Have you read the Headlines about the Property Market throughout August 2020?
We have read a number of headlines again throughout August about the direction that the Property Markets are headed. Most of these stories discuss the Property Market as one … instead of breaking down the Australian Property Market into more specific locations.
This headline, for example, states that the RBA predicts a potential 40% drop in house prices. This is a scary headline … but is it true or is it just click bait? Of course this would be “the most extreme” scenario, but is is the headline that is used to evoke a response.
We know Australia is NOT one property market.
And yet stories like the one above don’t discuss local markets, or the drivers of supply and demand at a local level, at all.
Brisbane is always very different to Sydney and Melbourne, for example. As a start, our properties are more affordable and our income to debt ratio is a lot lower. The amount of our take home income that we spend on our mortgages here in Brisbane is also a lot lower.
Additionally, markets around the country are all responding differently as a result of the pandemic. Let’s explore this in a bit more detail before diving in to why the Brisbane market is proving to be quite resilient.
What markets are most vulnerable to price falls and why?
It has been consistently reported that both Sydney and Melbourne properties are most vulnerable to price falls during the pandemic.
Shane Oliver, AMP Chief Economist, updated his forecasts recently for Australia’s property market. You can read the summary HERE. He confirmed the Sydney and Melbourne are more exposed to price falls given their higher dependence of international migration, higher debt to income ratios, higher price to income ratios and greater investor penetration.
Additionally, with the resurgence of coronavirus cases, especially in Melbourne, and the associated Stage 4 lockdowns, many commentators are again seeing reduced confidence in those locations.
At this stage we have not seen the number of cases in Victoria morph into a broader second wave across Australia and with border closures in place, it is less likely that this will eventuate.
Brisbane Property Market Prices
According to the latest Hedonic Home Value Index data by Corelogic, dwelling values in Brisbane saw a -0.1% decline in value over the month of August 2020. This brings the total decline in dwelling values across Greater Brisbane to -0.9% from the recent market peak. This is hardly in line with the broader predictions from some commentators over previous months.
The data is starting to show a divergence between regions where the virus curve has steepened, and where the virus is well contained. Melbourne is the market that has been impacted most with dwelling values falling -3.5% across the last quarter. Again this is hardly in line with broader predictions of much larger falls, but is does highlight that some areas may be more impacted than others during this time.
In the Brisbane Housing Market, we saw median values for the greater Brisbane region remain stable across the month of August 2020. The current median value for a Brisbane house is now $557,969.
The Unit Market in Brisbane saw a slightly higher median value decline of -0.3% for the month of August 2020. The current unit price in Brisbane is now $387,672.
Brisbane Rental Market Movements
The Vacancy Rate at the city level is continuing its downward trajectory, after an initial spike from March to April 2020. Since then rental markets have tightened, with many markets across Greater Brisbane experiencing the tightest vacancy for many years.
We urge investors to investigate the local vacancy rate of a suburb, and more importantly the trend for vacancy as part of their due diligence before buying. There remain some “at risk” locations in certain pockets of Brisbane. For example postcode 4000 (which includes the Brisbane CBD) has a local vacancy rate of 13%, which is extremely high risk for an investor who may be looking at buying into that market.
What are we seeing on the ground across Brisbane?
Our on-the-ground observations continue to suggest that some pockets in Brisbane are outperforming other locations across the City. When we break down sales we are seeing at a local level, we know there is extremely high demand in some suburbs which is continuing to put upward pressure on prices.
A high number of buyers combined with a lower volume of quality listings tends to have this effect.
Many homes are still being sold with multiple offers. This is consistent with what we reported last month.
Auctions that we have attended this month have remained strongly contested with multiple bidders in most instances. Below is a photo of one auction we attended where there were more than 100 people (yes we did a head count) and multiple registered bidders fighting it out.
Where we have seen properties passed in (yes this happens as well), we have observed that those properties have been impacted in some way.
Some have needed significant renovations. One was a development site and another was flood impacted. In these instances, buyers are more cautious about buying under auction terms and would prefer to do further due diligence before committing to a purchase.
We have also observed instances where the sellers expectations were simply too high and therefore the property did not sell where the market determined its value (even though negotiations post auction). This happens in any market of course.
In the most recent Herron Todd White Month in Review it states:
“As a general observation, investors have remained relatively inactive in the Brisbane market, but that doesn’t mean South East Queensland isn’t offering excellent potential for those looking to build their portfolio of assets.”
We are seeing inquiry pick up from investors once more, especially those who are seeking opportunities that effectively “pay for themselves” with the more generous rental yields that Brisbane offers.
What about the future – what does that look like?
In a recent announcement, Corelogic’s Head of Research, Tim Lawless, made the following statement:
“So far there has been no evidence that large numbers of distressed properties are coming to the market, however this could change towards the end of the year and into next year as fiscal support tapers and lenders become less lenient on distressed borrowers”
We will address this statement in more detail below.
Whilst the recent announcement of the JobKeepr and JobSeeker extensions may improve some confidence, for some people this is only putting off the so called “economic cliff” that has been referred to a lot. We remain of the opinion that different markets around Australia will be impacted in different ways.
For a start, Queenslanders are the most optimistic property seekers in the country according to a recent report. Demand is strong, and has remained strong, throughout the worst of the pandemic.
Additionally, any economic cliff, will be relevant to the level of exposure of each particular market.
According to a recent NAB announcement, Australian Home Loan deferrals are broadly in line with the total portfolio spread. This means the exposure of some States to potential “forced selling” is much less than some other states.
This provides a greater level of confidence for property owners and property buyers in Brisbane, given our exposure is a lot less than other locations around Australia.
Additionally, the average mortgage size is a lot higher in Sydney and Melbourne, compared to Brisbane and other Capital Cities around the country. On this basis, we urge people to read into the general data and understand more about local drivers of potential risk.
