in price growth over the past 3 months, however, the unit sector has started to see a loss of price growth momentum over the last month.

Both sectors are still appreciating, but houses have shown a more superior growth since the beginning of the year.

 

Brisbane Rental Property Market Update and Movements

Vacancy Rates in Brisbane tightened further throughout June moving from a city-wide vacancy rate of 1.4% in April to 1.3% in May. The table below highlights where vacancy rates across Brisbane sit at the end of May 2021.

Region Vacancy Rate May 2021
(change from April 2021)
Beenleigh Corridor 0.6% (+0.1%)
Brisbane CBD 3.9% (-0.5%)
East Brisbane 1.1% (-)
Inner Brisbane 2.2% (-0.2%)
Ipswich 0.8% (-)
Northern Brisbane 0.7% (-0.1%)
South East Brisbane 0.6% (+0.1%)
Southern Brisbane
1.4% (-0.1%)
West Brisbane 1.2% (-0.1%)

Source: SQM Research

The current vacancy rates in each region are extremely tight across the city. Even the Brisbane CBD is seeing current vacancy rates back at levels seen in March 2020 before the pandemic. Tight vacancy rates like this are putting upward pressure on rents as evidenced in the rental data below.

Rental incomes in the unit market throughout Brisbane have seen an annual increase of 3.8%, up 1.2% compared to last month.

Housing rents are still climbing faster, with the annual increase in rents for Brisbane Houses now at 8.4% according to CoreLogic Data, which is 1.1% higher than a month ago.

Gross rental yields for dwellings across all of Greater Brisbane have now started to fall with escalating dwelling prices outpacing rent price growth. At a city-wide level, gross rents have dropped slightly to 4.1%, down -0.1% from last month. This is still very attractive compared to Sydney at 2.6% and Melbourne at 2.8%.

Brisbane Property Market Update June 2021

 

What did we see on the ground across Brisbane during June 2021?

The Brisbane Property Market Update June 2021, like previous months, has seen the number of buyers continued to exceed the number of sellers, causing most properties to sell with multiple offers throughout the month. The depth of buyers in some pockets of the city is greater than in other pockets, and we are starting to see slightly decreased buyer depth at the lower end of the market.

Towards the top end of the market, however, the buyer depth is still very strong and houses within that top 25th percentile are moving very quickly. Auctions we attended were mostly sold, except for a small number of cases where the vendor’s expectations have now moved ahead of the market. This often happens when prices are escalating rapidly. Clearance rates, according to Domain, moved between 57% and 88% across the month in Brisbane, but every auction we attended had multiple registered bidders – even if it ended up passing in.

It is possible that some buyers are starting to get buyer fatigue and this is causing them to make some very strong offers that are well ahead of the market. We have been seeing this – especially in the middle and top price points. For those that continuously miss out, it is not uncommon to reach a point where getting into the market is more important than trying to buy well. This causes prices to rise as well because, with every new recorded sale, this becomes the new baseline that other buyers make an assessment from.

 

The months ahead …

Our position has not yet changed on the market outlook and we are still optimistic that Brisbane has a lot of steam left which will keep prices escalating into the near future. We have not yet seen a slow down in the number of buyers in the middle and top segments of the market, so demand still outweighs supply in these sectors. We are watching closely for signs that demand is slowing or supply is increasing – but right now neither of these things are happening. For this reason, we expect this price growth momentum to continue, more so for houses than units in Brisbane. We hope you have found our Brisbane Property Market Update June 2021 helpful. 

 

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How to Assess Flood Impacts in Brisbane

How to Assess Flood Impacts in Brisbane

Brisbane is a city built along the banks of the Brisbane River.  It is known as the “River City” for a reason. But being a River City, it is also a city that is exposed to flood risk, and this is what this article is going to focus on to ensure you can assess the flood impacts in Brisbane before you buy a home or an investment property.

Brisbane has experienced many significant flood events over the past two centuries. Back in February 1893, the first big river flooding event occurred where water levels were recorded at 8.35 meters above the low tide level in the Brisbane CBD, the second highest flood event ever recorded at the City gauge. This event was termed the Great Flood and that month was then referred to as Black February. The flooding was caused by a huge rain event associated with a tropical cyclone. This caused the Brisbane River banks to burst and the water flooded into the surrounding areas. This flood resulted in 11 deaths and about 190 people were hospitalised. 

Fast forward to January 1974 and our city experienced the largest flood to affect Brisbane in the twentieth century.  Once again, this was caused by a cyclone where 642 millimeters of rain fell within the space of 36 hours and the river system simply could not cope.

