Of late, a lot has been written about Brisbane being the next place to ‘boom’.
Many, including us, believe that Brisbane has entered a residential recovery & sale volumes; end prices & weekly rents should improve.
BIS Shrapnel have forecast up to 17% price growth over the next three years – 2015 to 2017 – for the Brisbane region.
Most of this is expected to take place during fiscal 2015 & 2016. The Brisbane property market is expected to peak during fiscal 2017.
Again, we do not disagree with these statements.
The current Brisbane recovery started late last year.
It followed a long stagnation period, which was needed, as the market had overheated during the latter period of the 2001 to 2008 property cycle.
Brisbane values appreciated something in the order of 230% between 2001 & 2008.
This time around, values are expected to lift, but mildly in comparison.
So maybe it should be Brisbane in small font, without the exclamation marks, rather than the hyperbole we keep hearing about.
Our calculations suggest that Brisbane property values could rise by between 10% & 18% over the recovery & upturn phases of this property cycle. This takes into account the current low interest rate setting & the local market’s capacity to pay.
The reason for the wide range in possible results is due to what may or may not happen regarding employment growth; migration; supply levels & how confident we feel.
As we wrote recently, it is very hard to predict the future these days.
Right now, as I write this Missive, the market has paused – “it’s dead” – one agent told me the other day, flabbergasted as to why. Just the typical October? Or is there something more going on?
Also, the time frame of the growth phase of the Brisbane cycle is hard to call, except to say that when interest rates ‘normalise’, then most, if not all residential markets across Australia should peak.
Below are four charts that outline what has been going on in Brisbane (the municipality of Brisbane – i.e. a 20km radius or thereabouts from the GPO) over the past two property cycles.
Brisbane, apparently, is expected to ‘perform’ at twice the growth rate (over the next three years) of Sydney; the next best capital city to witness dwelling price growth, according to BIS Shrapnel.
Only Brisbane, Sydney (9% projection) & maybe Adelaide (up 6%) are anticipated to see prices growth above the anticipated inflation over the next three years.
And for many markets, the next three years are the recovery/upturn phases of their property cycles.
In short, there is very little to get excited about here.
Post this upturn – whenever that might actually be – we believe that things will soften (I am trying, here, to put a smiley face on things), when it comes to Australia’s housing market. Go here to read more.
Assuming that what is projected eventuates, then this just reiterates to me that property investors need to do a lot more homework, as buying for generic price & even rental growth, looks like it isn’t going to do as much as it once may have done, before.
Oh, and did you know that still, one in every 15 dwellings resold in Brisbane City Council area made a gross capital loss over the past six months? This profit to loss ratio is improving, albeit slowly.
PS Go Brisbane – but all lower case & no punctuation marks, and to be honest, “with a massive dollop of goodwill”, needs to be thrown in too.