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What has been happening to the Property Market in Brisbane in July 2020?
This is the question that a lot of people ask when we first speak. There is so much variation in what is going on around Australia. We know, it is hard to keep up with information that is relevant to a specific region.
That’s how we can help! We not only look at the data, but we also understand what is going on by being “on the ground.” We can assess real-time demand around certain suburbs.
How do we do this?
We can monitor how many people are attending open homes in Brisbane.
We find out how many people are putting in offers for a property that is listed for sale.
AND, we see how many people are attending and bidding at auction in several suburbs around our city.
Let’s take a look at some the data and some of our real time observations, to summaries what is happening in the Brisbane housing market and also the Brisbane unit market right now.
Brisbane Property Market Prices
According to the latest Hedonic Home Value Index data by Corelogic, dwelling values in Brisbane saw a -0.4% decline in value over the month of July 2020.
In a recent announcement, Corelogic’s Head of Research, Tim Lawless, made the following statement:
“Record low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn. Advertised supply levels have remained tight, with the total number of properties for sale falling a further 4.3% in the 4 weeks to July 27th , sitting 15.2% below where they were this time last year. Additionally, increased demand driven by housing specific incentives from both federal and state governments, especially for first home buyers, have become more substantial.”
In the Brisbane Housing Market, we saw median values for the greater Brisbane region fall -0.3% across the month of July 2020. The current median value for a Brisbane house is now $555,284.
The Unit Market in Brisbane saw a slightly higher median value decline of -0.5% for the month of July 2020. The current unit price in Brisbane is now $384,681.
What is happening in the Rental market in Brisbane?
At a city level, the rental market in Brisbane has definitely recovered, although there are still some at risk markets around our city. For an in-depth review of the current state of the rental market the Brisbane Property Podcast provides a comprehensive review. Click HERE to access.
In short, the vacancy rate in many locations is trending down and is very tight. The areas where this trend is not happening are in the Brisbane CBD and locations immediately surrounding this and also in areas where there are a lot of higher density unit developments. In these locations, vacancy is still a big problem. Therefore these markets remain high risk.
Asking rents according to SQM Research across the city have also been trending higher, so this is also reassuring for property investors.
That said, Brisbane is not one property market and caution definitely needs to be taken when looking at a postcode level. You will see in the Brisbane CBD, for example, the situation is VERY different.
What are we seeing on the ground across Brisbane?
In our opinion, the data above may be slightly misleading based on our on-the-ground observations. Despite the overall median data trend showing very slight falls in house values, we are in fact seeing quality housing in very high demand. Some open homes we have attended over the month of July have seen more than 30-40 groups through. This illustrates that buyers are still very active in the Brisbane property market.
Advertised properties that are listed for sale in desirable locations are being sold very quickly in Brisbane. Often the sale is a result of multiple offers being submitted on the property. If listed for sale by auction, they are achieving high prices with multiple registered bidders.
There are markets within markets and we are seeing strong prices being paid for quality properties in many regions around our City. In the most recent Herron Todd White Month in Review it states:
“The Coronavirus crisis has not resulted in a measurable fall in property prices across the Brisbane market generally and $700,000 is a solid value band. As such, don’t expect to score a bargain due to the pandemic. A lack of listings means buyer choice is limited. In addition, many properties are trading off-market.”
How does the Brisbane Property Market compare to other Capital Cities around Australia?
Melbourne and Sydney are leading the decline in capital city values. Melbourne recorded a -1.2% fall in dwelling values across the month, whereas Sydney saw a fall of -0.9% in dwelling values for July 2020.
This is certainly now surprising, given the recent second wave of coronavirus cases in Melbourne. This has now resulted in Stage 4 Restrictions with the Victorian State Government’s recent announcement.
This has impacted on consumer sentiment with readings from the ANZ-Roy Morgan Consumer Confidence Rating weakening throughout July, despite the huge recovery from the April lows. This index shows a high correlation with HOUSING MARKET ACTIVITY (not prices). The recent downturn might therefore suggest that buyers and sellers may once again retreat to the sidelines.
In terms of changes in rent, Brisbane is doing well compared to other capital cities. The weakest rental conditions are being experienced in Hobart (House rents down -2% and units down -4.5% since March), Sydney (house rents down -1.1% and units down -3.2%) and Melbourne (house rents down -0.7% and units down -3.1%). It is important to mention that the weaker rental conditions are larger in the unit markets, compared to the housing markets in these cities.
What’s going to happen to the Brisbane Property Market moving forward?
There is a lot of worry and concern about what might happen to property values across the country when the governments fiscal response starts to taper in October and repayment holidays expire at the end of March next year. Of course, we may see a rise in distressed properties coming to the market. What we do not know is if this will put any downward pressure on prices. This is where I think the different property markets around Australia will each experience something slightly different.
According to the Commonwealth Bank Home Buying Spending Intentions Index, there was a 6% rise in home buying intentions nationally up to the end of June 2020. This index showed the index had returned back close to levels seen in March – after much weaker readings in April and May.
We are definitely seeing this trend on the ground with a the current high volume of buyers in Brisbane. Because of this, I’m sure we could see some moderate increase in new listings come to the market without any significant impact on the supply and demand balance. Remember property prices will only fall when supply outstrips demand.
With dwelling approvals now at the lowest level in 8 years, the future supply pipeline also looks tight. The most recent Australian Bureau of Statistics Data data showed a decline of -10.9% in new detached house approvals in Queensland.
Real-time demand is still strong and Brisbane property buyers are being fuelled by the lowest ever interest rates, good levels of affordability and strong rental yields compared to many other state capitals. This is good news for our local Brisbane property market and these factors will continue to support our property values into the future.
If you need help navigating the Brisbane Property Market, or if you are looking to purchase a home or an investment property in Brisbane in the future, please book a free discovery call to understand how we may be able to help. You can also find out more about our services by clicking HERE.