At that time the water levels peaked at 6.6 meters at the City gauge, but because development was a lot more advanced than it was back in 1893, 8,500 homes were completely inundated with floodwaters on this occasion.  Brisbane was an inland sea during this flood event and 14 people lost their lives as a result, mostly in the inner city suburbs.

Off the back of these flood events, the Wivenhoe Dam was constructed to provide flood mitigation control for the City.  This is located about 80km by road from the Brisbane CBD.  Residents in Brisbane became more optimistic that Brisbane would never flood again and development was fast tracked throughout the city.  No one thought that a river flooding event would impact our lives, or our homes again.

Then in 2011, the flood that was never meant to happen happened. After days of rain, the Wivenhoe Dam was over its capacity and the flood gates had to be opened to release some of the water.  Brisbane was in for a shock.

 

On 11 January 2011, the Brisbane River broke its banks and by 13 January 2011, the river was raging.  This time 20,000 residential homes were affected by flood waters across 94 suburbs throughout the city.  It was the flood that was never meant to happen, but it highlighted the fact that our River City may never be immune from future flood events.

Understanding how to assess the flood risk associated with a property is therefore important when you are looking to buy a property in Brisbane.  So here are some steps you can follow that will help you to assess this risk.

Downloading a FloodWise Report to assess the flood impacts in Brisbane

The Brisbane City Council provides predictions for the potential for flood risk for most properties around the City.  A FloodWise Property Report can be completed HERE.  You will be required to enter the property address, click Search and then select the way you would like to view the report before downloading.

Brisbane Flooding 1

This search will provide one of four types of reports, depending on the site. 

The first type of Report is issued when there is NO known FLOOD Impact across a site. You will see this note on Page 1 of the FloodWise Report if this applies to your property search:

Brisbane Flooding 2

Obviously, this is the best possible outcome as it means the property is not going to be impacted at all by any type of flooding event.

 

The second type of report provides a warning that the property has Flood and Planning Development Flags, but there will be no visible graphs. The alert on Page 1 of the FloodWise Report will look like this:

Brisbane Flooding 3

This usually means that the property is impacted by overland flow flooding. Brisbane City Council does not have publicly available information on the overland flow modeling. Whilst we can get an understanding of the overland flow pathways, we don’t have details and the onus is on a buyer to engage a hydraulics engineer to complete an assessment to ascertain what that impact actually is. For development, this becomes much more important compared with just buying a residential site.

 

The third type of report that might be produced happens when there is a known flood impact on a site, but the information is not complete enough to determine what the minimum habitable floor level must be for flood immunity.  There will be a graph on the first page of the report that will look something like this:

Brisbane Flood Report

This usually happens when a block of land is too large for the council to have complete clarity of what the flood impact is likely to be at every point on the site and therefore the minimum habitable floor level is not noted on the report.  In this instance, the onus is again on the property buyer to confirm what the minimum habitable floor levels might need to be to achieve flood immunity across the site.

 

The fourth and final type of report is produced when there is a known flood impact on the site AND there is sufficient information in council’s database to also determine what the minimum habitable floor level must be for a dwelling property to achieve flood immunity on that site.  The graph on this report looks something like this:

Brisbane Flood Report 2

You can see in this example, there is a dotted line that shows the minimum habitable floor level. This is the most comprehensive report out of all of the possible options.

 

Now let’s look at how to interpret the rest of the information in these reports.

The Green line on the right-hand side of the graph represents the contours on the property, or the ground levels of the site, based on the Australian Height Datum in meters m(AHD).  A level of 0.0 AHD is considered sea level.

The highest and lowest point on the site are noted on this report through the lowest and highest points on the Green line.  Obviously, suburbs closer to the bay in Brisbane will be closer to zero, whereas more elevated suburbs will be much higher.

On the left-hand side of the report, you will see some bars on the chart. These bars represent the annual probability of a flood event occurring for that particular property. These bars also show the magnitude of the associated risk for any flood event.  This is measured using the Annual Expedient Probability (AEP), in other words, the chances that a property will flood in any year.

Usually, the higher the probability (ie: the higher the AEP expressed as a percentage), the lower the flood level will be. The same holds true in that the lower the AEP, the higher the flood level will be. 

Some reports, but not all, will also include a flood level as recorded during the Floods of January 2011.  And finally, some reports, but not all, will include a Defined Flood Level (DFL) as well which is a measure used for Brisbane river flooding whereby the flood level of 3.7M AHD at the Brisbane City Gauge and a river flow of 6,800m3/s is the flow.  This gets a bit complex, but for those who understand hydraulics, it may be useful.

