Is it the right time to follow the sun and move into the Brisbane property market?
That’s a question now being asked by more and more property investors who are being priced out of Australia’s two big capital cities.
Many are now looking for opportunities in Brisbane where properties are more affordable, rental yields are relatively higher and the market finally seems to be moving forward.
Are they right?
Is the Brisbane property market a good place to invest?
Like most things in real estate the answer is – it depends.
While some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.
To help you make an informed decision, I’m going to examine what’s going on in the Sunshine State in detail in this blog.
But be warned…it’s a little longer than normal, so if you’re looking for a particular element of the Brisbane property market, use these links to skip down the page.
Fast facts about the Brisbane property market
1. BRISBANE PROPERTY MARKET PRICES
2. BRISBANE’S PROPERTY MARKET TRENDS
3. BRISBANE’S AVERAGE RENTAL YIELD
4. BRISBANE’S AVERAGE CAPITAL GROWTH
What’s special about Brisbane?
5. BRISBANE’S DEMOGRAPHICS
6. BRISBANE’S LAYOUT
7. BRISBANE’S INFRASTRUCTURE
8. BRISBANE’S ECONOMY
9. BRISBANE’S GROWTH
10. BRISBANE’S CULTURE
What Brisbane areas are worth investing in?
11. LOOK FOR BRISBANE’S BEST PROPERTIES IN THE INNER- AND MIDDLE-RING SUBURBS
12. BE MINDFUL OF A BRISBANE PROPERTY OVERSUPPLY
How do I choose a strong investment property in Brisbane?
13. BUY A PROPERTY FOR BELOW ITS INTRINSIC VALUE
14. BUY A PROPERTY THAT OUTPERFORMS THE AVERAGES
15. BUY A PROPERTY WITH A TWIST
16. BUY A PROPERTY WHERE YOU CAN MANUFACTURE CAPITAL GROWTH
How can I stay on top of current information?
17. GET NEWS, UPDATES AND ADVICE BY EMAIL
18. TAKE ADVANTAGE OF INVESTMENT ADVICE
Clearly Brisbane isn’t “one” property market
There are multiple markets in this diverse sprawling city; divided by geographic location, price point and property type.
Currently some markets are hot, while others are not.
And just to make things clear…
If you’ve been following my property investment strategy, you’ll know I only invest in capital cities and that’s why I avoid the Sunshine Coast, the Gold Coast and Queensland’s regional markets.
Fast facts about the Brisbane property market
1. Brisbane Property Market Prices
Brisbane Property Market in the second half of 2015 recorded a healthy rise in residential sales activity.
While predictions have been prolific that the slowing conditions in Sydney would flow through to other major capital cities, Brisbane has clearly defied expectations.
With growing confidence and activity across all price points, the overall median was up 2.8% over the last year and Brisbane’s unit and townhouse market also performed strongly with prices up 4.5% over the last 12 months.
Unit and townhouse sales up 13 per cent compared with the June quarter.
Source: Corelogic Feb 2016
2. Brisbane’s Property Market Trends
REIQ chief executive officer Antonia Mercorella says the market indicators of average days on market and average vendor discounting have remained relatively unchanged since the end of June, proving that the Brisbane property market is growing at a healthy and sustainable level.
“Listing numbers continue to increase with more vendors recognising the good selling conditions. This trend in listings is encouraging and will ensure there is enough supply to meet the growing demand,” she says.
“With more listings coming onto the market to meet the growth in buyer numbers, conditions are ripe for property prices to grow at a steady rate.”
3. Brisbane’s Average Rental Yield
According to the REIQ, Brisbane’s gross rental yield for the September quarter of 2015 for houses was 3.6 per cent and for units was 4.8 per cent, which was a slight softening on the results for the year before.
The changing results can partly be attributable to an increasing Brisbane property market price over the past 12 months.
4. Brisbane’s Average Capital Growth
For their final quarter, the Brisbane Property Market in 2015 was the best performing capital city across Australia.
According to CoreLogic RP Data.
In fact, CoreLogic RP Data senior research analyst Cam Kusher says the next 12 months is likely to be characterised by a slowing of the rate of home value growth in Sydney and Melbourne but increasing in Brisbane.
“While value growth slows in these cities there’s already some evidence to suggest that value growth is picking-up in southeast Queensland and Canberra, although we don’t expect values to increase at anywhere near the pace of recent rises in Sydney and Melbourne,” he says.