The real estate market in Brisbane continues to prove its resilience, despite the Coronavirus shock. The long awaited lift in the housing market throughout late 2019 and early into 2020 has definitely slowed down, but Brisbane still looks better placed to weather the storm in terms of fundamentals, compared to other capitals around the country. This month’s Brisbane Property Market Update unpacks all of the latest data, as well as our on-the-ground update.
With Brisbane less exposed to the shock pause in international tourism, compared to its close coastal regions of Gold Coast and Sunshine Coast, downside risk is more limited. It is also expected that Queensland, as a whole, is more likely to be supported by a domestic tourism recovery in the near term future.
Brisbane also has a lower exposure to foreign education and migration, compared to Sydney and Melbourne. Since 2013, population flows into Queensland have been steadily rising, but obviously the impact of Covid-19 travel restrictions will see a large dent in this trend for the short term. With the highest level of residents from around the country preferring to relocate to Queensland, it is likely that interstate migration will continue to drive population growth once the state borders are reopened. Deloitte Access Economics forecast population growth to slip to 1% in 2020 and 0.8% in 2021, but it is encouraging that growth will still occur, just as a lower level.
When we explore what has been happening at a local level in this Brisbane Property Market Update, the turnover in real estate was down 40% in Queensland in April, compared to 45% nationally according to Westpac Economics. But sales activity has jumped 22% in May (Westpac Housing Pulse) which is positive for the local market. Despite this, sales volumes are still -30.2% lower than the equivalent period last year in Brisbane according to Corelogic which is contributing to the imbalance causing a strong seller’s market right now.
Buyer demand is strong, driven largely by owner occupiers and also first home buyers according to our Agent network. This is similar to what we reported last month. We are also starting to see investor inquiry pick up, although this segment of buyers are still more cautious about the overall macroeconomic environment. Property search activity has increased more than 45% from a year ago according to REA Group … another positive sign that seems to be associated with more buyers on the ground at open homes across Brisbane.
Asking Prices for Brisbane houses are +0.4% higher for the month of June according to SQM Research, and 0.8% higher for units. Asking rents based on SQM Data in Brisbane also look optimistic with growth of +1.5% in the housing market and +1% for units for the week ending 28 June 2020.
Price growth based on settled sales in Brisbane according to the Corelogic Hedonic Home Value Index at the end of June 2020 has moderated, rather than faltered. Over Greater Brisbane house prices are recording a -0.4% change compared to a softening in the unit market -0.8%. Given the macro-economic environment and the very low transaction volumes this is not alarming at all.
Vacancy Rates at a city level have recovered slightly from April to May, but there are some suburbs we consider to be at risk. Rental vacancies have continued to escalate between March and May on a month by month basis in the CBD (currently at 13.3%), West End (9.1%), Newstead (7.7%) and Herston (7.7%).
Rent discounting is also greater in some of these locations with Domain reporting 24% of rentals were discounted in May compared with 14.9% in February. Two other suburbs with high rates of rent discounting in Brisbane are East Brisbane (15.2% in May vs 8.5% in February) and Milton (32.7% in May vs 10.3% in February)
Property investors need to be aware that Brisbane is not one property market and it is important to understand location and product type before making any investment decisions.
Looking forward, Queensland unemployment has increased to 6.8% in April 2020 (JLL Research), but new payroll data released by the ABS shows jobs in Queensland fell 6.1% between March and May and total wages fell 4.6%, but this was less than the national average in both instances. This is reassuring for our local economy at this time.
With major infrastructure projects already underway, the Brisbane City council announcing further fast tracked projects including the construction of new river crossings and the federal government announcing that the inland high speed rail project linking Melbourne and Brisbane to be pushed forward, this is more good news for our region.
The supply pipeline still remains grim, as we have reported previously, with residential approvals across Brisbane continuing to decline. New dwelling approvals fell -17.7% across greater Brisbane to the year ending March 2020 and now they are likely to decline further due to Covid-19. New completions for apartments are down from 2019 again this year and this trend is also likely to continue.
Brisbane offers affordability, livability, quality schools, great lifestyle and good future economic prospects. These factors all drive the demand for quality properties in our City.
With the current imbalance between supply and demand, the future does look bright despite what is going on around us. For those with a long term horizon, it might be time to think about preparing to get into the market.
We hope you have enjoyed this month’s Brisbane Property Market Update. If you would like to get in touch to find out more, please contact us TODAY!
It is not surprising that the data reported for May in relation to the Brisbane Property Market supports our “on-the-ground” assessment of what we have been seeing for a number of weeks. In short, there has been no change in house values recorded across the month according to Corelogic Data. No increase and certainly no decrease in house values (ie: 0.0% change), despite what media reports might have led you to expect. In the unit market in Brisbane, prices have retracted -0.6%, reflecting less stability in this asset class across Greater Brisbane. In this month’s Brisbane Property Market Update we dive into these results a little further.
Last month we reported improved optimism from buyer’s across Brisbane. This has continued throughout May, as open homes and auctions have re-emerged through the city, coinciding with significant gains in the 4 week moving average in consumer confidence as reported by the ANZ-Roy Morgan Index.
Whilst the unemployment level reached 6.2% in May, this has not yet had any material impact on the demand for property from buyers here in Brisbane. Whilst employment is critical, there is no data that backs up the claim that a spike in unemployment always leads to a fall in property values. The availability of credit seems to be a more significant driver of demand, because lower borrowing costs effectively allow borrowers to take on bigger mortgages and right now, interest rates are at their lowest level ever.