If the bars on the left-hand side of the chart are higher than the points in the Green line on the right-hand side of the chart, then you can expect that during a flood event, water is likely to cover part or all of that land.  You can then calculate the DIFFERENCE between those two levels to get an indication of the likely flood LEVEL for that property at its highest and lowest point.

When it comes to new approvals for dwellings, or renovations on properties, council are focused on the 1% AEP levels. For any non-habitable spaces within a home (eg: garages & laundries) council requires those floor levels to be 300mm ABOVE the 1% AEP level for a site.

For any Habitable spaces (eg bedrooms, living rooms dining rooms) these need to be at least 500mm ABOVE the 1% AEP level for a site.

For any existing dwellings that may not already achieve flood immunity, a calculation between the ground levels and the ACTUAL floor level can often determine what level of flood inundation could be expected in the event of a significant flood event on that site.

If a property ALSO falls within a Creek/Waterway Flooding overlay Category 1, 2 or 3 OR in a mapped overland flow path, you may also need to account for an undercroft area in the event you are looking to complete any future renovation works. This can get quite complex, and we recommend if this applies to seek help from professionals such as architects, certifiers, and town planners.

On Page 2 of the Property FloodWise Report a Technical summary will be provided.  This information is predominately for builders and architects who are completing renovation or building works on a property.  Basically, if you understand how to read the graphs on page 1, you will not need to understand this more detailed technical information.

Checking the FloodWise Report for a property is an important part of the due diligence process that should be completed prior to a property purchase so that you understand the flood impacts in Brisbane and how they may impact on a specific property.  Understanding how to interpret the reports is also essential. Finally, applying the information from the report to the specific property, and understanding what it means in relation to the existing property on a site is invaluable.  This ensures any future compliance requirements in relation to renovations or improvement works are understood upfront.

 

Get in touch if you would like to know how we can help you. You can book in for a FREE Discovery Call with Streamline Property Buyers. We are the Most Qualified Team of Brisbane Buyers Agents.

Other blog titles you might find interesting:

When is the market fenzy in brisbane going to stop Why you should not let FOMO set in when you buy

 

Why use a Buyers Agent in Brisbane?

Why use a Buyers Agent in Brisbane?

Have you ever considered using a Buyers Agent in Brisbane?  Do you know how a Buyers Agent can help?  This article explains some of the benefits of using a buyers agent in Brisbane to assist you with your next home or investment property purchase.

The process of buying and selling property in Australia is somewhat different to many other countries around the world. In America, for example, most people buying property are represented by a Buyers Agent and most people selling property are represented by a Sales Agent. In Australia, the role of a Buyer’s Agent is just emerging.

analysis by buyers agent in brisbane

With the projections for the Brisbane property market looking so bright, now may be a great time to use the services of a Buyers Agent in Brisbane to find the perfect property, but you may be wondering, what is a Buyer’s Agent? Let’s explore this further.

What is a Buyers Agent in Brisbane?

A Buyers Agent (also sometimes referred to as a Buyers Advocate) is a fully licensed real estate professional that specializes in searching for, evaluating and negotiating the purchase of a property on behalf of the buyer.  A Buyer’s Agent works “exclusively” for the buyer and acts in their best interests. A Buyer’s Agent does not SELL real estate.

What does a Buyers Agent in Brisbane actually do?

Working with a Buyers Agent in Brisbane will ultimately make the whole process of buying a home or investment property stress-free.

Buyer’s Agents help property buyers to:

  • Save time – all property searching, inspecting and property due-diligence can be done for you
  • Eliminate frustration – no time on your weekends wasted looking at properties that do not match your requirements
  • Stress Less – having professional representation during the property buying process guarantees you a less stressful process
  • Improve Options – buyers get access to all properties that are available for sale both, on and off-market when working with a buyers agent due to their extensive agent network and strong agent relationships
  • Get a better deal – having a strong sense of understanding property values is important when it comes time to negotiate and to determine the property price
  • Improve confidence – know you will not overpay because you are being represented

 

A quality Buyers Agent in Brisbane will also uncover everything about a property that you may not even think to check.

There are so many layers that can be uncovered that may impact on what you can and cannot do with a property, and also whether a property will be covered by certain insurances or not.

Of course, getting a building and pest inspection these days is mostly standard practice, once a contract for the sale of a property is entered into.

But what about the things you cannot see? The things that are underground, the development that is approved for an area or even the land zoning or overlays that effect a particular property?

buyers agent in brisbane at work

We always recommend doing your due diligence on every property BEFORE you inspect.  You can check out our resources 9 Property Due Diligence Checks Before you Buy which will help you to avoid making any big mistakes!

 

How can a Buyers Agent in Brisbane add value?