As we head into 2016, it’s likely that Brisbane’s property market prices will grow in a sustainable way.
The affordability factor, with Brisbane’s median house price now far lower than Sydney and Melbourne, as well as higher rental returns, is likely to drive more interstate investment into the city and Queensland generally.
What’s special about Brisbane?
5. Brisbane’s demographics
According to the Australian Bureau of Statistics 2011 Census, the median age of Brisbane residents is 35, which is younger by two years than the average age for Australia.
The average family size is 1.9 children.
The Greater Brisbane region, which encompasses the local government areas of Brisbane, Logan, Ipswich, Redcliffe and Moreton Bay is home to more than two million residents.
According to the 2015 Intergenerational Report the population of Australia is expected to almost double by 2055, with Queensland also becoming home to more than seven million people over the next 40 years.
Given its sub-tropical climate, the region is well known for its laidback lifestyle and enviable weather.
Greater Brisbane also has far more affordable property than the southern cities of Melbourne and Sydney.
In fact, the Brisbane median house is the third most affordable in Australia even though Queensland’s population is the third highest behind New South Wales and Victoria.
6. Brisbane’s layout
Brisbane, is a sprawling city with outlying suburbs up to one hour drive from the city centre.
Winding around the Brisbane River the city is rather hilly, with prominent rises including Mt Coot-tha, Enoggera Hill, Mount Gravatt, Toohey Mountain and Highgate Hill to name a few.
The Central Business District itself is fairly well laid out but it can be tricky to navigate through with all the one way.
If you ever get confused a golden rule for the CBD is that the streets with female names (Margaret, Ann, Queen etc.) run parallel to each other and the streets with male names (Edward, George etc.) also run parallel to each other.
The CBD is still in the original settlement location in a curve of the river about 23 kilometres upstream from Moreton Bay.
The river acts as a natural divide with the city colloquially broken into two sections, namely “north of the river” and “south of the river”.
The inner-ring of suburbs of Brisbane are classed as between zero and five kilometres from the CBD, the middle-ring from five kilometres to about 12 kilometres and the outer-ring from the point to the start of the borders of its Greater Brisbane’s regional councils.
In spite of the hilly areas of Brisbane, much of the city exists on the low-lying flood plains, with several suburban creeks throughout the suburbs joining the Brisbane River.
7. Brisbane’s infrastructure
Currently Queensland, with 41 projects that have a value of more than $500 million each, has the biggest infrastructure pipeline of all states followed by New South Wales with 25 and Western Australia with 14.
Collectively Queensland’s major projects have the potential to generate almost 100,000 direct jobs plus additional indirect jobs.
The Commonwealth Games will be held on the Gold Coast in 2018 so construction is starting to ramp up on a $2 billion Athletes’ Village plus assorted stadium facilities in 2016.
Other major projects for Brisbane include the $1.1 billion Moreton Bay Rail Link (8,500 jobs), $3.8 billion expansion of the Brisbane Airport (11,000 jobs), and $3 billion mixed-use redevelopment of Brisbane’s Exhibition Showgrounds (15,000 jobs).
Capitalising on opportunities from the Asian Century, there are 10 major tourism projects with a combined value of $30 billion scattered up and down Queensland’s coastline.
New resorts – and upgrades of existing resorts – are slated for Brisbane, Ipswich, the Gold and Sunshine coasts, Rockhampton, Mackay and Cairns.
While new infrastructure is an important element for investors to consider, it doesn’t necessarily lead to property price increases and sometimes can be detrimental to an area through increased traffic, noise or pollution.
8. Brisbane’s economy
Brisbane is Queensland’s economic engine room – a growth city with a strong history of economic performance and significant infrastructure investment.
According to the Brisbane City Council economic fact sheet Q2 2014, Greater Brisbane’s economy has rapidly expanded to be worth $135 billion, representing 47.1 per cent of Queensland’s economic output in 2012-13.
Despite global uncertainty, the economy is predicted to be worth more than $217 billion by 2031, according to the Brisbane City Council Economic Development Plan 2012-2031.
The Queensland economy has consistently demonstrated above-average growth, growing at an average annual rate of five per cent over the past decade, which is one per cent above the Australian average
Queensland Treasury and Trade believe the State is perfectly positioned to capitalise on this and consequently its economy is expected to grow by six per cent in 2015-16.
According to the Queensland Government’s Mid Year Review 2015-16, the economy is growing by four per cent and jobs growth has also rebounded, albeit more slowly than projected.