The demand for property is also driven to a large extent by population growth. Brisbane will be less impacted than Sydney and Melbourne by the cessation of international migration due to closed international borders, but we will be waiting eagerly to see what happens when the state borders are open again. This is because the largest portion of our population growth comes from interstate migration. It will be interesting to see if more people reflect on their circumstances as a result of the Covid-19 shut down, and as a result there may be a greater shift to locations that deliver a more affordable lifestyle. I wonder if South-East Queensland will see a spike in migrants from the southern states once the borders are again open? I guess time will tell.
But even with state borders still closed, there seems to be enough pent up demand from local home buyers and interstate investors who may have been in the market for months (even before the pandemic) and they are now actively searching again despite what has happened over the last 3 months.
It also seems that Listings are beginning to pick up as sellers also have renewed optimism about the market. According to Corelogic, pre listing activity is up 2% to the week ending 31st May 2020, but listing activity remains down compared with this time last year.
SQM Research have reported a +1.8% increase in total listings in Brisbane throughout May, but the yearly change is still -12.9% lower than the same time last year so we still have a severe supply shortage. This means that quality properties are very quick to sell with multiple buyers. Some properties are being measured by hours on market, not days on market in some popular pockets around Brisbane due to the depth of buyers, and lack of available properties for sale.
The longer term supply chain for new properties also looks set to slow down with apartment building work completed to the end of March down 57% in Queensland since December 2016 according to ABS Data. We expect the Government will announce an enormous amount of stimulus to encourage home buyers to buy, build and renovate properties to stimulate slowdown in the construction industry, as it is one of Australia’s largest employers.
Weekly rents across Brisbane are also higher across the month of May according to the SQM Research Weekly Rents Index, with houses reporting a +0.6% rolling monthly change. This is reassuring for property investors who have been nervous about falling rents, due to the effects of Covid-19. At this stage there appears to be stability in the rental returns within the Brisbane housing market.
Of course, there are some “at risk” suburbs in Brisbane where vacancy rates have spiked due to Covid-19, which means finding a tenant will be harder – thus impacting on rental yields. We have previously summarized these locations in a previous Brisbane Property Market Update HERE. Suburbs most impacted by vacancy risk have more high-density unit developments, and most suburbs where lower density family homes are located have not been impacted across the city.
Much of the reported information in this Brisbane property market update may come as a surprise to many who are reading the news headlines. We have been reporting for weeks that there is little correlation between the news headlines and what we are observing by being “on the-ground.” Property buyers need to be cautious in terms of what information they may be relying upon to make large financial decisions (like buying or selling a property) at this time because as the data shows, the Brisbane housing market is proving it’s resilience.
We are not going to lie, as I write this Brisbane Property Market Update for April 2020, I realize that has been a very tough month for many of us and it feels like a long time ago that we wrote our last Market Update. We have had to come to terms with a new way of living and we have spent a significant amount of time at home. For many of us we spent the Easter Holiday period at home, we are working from home and now we are juggling the supervision of our children’s school education from home.
It is probably fair to say that our home has become our cocoon for everything that we do!
There have been some scary headlines from journalists about property prices plummeting throughout the month. Admittedly, you do have to read into the story because the headline generally states the “worst possible” scenario based on a number of alternative possible outcomes in the months ahead. Also, most commentators are also suggesting the Sydney and Melbourne markets will be impacted more than others due to the much higher debt to income ratios in those capital cities, compared to elsewhere around Australia. Another reason to always be cautious about the information you are reading – Australia is NOT one property market!
Of course, predictions are just that and there is no certainty about them. A lot depends on how long Covid-19 impacts our lives and conditions are too uncertain to make any meaningful assessment. In saying that, Australia has done a great job of flattening that curve! In fact, we are excited that the Queensland Government is already easing restrictions the first step towards life returning to a “new normal.” With so few cases reported in Queensland since 5th April, we are optimistic that things will continue to open up and we can start to get our economy moving again.
According to SQM Research listing volumes are 10.1% lower in Brisbane than they were 12 months ago and in the last month alone (between March and April 2020) listing volumes were down a further 5.6% so we expect transactions volumes will remain low for some time yet, simply due to limited supply.
New Building Approval data released early in May from the ABS confirms that year on year new House approvals have fallen 3.4% in Queensland and year on year new unit approvals have plummeted 24.4%. Approvals are a leading indicator for future new housing supply so this shows the shortage of property may continue for some time yet. There have also been fewer sales across the city throughout April as well. With open homes banned and auctions having to move to digital platforms we all had to change the way we conduct our business.
There have been fewer buyers and fewer sellers throughout the majority of the month across Brisbane. Whilst there was a distinct shut down in the earlier part of April, since Easter we have definitely seen the optimism return (from a buyer’s perspective) so there is hope that this renewed optimism continues in the coming weeks. Even buyer search activity on realestate.com.au has increased 41% after a sharp decline at the end of March 2020, so people are starting to at least “think” about real estate after going into hibernation for a few weeks.
This month also saw the Queensland Government announce some very unfair proposed arrangements to be legislated between Landlords and Tenants, however after less than a week of intensive industry lobbying, what ended up being legislated is very fair and will now guide any hardship arrangements for Landlords and Tenants. For more information relating to these changes click HERE. Despite this, Property Managers in Brisbane are reporting less than 2% of all Tenants experiencing any Hardship or arrears as reported HERE and HERE.
In terms of property values if you already own property in Brisbane you will be pleased to know we have seen no noticeable drop in values and this is consistent with the feedback we are hearing from our Agent network across many parts of Brisbane. The latest Corelogic Hedonic Home Value Index showed an increase of 0.3% in dwelling values across the city in April 2020. This is reassuring given a typical settlement period is 30 days in Brisbane and the pandemic was declared on March 11, so this months’ figures would capture a lot of the contracts that were entered into throughout March when the number of coronavirus cases was rapidly escalating.