Using a Buyers Agent in Brisbane may be worthwhile if:

  1. You don’t know the local Brisbane market very well
  2. You are time poor and don’t have time to search for and inspect lots of properties
  3. You keep missing out on properties that you like because other buyers act faster than you
  4. You are uncertain about what to pay
  5. You are frustrated as a result of dealing with Sales Agents
  6. You feel overwhelmed with the entire process or certain parts of the process
  7. You don’t know where to buy
  8. You are having trouble finding properties to buy
  9. You have found a property but you are not confident to bid at auction
  10. You would simply prefer to be professionally represented.

This short video explains some of the advantages of working with a Buyers Agent in Brisbane.

Also, if you do not already know how to check flood maps, for example, in areas that are affected by river flooding, creek flooding, or overland flow a buyers agent will be able to perform all of this due diligence for you. 

All of these types of flood issues will impact on a property, and may also have an effect on the premiums payable on an insurance policy for a property.  It may also limit opportunities for manufacturing additional equity in a property through renovation or development.

This is information that, as a property buyer, you would want to be aware of given the size of the investment that is made when you purchase a property.  You just don’t want to make a mistake.

There are many more areas that form part of a comprehensive property due diligence search, especially in some areas around our City.  By engaging a Buyers Agent in Brisbane, who is able to outline all areas that you need to be aware of, and who can undertake all of the due diligence searches on your behalf, you are ensuring that you are entering into a contract for a property purchase fully understanding everything about a property – both what you can and cannot see during an inspection.

The video below explains some of the pitfalls when relying on on-line property listings.  Property buyers can waste a lot of time inspecting properties that do not look like they did in the listing images.  

This article has explained some of the benefits of working with a Buyers Agent in Brisbane.  It is not for everyone, but for those who are looking to be professionally represented, there are huge advantages for property buyers.

Please feel free to reach out if you need assistance with your property search. At Streamline Property Buyers we will ensure you don’t make any costly mistakes.

 

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Would you like to understand more about working with a Buyers Agent in Brisbane?

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When is the Property Market Frenzy in Brisbane going to Stop?

When is the Property Market Frenzy in Brisbane going to Stop?

When is the property market frenzy in Brisbane going to stop? The residential market in Brisbane has been in a rapid period of growth for months. Prices are escalating every week and with buyers who have been missing out, we are seeing that they are becoming even more eager to secure a property with every week that passes by. Buyers are even taking big risks just so that their offers are competitive. We are seeing buyers dropping out the finance clause and even eliminating the condition that allows them the security of a post-purchase building and pest inspection.  This leads to the question … how long is this property market frenzy in Brisbane likely to continue and when might it start to slow down?

In a strong seller’s market, like Brisbane is right now, there are more buyers than sellers and this has the effect of pushing prices up. It comes down to supply (properties) and demand (buyers) and the depth of the imbalance is what has the greatest impact on the rate of price growth.

Supply is tight right in Brisbane right now because sales volumes have increased 38.5% over the twelve months to May 2021 according to Corelogic data, whilst total listing volumes are -23.8% lower in Brisbane compared to the equivalent period of 2020. This means there are FEWER properties available to buy through the major real estate portals of realestate.com.au and domain.com.au. The number of properties for sale is a LOT LESS so supply is LOW.

But what about DEMAND in the Property Market Frenzy in Brisbane?

Well, the demand for property can be measured in a number of different ways. We can look at how many people are physically inspecting properties on a weekend. This is a sign of “real-time” demand that helps us to understand how many people might be interested in a particular property when it is listed for sale and open for inspection.

We can then also get a good understanding of demand based on how many offers are put forward for a single property that is available for sale. This helps us to understand the buyer depth in a particular location.

Then we can review the number of people registering to bid at auctions across Brisbane. Obviously, everyone who registers to bid is a serious buyer, subject to the price point of course. The property market frenzy is causing stress when people are missing out at auctions and beginning their search again.

Brisbane Auction
Brisbane Auction crowd – Property Market Frenzy

Auction clearance rates can also be an indicator that helps us to understand the market demand.  When the auction clearance rate is high, we know that there have been a lot more cases where the seller’s expectations have been met because there have been enough buyers to push the price up to allow the property to reach the reserve price. 

Demand can also be demonstrated through other information such as lending data. The number of finance commitments throughout Australia hit record highs in April 2021.

Lending data also tells us where the demand might be coming from in terms of who is driving the demand in certain locations.  For example, we know that first home buyers have started to pull back from loan commitments, an indication that there are fewer first home buyers actively looking to buy compared to 3 months ago.  But we have now started to see an uptick in the number of investors who are seeking funds for a property purchase so this indicates that the demand is being driven by a change in the composition of buyers.  Owner Occupiers are still the group driving the majority of the demand in Brisbane, based on lending data from ABS and APRA and our own observations. 