9. Brisbane’s growth
According to the Queensland Government Statistician’s Office 2015 Population Growth Highlights and Trends report, the state’s population is continuing to grow, however at a slower level than previously experienced.
As at 30 June 2013, the population of southeast Queensland (SEQ) was estimated to be 3.27 million persons, 70.2 per cent of the total Queensland population, while the population of regional Queensland was estimated to be 1.39 million.
Brisbane was the most populous local government area (LGA) in Queensland with 1.13 million persons, representing 24.3 per
cent of Queensland’s population.
In 2012-13, Brisbane had the largest population growth of all LGAs in SEQ (up 20,860 persons), followed by the Gold Coast (11,030),
Australian Bureau of Statistics estimates reveal the nation’s population grew to 23.7 million by the end of March 2015, up by around 316,000 people, or 1.4 per cent, on the same period a year earlier.
The bureau said that is the slowest growth in almost a decade, with a steep fall in net overseas migration the main cause.
10. Brisbane’s culture
Given its sub-tropical climate, Brisbane is well-known for its outdoor lifestyle, especially the plethora of dining options along the Brisbane River in residential and restaurant precincts such as Teneriffe, Bulimba, New Farm and West End.
Brisbane is no longer a “big country town” in fact it’s a veritable hotbed of cultural and creative offerings, festivals and events, according to experts.
Exclusive blockbuster exhibitions and inspiring theatre productions sit alongside independent and emerging local performances, outdoor cinema, street art and intimate gallery and performance spaces.
Lovers of comedy, musicals, live theatre and dance head to the Brisbane Powerhouse and QPAC.
The Queensland Museum and QAGOMA offer free entry to permanent exhibitions.
Fortitude Valley and West End are go-to destinations for local live music gigs and DJs, while international acts visit the Brisbane Entertainment Centre or Suncorp Stadium.
And while Brisbane is Australia’s third largest city, tenants don’t necessarily want the same features as renters in Sydney and Melbourne.
What Brisbane areas are worth investing in?
The result was the leader by a wide margin, with Sydney and Melbourne scoring only about 11 per cent and 17 per cent respectively in the survey.
So where should an investor start looking?
Like everywhere else in Australia, the Brisbane property market will be driven by demographics – where people want to live, how they want to live and how much they can afford.
That’s why I only invest in areas where the locals’ income is growing faster than the national averages.
Think about it… in these locations locals will have higher disposable incomes and be able to and should be prepared to pay a premium to live in these locations.
Many of these locations in Brisbane are the inner and middle ring suburbs which are gentrifying as these wealthier cohorts move in.
There are great investment opportunities in these suburbs in houses, townhouses and apartments.
Some advice for new Brisbane investors?
11. Look for Brisbane’s best properties in the inner- and middle-ring suburbs.
Research shows that those suburbs close to the city centre generally perform better than all others over the long-term.
About 10 years ago there was a study from Macquarie Bank showing that (in general) properties closer to the CBD and closer to water increased in value faster than those further from the CBD and further from water.
And this general trend has again been confirmed by a paper by the Australian Housing and Urban Research Institute, which found that both in percentage terms and in absolute terms over the long haul suburbs located reasonably close to the CBD, where demand is high, close to employment and where the most people want to live and where there’s no land available for release, outperformed the outer suburbs.
One of the significant changes to occur in Australian cities over the past 50 years, and which has pushed up inner- and middle-ring suburb property values, is gentrification.
Interestingly this wasn’t caused by deliberate planning policy, but resulted from a set of demographic changes that have occurred in most major capital cities around the world.
The exodus of industry, migrants and many workers made way for gentrification of our inner suburbs where initially house prices and rents were cheaper than in the suburbs.
Later, our changing demographics with declining household size, in part because we were getting married later and having fewer children, meant that small inner suburban dwellings or apartments provided ideal accommodation for the expanding cohort of professionals who worked in or close to the CBD.
Gentrifiers were initially drawn to these inner suburbs by the diversity of jobs, educational opportunities and lifestyle and this trend continues today as more and more Australians are swapping their back yard for balconies.
12. Be mindful of a Brisbane property market oversupply
Like inner-city Melbourne, there has been a large increase in the number of off-the-plan units built in Brisbane over recent years.
There are about 19,800 apartments that are either under construction or being marketed within the inner-city precincts of Brisbane.
This new supply is expected to be completed over the two years to 2017 period.