At the time of writing this Brisbane Property Market Update, there remains plenty of uncertainty about the immediate future. Whilst Australia has had a remarkable response to tackling the coronavirus, any longer term impact on housing (and specifically the Brisbane Property Market) will depend on factors that hinge on the timing and the extent of social distancing policies being lifted. Already we are seeing positive signs that the Government intends on opening up the economy gradually and this in turn will likely support consumer confidence, which in turn should see housing market activity pick up again. Of course what we don’t want to see is a second wave of coronavirus cases so let’s keep our distance and do what we can to stay safe and slowly kick start our economy again.
The trend in Brisbane house price growth remained positive throughout the month of March, despite the outbreak of the COVID-19 virus radically changing the way we now have to live over the last 2 weeks of the month. In this Brisbane Property Market Update, the latest Corelogic Hedonic Home Value Index data shows there was an overall increase in dwelling values in Brisbane of 0.6%, which can be divided into House price growth of 0.7% and Unit price growth of just 0.1%. Interestingly, according to the same data, overall dwelling values in the Brisbane sub-regions of Ipswich and Logan/Beaudesert edged lower this month, despite value growth across greater Brisbane as a whole providing concrete evidence that Brisbane is not “one property market”.
What comes next is uncertain, as it will largely depend on the length of time that the current health and economic crisis persists. But looking at SQM Asking Prices for Brisbane, for the week ending 31st March 2020, for all houses there is a -0.1% rolling month change and -0.5% for units. Of course, when we take that down to a suburb or postcode level the story is very different with some areas showing much more positive forward indicators than others. It is important to note that asking prices do not always equate to sales prices, but is it one indicator we can look at to determine seller expectations in these uncertain times. Despite the increased inquiry we have received in relation to a potential “fire sale,” there is no evidence of this at all in Brisbane right now.
Corelogic head of research, Tim Lawless said “Considering the temporary nature of this crisis, along with the unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record low interest rates, housing values are likely to be more insulated than sales activity.”
This provides some level of confidence for the residential property sector during the next 6 months whilst all of this support is in place. Property values are unlikely to be impacted when property owners can simply stall their repayments to the banks in the case of financial hardship. Of course, the uncertainty of low long this health crisis and associated economic disruption will last is unpredictable right now, so we hope to gain further insights into this in the coming days and weeks.
There are early indicators that listing volumes will fall substantially over the coming weeks. Corelogic have confirmed that reports generated through their online platform (used for pre-listing Real Estate sales packages) have more than halved in recent weeks and Agents are also reporting both buyer and seller inquiry has fallen by more than 50%. If sales volumes do fall significantly in the coming weeks and months, then the reliability of property data in the coming months may be compromised to some extent. I have previously discussed the importance of this HERE . It is times like now that local knowledge of what that data is made up of will be critical to understand true price movements based on comparable properties.
From a rental perspective in Brisbane, the overall trend in residential vacancy rates continues to decline with city wide vacancy rates recorded at 2.2% as the end of February 2020 . When we assess at a suburb level, there are several locations where vacancy rates have been much lower (even below 1%) due to a severe shortage of rental properties available.
In the last week, there have been reports of an increase in rental listings , especially for fully-furnished properties that are no longer being listed under short term accommodation sites such as Airbnb as owners seek a more stable income source and convert those properties onto the full-time rental market during these turbulent times. According to Domain there were 1420 new rental listings between March 16th and March 29th which equates to an increase of 53% compared with the previous 4 weeks. But to date, our feedback from Property Managers in Brisbane is that properties are still being rented quickly despite a drop off in tenant inquiry, because it appears that people who are inquiring are ready to move immediately.
Forward indicators for asking rents by SQM Research show for the week ending 28th March 2020, asking rents across all of Brisbane on all houses was down -0.5% and fur units this was -0.4%. This might indicate a flattening of rent price growth, however when we look at certain locations at a postcode level it again confirms that there are markets within markets, as there are still many suburbs where we have been purchasing properties for our investor clients where asking rents are still higher for the week, month and quarter. Again, this highlights the importance of local knowledge in these uncertain times.
Having reviewed what I wrote in last month’s Brisbane Property Market Update there have certainly been a lot of unprecedented changes over the last 4 weeks! But there have also been huge changes to support the residential property market during these difficult times including interest rate cuts, enormous government support announcements, and banks freezing interest and principal repayments (if necessary). The missing link right now is support for tenants and we expect an announcement by the State Governments in the coming days in this regard. That said, many of the fundamentals for Brisbane have not changed. Supply is still down. The Infrastructure is still underway. Right now demand has dropped, but once the virus is contained, we expect economic activity to improve quickly, therefore driving a turnaround in consumer sentiment. With record low interest rates and many neutrally or positively geared opportunities in the Brisbane Property Market, on the other side of COVID-19 (and yes there WILL be the other side) we expect the demand for property in our great City to be sky high.
Brisbane continues to show underlying strength in its property market with a new record median house price set in February 2020 of $503,265. This month’s Brisbane Property Market Update can report another month of positive house price growth. February demonstrated an increase in property values of 0.6% according to the Corelogic Hedonic Home Value Index across all areas of Greater Brisbane which is in line with the national trend for positive property price growth since June last year. Of course several pockets within Brisbane are performing a lot better than others as we have explained in previous monthly updates.
Further support from the Valuer-General’s 2020 Property Market Movement Report showed that the residential median land value increased slightly in Brisbane from $455,000 to $460,000 over the last 12 months.
Brisbane’s upper quartile values are 2.2% higher over the last 12 months compared with the lower quartile, up just 1.3% so the trend shows stronger performance across premium markets. This may be attributed to the dominance of owner occupiers during the last 12 months (rather than investors) and the geographical spread of properties included in the data whereby properties closer to Brisbane’s CBD in the higher price brackets are performing better than other properties much further out.