Things that contribute to the demand for Brisbane Property include both macro and micro level indicators.

At a macro level, all markets across Australia are being fueled by low interest rates. The RBA has clearly stated that interest rates will remain low until inflation reaches a target band of between 2-3% and minutes from a number of their monthly meetings suggest that rates are unlikely to see any change until 2024 at the earliest.  This makes money cheap and makes property purchases more affordable for many buyers across Australia.

Also, the National Economy has recovered at a much faster rate than anyone expected following the worst of COVID-19. We have seen unemployment tighten and consumer confidence rebound to very high levels. These factors contribute towards people having the confidence to make big purchasing decisions such as the purchase of a home or an investment property.

At a micro level, Brisbane is a little different to other national capital cities around Australia. We have a unique set of circumstances that make our demand metrics EVEN higher than other locations around the country.

First, the South-East Queensland region has seen record levels of interstate migration off the back of COVID-19.  Whilst other large cities are declining in their population, Brisbane is GROWING and this is contributing to the additional DEMAND for Brisbane Property.

Brisbane City
Brisbane Property Market Frenzy

A growing population puts pressure on the availability of rental properties as well.  After hitting a peak in 2016, the pipeline for new dwellings in inner Brisbane has been declining and we now have a situation where the new supply pipeline is years away.  In the meantime, new residents to Brisbane have to find somewhere to live and this is putting pressure on the rental market.

Vacancy rates at a city wide level are at 1.3% in Brisbane Property. At a suburb level, we are seeing vacancy rates as low at 0.4% – sometimes even less.  When there are very few properties available to rent, we see rental price growth happen very rapidly as well.  Supply and demand works in the rental market just as much as it does in the sales market.

More people moving to Brisbane means more buyers also competing for the same limited amount of stock.  Population growth is increasing the demand for properties in Brisbane, and this is unique to our city right now.

To understand WHEN this property market frenzy in Brisbane might slow down we need to understand WHY this is happening. 

First, we can’t see the population shift slowing down any time soon.  People are recognizing that Brisbane provides a more affordable option than other major east-coast cities of Australia and also provides a more relaxed lifestyle. Our Covid-19 response has also been superior to other cities overall, so many are seeing Brisbane as a safe haven for their families in this ever-changing environment.

Second, whilst interest rates are low buyers will continue to take advantage of cheap finance to upgrade their home or invest into a market that shows good prospects for both capital growth and yield requirements.

Also with an improving economy buyers will continue to have the confidence to invest in large assets such as Brisbane property, finding it a safe place to put their money.

Unless we see a large volume of sellers come to the market all at once, which is extremely unlikely, the high demand will continue to outstrip the available supply and prices will continue to rise into the foreseeable future.  We do expect this frenzy to continue for some time yet. For how long?  No one can accurately predict this.  But when we start to see a slow down on the ground, when we start to see fewer offers on properties available for sale, or when we start to see fewer registered bidders at auction, we might change our opinion on the strength of the market growth.  But for now, hold on and make the most of the ride.  Brisbane has been waiting for this to happen for many years. Now is definitely the time for Brisbane to shine on the national property growth charts!

Get in touch if you would like to know how we can help you understand Brisbane Property.

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The Multiple Offer Process in Brisbane

The Multiple Offer Process in Brisbane

Buying a property can be daunting especially in a competitive market like Brisbane is right now, and with the rising popularity of the Multiple Offer Process. When a property market is so hot that there are more buyers than sellers, we often find that more than one person wants to buy the property. When two or more property buyers put forward an offer to purchase a property, the purchase becomes a Multiple Offer Process.

Buying with the multiple offers process can be stressful. It is a highly competitive environment, but there are certain things that can be done to improve your prospects for success. Of course, understanding the process is the most important first step, so let’s take a look at how this works in Brisbane.

Ashgrove bisbane

There are certain obligations that a real estate agent should comply with in this situation and there are also best practice guidelines set out by the REIQ. 

Section 22 of the Property Occupations Regulation 2014 (Qld) states that an agent must act in accordance with their seller client’s instructions unless it is contrary to the conduct provisions of the Property Occupations Regulation or otherwise unlawful to do so.

Of course, the Australian Consumer Law prohibits conduct, in trade or commerce, which is misleading or deceptive or is likely to mislead or deceive. Agents must, therefore, exercise a degree of caution to ensure that any representations which they make in the course of marketing a property, are accurate and not likely to mislead or deceive.

