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 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 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!
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