From a rental perspective, during February, gross rental yields compressed slightly from 4.6% to 4.5% in Brisbane according to Corelogic Data This can possibly be attributed to house values rising slightly more rapidly than rental rates, but it may also be due to seasonal factors so we will be monitoring this in the coming months.
Keep in mind mortgage rates are also trending lower, with another rate cut announced on 3rd March 2020. From our review some three year fixed rate loans now being offered for an investor for as low as 3.14%, so depending on an investor’s deposit amount and mortgage structure there are still a lot of neutrally geared or positively geared property investment opportunities in Brisbane.
Looking ahead, there are a few things we are monitoring to determine the potential future impact on property values in Brisbane. Broadly speaking, the primary factors supporting the steady price growth in Brisbane remain in place. These include the low cost of debt and improved borrowing capacity. Additionally, Brisbane remains affordable with a median house price $369,669 cheaper than in Sydney and $185,823 cheaper than in Melbourne so affordability pressures are less likely in our City. Furthermore, population growth is still 2.3% greater than the decade average, economic growth is up 21.2% above the ‘normal’ decade average level of output, jobs growth is trending higher and unemployment is reducing with the lowest trend jobless rate in 10 months according to the CommSec State of the States economic performance report (January 2020) .
Of course we can’t predict with certainty right now what impact the Coronovirus may have on property values, if any. There certainly may be supply chain issues for the construction industry, slowing down the delivery of an already lacklustre level of new housing supply due to falling construction commencements over the last 12 months. Foreign Investment has already plunged by 58% year on year in the 2017/18 fiscal year to the lowest level in a decade so foreign buyers have already existed the market in years prior. Perhaps there may be some impact to properties associated with tourism, (eg – hotels and motels) and also student accommodation, again it is too early to tell. Of course we can’t estimate the impact that it may have on consumer confidence or economic growth, but looking back on the SARS outbreak in 2003, there was a sharp slowing of output growth in China for a few months, before a sharp bounce back as the outbreak was controlled and economic stimulus measures were introduced.
So whilst we are entering a period where some may see uncertainty, Brisbane is still poised to report robust growth based on the fundamentals outlined above. With continued signs of strength across many locations in Brisbane is it a great time to secure your next home or investment property in Brisbane. We look forward to discovering what next month’s Brisbane Property Market Update will uncover.
In this months’ Brisbane Property Market Update, it has been described as the “busiest January in a decade” by some real estate sales agents and we certainly agree with this statement.
Right from the first Saturday in January, we have witnessed record numbers of people at open homes, most likely fueled by the low interest rates, the limited volume of properties available for sale and rising market confidence.
Corelogic data released on 3rd February 2020 has confirmed that the median dwelling values in Brisbane rose again in January by a modest 0.5%, but when we look at houses alone this growth was 0.7% across January whereas units experienced negative growth of -0.6%. Of course, seasonal factors often result in reduced sales activity in the month of January, so we expect February will deliver a much better feel for the current Brisbane trends as activity returns to normal.
Looking ahead, interest rates are expected to see further reductions in 2020, which along with consistently strong population growth to South East Queensland, is likely to continue to support housing demand in Brisbane.
In terms of supply, according to the most recent quarterly ABS Data, published on 15th January 2020, dwelling approvals, commencements and completions are all collapsing across Queensland as a whole, despite rising population growth. Total dwelling commencements are down 27% from the previous year. Listing volumes remain 6% lower in Brisbane compared to this time last year, so this also puts limits on the available supply in the current market.
To summarize, supply is currently constrained and demand for property is huge right now in Brisbane.
If you are looking for sustained capital growth opportunities, according to Herron Todd White’s latest Month in Review, the closer you buy to the Brisbane CBD, the more likely you will see capital gains. Add to that … detached housing still attracts better growth premiums than attached housing. This is certainly supported by current Corelogic data. Commentary in the latest Herron Todd White report indicates that for a good investment location in Brisbane, you can travel further out but be nearby to public transport options, major services and employment centers.
With the First Home Buyers Deposit Scheme now in place, there is also going to be more competition in the market where properties are valued up to $475,000 in Brisbane (being the threshold that the Australian Government has applied for our City) This is something to keep in mind if you are looking to buy with a similar budget.
Gross yields are still very attractive in Brisbane, averaging 4.5%. Corelogic has confirmed that the City has experienced rental price growth of 1.8% over the last 12 months and SQM Research aligns with this showing an increase of 3.7% in asking rents over the last 12 months across Brisbane as a whole.
With interest rates at record lows (the average fixed rate mortgage for an investor was 3.48% at the end of December 2019) it is not hard to find positive cash flow properties in Greater Brisbane areas, but we urge investors to assess the potential for strong capital growth drivers in some of these locations if this is also part of an investors’ strategy.
As we always say. Brisbane is not one property market and there are certainly local pockets where growth has been much greater than the overall City average. The latest Domain House Price Report reported a number of suburbs that completely outperformed the Brisbane average – with many suburbs reporting strong annual growth well above 7% – and a few suburbs with double digit growth.
We are certainly excited by what we are seeing on the ground every week. The Brisbane market seems to be hot …. and the competition is fierce. We are monitoring closely price movements in “real time” throughout certain pockets to ensure we keep up with the very latest trends in our great city. It is interesting to monitor what we were saying 12 months ago. We will continue to write our regular Brisbane Property Market Updates to report on what we are seeing on the ground, as well as in the data itself. If you are interested in getting in understanding how we may be able to help you with a property purchase in Brisbane … please reach out to us at any time.
Property Markets around Australia have continued to perform well throughout December, and certainly Brisbane is one Capital City that has ended the 2019 year with positive annual growth. This growth has occurred mainly in the second half of the year, spurred on by lower mortgage rates, a relaxation in borrower serviceability assessments, improved housing affordability and renewed certainty around property taxation policies following the Federal election. This Brisbane Property Market Update will explore these trends in detail.