Under a multiple offer process, Agents have an obligation to:

  • Immediately inform their seller clients of all offers made,
  • Act in accordance with instructions from their seller clients, and
  • To obtain the maximum sale price for the property.

However, in obtaining the maximum sale price for the property, agents must treat all buyers honestly and fairly and not engage in misleading or deceptive conduct and/or unconscionable conduct.

Conduct that may be considered misleading or deceptive and/or unconscionable can include, but is not limited to:

  • An agent playing potential buyers off against each other in an attempt to draw out further offers and drive up the sale price; and
  • An agent advising a buyer of the existence of a higher offer in circumstances where a higher offer does not exist has lapsed or has previously been rejected by the seller.

 

Brisbane Property research

Agents also have obligations to the buyers in this situation to:

  • To advise every buyer that they have received more than one offer on the property
  • To give each buyer the opportunity to revise their offer, if they wish to do so
  • To let all buyers know that once their offer has been submitted, that they may not have the opportunity to negotiate further – their offer must be their “Best and Final.”

Real Estate Agents in Brisbane who adhere to ethical and professional standards outlined by the Real Estate Institute of Queensland (REIQ), would distribute an “Acknowledgement of Multiple Offers” form to all buyers when there is more than one offer on the table at one time.  This is signed by the buyer and returned to the Agent with the offer.

All offers are meant to be private and not able to be disclosed to competing parties.  It is effectively a “silent auction” process – but with one chance only to secure the property.  The process is often confusing and stressful for a buyer who may not understand what they need to do to make their offer stand out.

In many instances, a Seller is looking for the best price.  This is the objective of most sales campaigns when a vendor is selling their property.  But in some cases, the terms that accompany an offer can make a big difference also.

Here are some things a buyer can do to make an offer stand out under a Multiple Offer situation in Brisbane:

  • Increase the size of the deposit – this gives the seller and their agent the confidence that the finance will be approved.
  • Align the settlement date with the Seller’s ideal timeframe – understanding the seller’s motivations can often work to a buyer’s advantage.
  • Be finance ready – a shorter time frame for a finance clause, or an offer without a finance clause will be more attractive for a seller.
  • Shorten the timeframe for the Building and Pest Inspection – pre-book a building and pest inspector so the timeframe can be shorter.
  • Stretch that little bit more – most buyers put forward round numbers when making an offer. Buyers who add an extra few hundred dollars to the end of the offer amount can sometimes be successful because of the extra stretch.
  • Write a personal letter – We have seen this done successfully in Brisbane. Buyer’s who try to find an emotional connection with the seller can sometimes pull on the heartstrings of a seller and convince them to choose their offer.
  • Consider waiving the right to a “Cooling Off” period – if your buyer is certain about the purchase this is also possible.
  • Be flexible with other conditions – understanding the seller’s circumstances will help to align any additional special conditions in their favour. For example, rent-back clauses can be useful when the seller has not yet bought elsewhere – so get to know the motivation behind the sale!

 

The Multiple Offer Process can be overwhelming for many buyers, but understanding the process often helps to provide more confidence. Being able to position an offer favourably, even outside of price, can often be the difference between buying and missing out. 

If you need assistance with buying in Brisbane, of course, we are here to help. Reach out to us to book your Discovery Call today.

Book in for a FREE Discovery Call with Streamline Property Buyers
We are the Most Qualified Team of Brisbane Buyers Agents

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Brisbane Property Market Update May 2021

Brisbane Property Market Update May 2021

The Brisbane Property Market remains firmly entrenched in a housing boom. The growth is being driven by the most expensive end of the market, growing more than double the rate of the least expensive segment of the market. This is most likely due to the high level of activity in the owner-occupier non-first home buyer segment.

With interest rates still at record lows, buyers are taking advantage of “cheaper than ever” finance and we are seeing huge demand for large family homes in premium locations around the inner-city suburbs.  Investors are also stepping up their activity across Brisbane, motivated by the prospects for continued strong capital growth and also attractive investment yields compared to other large capital city markets around the country.

First home buyer activity is starting to pull back based on lending data, perhaps due to the rapid price growth to date likely impacting on affordability in some locations through the city.

With the local economy continuing to show signs of improvement, interstate migration stronger than ever, consumer confidence remaining high and even business confidence remains strong, we are seeing persistently strong demand for housing across Brisbane.  Auction clearance rates have even been consistently strong every week in Brisbane, yet another sign of a strong housing market throughout the city.  The demand for housing is stronger than we have ever seen in our city.

In fact, Corelogic estimates that sales volumes have increased 25.6% in the Brisbane property market over the 12 months to April 2021. This is a sign that people are buying, and they are buying at a rapid pace.

From the supply side, total listing volumes are still approximately 30% down in Brisbane compared to the same period last year. So, we have a huge number of buyers, competing for less stock.  There is a very large imbalance.

This imbalance between supply and demand is continuing to create urgency for those in the market.  Fear of Missing Out (FOMO) is something we are seeing a lot amongst buyers. Every time a buyer misses out, they get a little less fearful next time and they tend to get a little more desperate as well, often paying top dollar just to get into the market and out of the rat race.

This article will explore what we are seeing throughout Brisbane and also what the most recent data is telling us.

 

Brisbane Property Market Prices

The latest Hedonic Home Value Index data by Corelogic released on 31st May has confirmed that the median dwelling value in Brisbane increased 2.0% over the month of May 2021.  This is a stronger result compared with April (+1.7%) so property price growth is again accelerating throughout Greater Brisbane.  The current median value for dwellings across Greater Brisbane is $574,572 which is $16,277 higher than just one month ago, and $52,886 higher since the Corelogic results were published at the beginning of the year on 4th January 2021.

The quarterly growth in dwelling values across Greater Brisbane is now 6.2% and annual growth for the last 12 months is now 10.6%. 

Index Results May 31, 2021

 

Brisbane Property Market – House Prices

In the Brisbane Housing Market, we saw median values for the greater Brisbane region increase 2.2% across the month of May 2021.  The 12 month change in Brisbane house prices has been 11.9%. The current median value for a house in Greater Brisbane is $641,727, the highest it has ever been and $19,921 MORE than one month ago.

House prices May 2021

 

Brisbane Property Market – Unit Prices

The Unit Market in Brisbane saw further positive growth in the median value this month with another increase of 1.2% growth in May 2021.  The 12 month growth for units across Brisbane is now 4.2%, definitely a sign that the unit market has bottomed out and is beginning to recover. The current median unit price in Brisbane is $411,664, which is $5,762 more than one month ago.

Unit Prices May 2021

 

Brisbane Property Market – Rental Market Movements

Vacancy Rates in Brisbane tightened further throughout May moving from a city-wide vacancy rate of 1.5% in March to 1.4% in April. The table below highlights where vacancy rates across Brisbane sit at the end of April 2021.

Region Vacancy Rate March 2021
(change from February 2021)
Beenleigh Corridor 0.5% (-0.2%)
Brisbane CBD 4.4% (-0.8%)
East Brisbane 1.1% (-0.1%)
Inner Brisbane 2.4% (-0.5%)
Ipswich 0.8% (-0.2%)
Northern Brisbane 0.8% (-)

South East Brisbane

0.5% (-0.1%)
Southern Brisbane 1.5% (-0.2%)
West Brisbane 1.3% (-0.1%)
West Brisbane 1.4% (+0.1%)

Source: SQM Research

You will see above that every region tightened further between March and April which indicates a rental crisis is looming throughout Greater Brisbane.  This is something that is going to put upward pressure on rents as supply tightens in an environment whereby the demand for rental properties continues to increase.

Already, rents in the unit market in Brisbane have seen an annual increase of 2.6%, up 0.5% compared to last month.

Housing rents, however, are climbing faster, with the annual increase in rents for Brisbane Houses now at 7.3% according to Corelogic Data, which is 0.9% higher than a month ago.

Gross rental yields for dwellings across all of Greater Brisbane remain at 4.2%, which is still well above Sydney at 2.6% and Melbourne at 2.9%.

 

Annual Change in Rents for houses and units May 2021

 

What did we see on the ground across Brisbane Property Market during May 2021?

Not a lot has changed on the ground throughout May 2021. Buyers are still very active at open homes on Saturdays and if you arrive on time to a property, you can expect to line up before you can move inside.  It can be quite tight in some properties, especially when buyers are all attempting to comply with social distancing requirements.

At auctions attended by members of our team, we are seeing a good volume of people registering to bid.  Fewer buyers actually place a bid, possibly because the price escalates too fast and the property becomes out of reach for some early in the bidding process.  Most properties are achieving a good price at auction, especially when only 2 bidders are left and both parties seem to have that “never-give-up” attitude.  When this happens, the price achieved can often be quite inflated.

There has still not been a property that we have considered for our clients where multiple other buyers are also interested.  This is usually the case both on and off-market.  The multiple offer process is becoming mainstream and most buyers who are active in the market are getting better prepared as they know properties are selling after the very first inspection.

 

The months ahead …

We often get asked “is now a good time to be buying in Brisbane?”  The answer to this question requires an understanding of which direction the market is moving and what the likelihood of a market correction in Brisbane is, in the near future.