December saw price growth across Greater Brisbane inch higher, up a further 0.7% across the month according to the most recent Corelogic data . This equates to 2.4% price growth across the final quarter of 2019, which supports what we have been reporting on the ground for a few months now.
Interestingly, the Corelogic data also showed that the greatest price growth in Brisbane has occurred in the middle of the market over the month. This segment increased +0.7%, compared with a 0.1% rise across the lower quartile and steady conditions across the upper quartile.
SQM Research confirmed that property listings decreased again in December, down -14.6% for the month and down -8.4% compared to 12 months earlier. Whilst there is certainly a seasonal fall in properties listed for sale at this time of the year because it is the start of the festive season and summer holiday period, listing volumes are still lower now than they were 12 months ago in Brisbane.
Buyers are still very active in the Brisbane property market. This was the case right up to Christmas. We attended an open home just 5 days before Christmas and there were 40 groups through the property, which went to multi-offer on the same day and resulted in a contract for the seller that afternoon. The Brisbane market is certainly proving to provide some good returns for sellers at the moment!
Further to this, the Herron Todd White Residential December 2019 Report detailed that over the last 12 months in Brisbane, demand for suburbs closest to the city centre was consistently better than for most of the fringe suburbs. It was reported that cashed up interstate migrants played a role in this, searching for high quality lifestyle – oriented homes. In addition to this, it was noted that desirable school zones continued to contribute to price growth potential with higher demand in locations with good school catchments translating to premium prices. This is something we have previously highlighted as well.
According to SQM Research asking prices across Brisbane increased again in December, up +0.5% for houses for the month. This represents a total +2.8% positive 12-month change … correlating well with the Corelogic median price growth for our City across the same time period.
With Herron Todd White reporting that Brisbane is at the Start of its Recovery in the housing market and at the bottom of the market in the unit market, there are very good prospects for capital growth across our City in the near future. Brisbane currently presents with excellent indications of sustained, long-term capital gains, particularly in the detached housing market. We are looking forward to the months ahead and will continue to report trends and on-the-ground updated through our regular Brisbane Property Market Update blog series. Watch this space for further details in the months ahead!
Brisbane property values have continued to grow slowly and steadily over the last month on the back of stronger house price growth at a national level. Since our October Brisbane Property Market Update was published, Corelogic Home Value Index data has confirmed that Brisbane house prices increased 0.9% over November and units a more moderate 0.3%.
However from this point forward we will treat this data with caution as we have learned that the Brisbane results reported by Corelogic incorporate not just Brisbane, but also Ipswich, Logan, Redlands, Moreton Bay, Lockyer Valley, Scenic Rim and Somerset – a geographical spread of more than 32,000 km2.
This is not Brisbane … this is South-East Queensland!
Nevertheless, at this time of the year at the back end of the Spring Season we expected to be reporting that a lot more properties became available for sale. But this has not been the case. Advertised stock levels have been persistently low, which has created a sense of urgency in the market as buyer demand had escalated.
A total of 4,039 fresh listings were added to the Brisbane market over the first four weeks of November, tracking almost 14% lower than a year ago and 11% below the decade average. This was the lowest number of new listings added to the market for this time of the year since 2012. Total listing numbers also remain relatively low across Brisbane. There were 20,704 properties advertised for sale across the market over the past four weeks, which was 8.1% lower than a year ago and 3.7% below the decade average.
Brisbane’s Prestige Market is firing with recent reports of multiple properties selling above $3M within a single week. The biggest selling point for this market appears to be land size and the width of the frontages … and this segment is being driven by an increase in the number of people downsizing and pressure from southern buyers according to Sales Agents who have been involved in these transactions.
SQM Property index reports show that the asking price for Brisbane houses has increased 2.1% over the last 12 months, but has decreased 2.1% for units. Furthermore, rental yields continue to improve with a 2.6% increase in the weekly rents index for houses and a 1.4% increase in the same index for units.
With overall vacancy rates still trending downwards and at a City level sitting at 2.3% we clearly have a tight tenancy market. In fact, there are some suburbs in Brisbane that currently have vacancy rates less than 1% … proving there may already be a shortage of quality investment properties available for the growing rental demand that exists in some pockets.
Coming towards the end of the year, we expect a further drop in new listings … but often this time of year brings some increased activity in the off-market space. A lot of buyers will pause their search and focus on the festive season so demand may also drop off. These circumstances often create buying opportunities for those who are still actively looking to secure a property over the coming weeks. Let’s just hope by the time we are writing the next month’s Brisbane Property Market Update we see more new listings at the start of 2020 so that the current buyer demand can be met and so there is less competition for properties in the foreseeable future.
It appears that property values around the nation have continued to trend higher in October and Brisbane certainly follows this positive month-on-month gain. Since last month, we are even more excited about what we are seeing on the ground. In this month’s Brisbane Property Market Update we can report that buyer activity is really starting to push prices up in some pockets around our city, which is great news for those who already own property in Brisbane, and also those just getting into the market now.
The CoreLogic Home Value Index Results for October confirm a further 0.8% increase in Brisbane dwelling values, pushing the median price growth for the quarter up to 1.1%. Houses and units saw similar price growth this month with 0.9% and 0.8% respectively.
Relying on overall median price growth trends for an entire City can be somewhat misleading for investors and property owners who want to understand what may be happening at a more local level. AS we have said before, Brisbane is not one property market – there are markets within our City that are certainly performing a lot stronger than the overall median trends. Let me give a couple of examples.
In a northside suburb, about 15km from the CBD, we recently attended the first open home for a property listed for sale just 3 days prior. The listed price was $519,000 so the property was in an affordable location and appealed to a wide range of buyers including first home buyers, families, investors and downsizers. There were more than 30 groups through at the first inspection (indicating very high demand) and the property received multiple offers on the same day – 7 offers to be precise. This property was located in a suburb where new listings are few and far between, so the supply of homes available for sale is very limited. This puts an enormous mismatch between supply and demand and the result was that the price escalated and it ended up going under contract for just under $550,000 – about $30,000 more than the asking price.
In another example, we attended an auction in another Brisbane suburb last weekend, and there were 22 registered bidders who were keen to secure the property. When we performed our comparative sales analysis we knew similar properties in the area had sold for around $550,000. We also knew that these sales had taken place in a different market … either late in 2018 or early in 2019 before all of the current buyers entered the market created the renewed confidence that we are now experiencing. The property sold under the hammer for just under $650,000 – nearly $100,000 MORE than the last comparative sale in this area, which represents a shift of approximately 20%. So, there are 21 other buyers still looking to purchase in this area and every time they miss out, FOMO sets in and they often stretch their budget a little more. Again, this type of competitive pressure is representative of the current market in certain pockets around Brisbane.
Except for properties that we have been lucky to secure off market for our clients, every property that we have purchased that has been listed on the market over the last 2-3 months has been under multi-offer. This has included properties in many different suburbs across many different price points.
Like any data, it is important to understand what information contributes to the median value. CoreLogic Hedonic Home Value Indexes that we report on each month include sales from many areas of Greater Brisbane including the Brisbane local government area as well as Moreton Bay, Redlands, Ipswich, Logan and the Gold Coast. There are so many different markets across these regions and certainly many that we do not consider to be investment grade, so whilst the median price growth trends provide some certainty that our markets are heading in the right direction, it is important to get some further understanding of what we are seeing on the ground every single day around Brisbane.
In terms of rental markets, Brisbane was one of only two Capital Cities around Australia to record rent price growth this quarter – up 0.2% with median gross yield for Greater Brisbane now sitting at 4.6%. Again, this data includes many of the investment properties located outside of the Brisbane local government area. Gross yields typically decrease as you move closer to the CBD but even in our Blue Chip suburbs our rental return is comparatively a lot more attractive compared to the yields that can be achieved in the Melbourne and Sydney property markets.
With the average 3 year fixed rate investor mortgage now at 3.8%, more properties around Brisbane will be showing a positive cashflow for investors and therefore tenants may actually be better off buying their own property as opposed to renting. Understandably, not everyone qualifies for a mortgage and saving for a deposit can also be hard. But with the Federal Government’s incentives about to kick in in January 2020, now might be the perfect time for many to make a start on the property ownership ladder.
We are certain that, at a suburb level, we are seeing significant price growth in many pockets right now. The data is recorded based on settlements, so it is slightly delayed, and this must be considered as well. If you are relying purely on data to select your Brisbane Investment Property then you may have already missed the boat! We hope you have enjoyed this month;s Brisbane Property Market Update and we look forward to bringing you more of the latest trends next month.
September is the first month of Spring, and housing markets around Australia have made further progress towards a recovery. In Brisbane, it is still slow and steady, but the trend in dwelling values is still upward.
The Corelogic hedonic home value index at the end of September confirmed a further 0.1% rise in dwelling values across wider Brisbane. This can be further assessed by houses and units which show the price growth trend for September is upward for houses, but not units. Houses recorded a 0.2% increase in values whereas units demonstrated a -0.2% decrease over the same period.
Vacancy Rates for Brisbane are, in most cases, still trending downward with some variation by suburb. The overall Brisbane Vacancy Rate is sitting at 2.5% according to SQM Research, so any suburbs which are sitting higher than this are likely to have supply issues in the current market. There are a number of suburbs that we are actively buying in which have vacancy rates below 2% which demonstrates the extremely low supply of properties available for rent.
Additionally, asking rents over the month of September according to SQM Research showed that Brisbane is the only Capital City to record an increase over the month for both houses and units. Asking rents increased 0.6% for houses and 0.9% for units which represents a 12 month change in asking rents for Brisbane houses of 3.5% and units of 1.9%.
This is good news for investors as the yield for many properties in Brisbane is a lot better than the yields that could be achieved when comparing investment properties in Sydney and Melbourne. And, of course, with the capital growth projections of around 20% over the next 3 years that have been reported by BIS Oxford Economics and the QBE Housing Market Outlook Report, the total investment return in Brisbane is likely to be superior in the immediate future.
Recent results from the Property Investment Professionals of Australia (PIPA) Investor Survey Report for 2019 showed that Brisbane is the number one state capital with the best investment prospects, with 44% of respondents indicating that our city has more positive prospects. This is ahead of Melbourne at 27%, Sydney at 14% and Adelaide at 7%. This is potentially one reason why buyer demand in Brisbane continues to grow.
Generally when we see increasing demand, coupled with decreasing supply, there is upward pressure on prices. It seems Brisbane currently has the perfect recipe for growth. The latest SQM data confirms that the number of properties listed for sale from August to September actually fell by 4.8% over the month. New listings fell slightly, but it seems older listings that had been on the market for some time, fell away significantly. But when we compare the data for listing volumes at the end of September in Brisbane with the data from 12 months ago, it shows a massive 17% reduction in properties available for sale. Coupled with falling building commencements, this obviously creates an enormous imbalance between the underlying driver of prices in the property market being supply and demand.
And what is happening on the ground? Some new listings are being sold within days, many are going to multi-offer, record numbers are being seen at some open homes and when a property is listed for auction (which is not the most popular way to sell a property in Brisbane) we are seeing a lot more registered bidders attempting to secure their ideal property. We are still seeing prices increase in many pockets around the City, often with properties selling for more than the asking price, and whilst the overall median value is only moving marginally, suburb specific price movements are expected to be a lot greater in certain pockets.
With these underlying conditions in place, a stable economy, buyers now experiencing better access to borrowed funds and interest rates coming down, we continue to remain optimistic about the future for Brisbane property price growth.