Based on our observations, the Brisbane property market will continue to grow in the coming months. This is because the demand for property from Buyers still exceeds the number of properties available for sale. When demand exceeds supply, prices rise.

We need to see either buyer numbers significantly drop, or listing volumes significantly increase for the market to slow down. When this happens, we will only see prices fall if the supply of properties exceeds the demand for those properties. This is NOT a situation we envisage any time in the short-term future for Brisbane.

So, if you want to avoid the competition, and sit on the sidelines until the market slows down, you may need a higher budget to buy into the same area that you can afford today.  Alternatively, you may need to look at alternative locations in the future, given you will most likely be priced out of your preferred suburbs due to market growth that will continue to happen between now and when the market starts to slow.

The time to buy – is when you can afford to do so. Don’t let the market conditions dictate the timing, or you may be disappointed in the future.

 

Would you like to understand more about working with a Buyers Agent in Brisbane?

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The importance of finance pre approval when buying property

The importance of finance pre approval when buying property

We explain the importance of finance pre approval when buying property in Brisbane. The property market in Brisbane is extremely competitive right now and you need to ensure you have a finance pre approval when buying a property.

The high volume of buyers searching for a property
now outweighing the number of properties that are available for sale. When there is a
supply shortage (ie: low listing volumes) in conjunction with high demand (ie: a large
vole of buyers), then ensuring an offer is competitive becomes incredibly important.

Brisbane is a market whereby the majority of residential property sales occur by private treaty. This
means a property is listed for sale on the major real estate portals, and once buyers have seen the
property, they can submit an offer to the seller to be considered. When there are multiple buyers
who are interested in the property, multiple offers may be submitted by a specific cut off time for
the seller’s consideration.

The objective of a seller is always to get the highest price, but they are also looking for certainty of
the sale. When offers are submitted through a private treaty sales process, many of the offers will
be subject to certain conditions, such as a building and pest clause or a finance clause.

Finance Pre approval when buying property

A finance clause can be inserted into a contract of sale to enable a buyer to obtain a final approval
from their lender before the purchase becomes an unconditional sale. This usually involves the bank
sending a valuer to the property that has been purchased to ensure that the bank also values the
property at the purchase price. If the bank valuation comes in at the purchase price, then the
paperwork is finalised and the final approval can be issued. When a bank valuation comes in under
the purchase price, a buyer can cover the shortfall, contest the valuation, or withdraw from the sale
contract and get the deposit refunded.

To ensure that the post contract phase to obtain a final approval is fast, quite often a pre approval when buying property is
required. This means that the bank has assessed the majority of the documentation associated with
obtaining a loan for a property purchase and has provided guidance to a buyer in relation to the
amount that they can comfortably afford to pay for a property purchase.
Where we sometimes see things breaking down is when buyers don’t have a finance pre approval when buying property.

In the majority of circumstances, having a pre approval when buying property in place provides more certainty to buyers, which
in turn provides more certainty to sellers and their agents, as long as this is disclosed when making
an offer.

Results from a recent study by Aussie Home Loans confirmed that 52% of property buyers do
not know where to begin to obtain a finance pre approval when buying property and 54% said they had missed out on a
property because they did not have a finance pre approval in place. These are very alarming
statistics.

Sales Agents will often be asking buyers if they have a finance pre approval in place to ascertain the risk of
that buyer not following through with the purchase. When a contract is entered into, and a buyer is
not finance ready, then often requests for an extension of the finance clause can cause a purchase to
fall over. In a market where buyers who may have been the under bidders are waiting to hear if a
contract has crashed, there is a real risk to buyers who may not have a pre-approval in place if the
timeframe required to obtain a final approval pushes out.

The same survey by Aussie also revealed that 91% of buyers “feel stuck” which is holding them
back from making a property purchase. Reasons for this included current market conditions,
competition from other buyers or not being able to find the right property.

Ashgrove bisbane

Of course progress is within reach if buyers do their homework and get organised in advance. When
a buyer can beat the competition due to having better terms in relation to an offer, it often puts
them in a more favourable position in a highly competitive market. If two offers are made at a
similar price, then the offer with the more favourable conditions is likely to be the one that a seller
will select.

Remember, sellers want certainty, and so do their agents. Having a finance pre approval when buying property ensures that when the right property comes along, a buyer is ready to make the move. It also ensures that the offer is more competitive than others whose terms may be less favourable when there are multiple offers that a seller can choose to accept.

Get in touch if you would like to know how we can help you.

Book in for a FREE Discovery Call with Streamline Property Buyers
We are the Most Qualified Team of Brisbane Buyers Agents

Read our other Content Now!

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