A further 19,700 apartments are currently proposed or in the early planning stages within the same precinct but may not actually be constructed.
The Brisbane apartment market has continued to flourish on the back of strong investor demand from both interstate and foreign investors.
Due to its value proposition and higher yields, Brisbane will continue to experience steady demand for residential product across all the inner city precincts.
But be careful….
The strong supply pipeline is expected to limit the pace of capital growth in the inner city apartment market.
I can see the situation where some off the plan purchasers will have to wait up to a decade for capital and rental growth.
Here’s a big mistake made by interstate property investors buying into Brisbane
Currently the Brisbane property market is being infiltrated by Sydney investors ‘buying blind’.
With Sydney property prices having risen strongly over the last few years and now that the market has slowed down from it’s frenetic pace, these high prices plus tighter banking regulations limiting investor’s budgets has caused many Sydneysiders to follow the sun north and look for property investment opportunities in Queensland but many are making a big mistake.
According to an article in Domain Sydney investors are increasingly buying properties in Brisbane solely on photographs and skipping inspections.
And they’re buying the wrong properties in the wrong location based on price.
Agents quoted in Domain say these southern investors are buying up in Brisbane suburbs considered “unfavourable” by locals and boosting house prices
One agent was quoted as saying:
“…blind-buying Sydney investors had flooded into the Logan market.
“Out of every 10 sales, five will be investors, and two will not have viewed the home, and that is a modest estimate.
“Often it seems as the investors have no idea about the area’s reputation.”
Domain quoted another agent as saying:
“We are seeing about 70 per cent of Sydney investors buying without seeing the homes,”
The lesson – don’t buy sight unseen:
It’s incredible what you can achieve, and the unsightly features you can avoid showcasing, when you’re using a good camera and exploit the right camera angles.
I’ve heard horror stories of people who have bought sight unseen thinking their investment property had an incredible view (it did – but only from the toilet) or who didn’t realise huge powerlines dominated the streetscape, because they relied on agent photos only.
The moral of the story is don’t risk purchasing site unseen unless you have a trusted representative review the property on your behalf.
How do I choose a strong investment property in Brisbane?
13. Buy a property for below its intrinsic value
I’m a big believer in buying property for below its intrinsic value – that’s why I avoid new and off the plan properties, which generally attract a premium price tag.
Remember, though, that you’re not looking for a ”cheap” property (there will always be cheap properties around in secondary locations).
You’re looking for the right property at a good price.
Properties to consider may be ones that are a little ugly or untidy but have good “bones” and are in good or superior locations.
14. Buy a property that outperforms the averages
Look for an area that has a long, proven history of strong capital growth and is one that is likely to continue to outperform the averages.
This is largely because of the demographics in the area.
These suburbs tend to be those where a large number of owner occupiers desire to live in the area, because of lifestyle choices of offer.
I look for suburbs where wages (and therefore disposable income) is increasing above average.
This translates to being an area where locals are able to and prepared to pay a premium price to live there, putting a financial floor under your investment property.
This is also considered to be gentrification.
So what we’re seeing is high-income people moving into particular locations, which perhaps used to be considered blue-collar, and spending their money there in new cafes and on renovating their homes.
15. Buy a property with a twist
An investment must have something unique, or special, or different or scarce – some ‘X factor’ that makes it stand out from its neighbours – in order to land on my shortlist.
So when your looking at the Brisbane property market, consider properties that are “special” because of their design, e.g. perhaps Queenslanders or art deco apartments or properties in desirable locations.
Although you must keep in mind that sometimes these unique properties are more expensive to buy and to maintain, but history shows us they usually have stronger capital growth
16. Buy a property where you can manufacture capital growth
An ideal investment is one in which you can manufacture capital growth through refurbishment, renovations or redevelopment.
For example, there are tens of thousands of properties out there that could all have their values increased through simple renovations.
While I don’t believe that investors should subscribe to the “buy, renovate, sell” philosophy, because the opportunity to profit is not great, what works really well, if done correctly, is a buy renovate and hold your investment property.
Here you buy a property with renovation potential, renovate and then keep it as a long-term investment having added value.
This added value will give you improved rentability – your property will be more attractive to a wide range of tenants – as well as achieving a higher rent and you will have “manufactured” some equity.
So what does all this mean?
To me, the picture is clear.
Brisbane’s property market is ripe for investment – it’s economy is improving, population is growing, infrastructure is being added and property remains affordable.
Your biggest challenge is to find the right property to buy, but that’s what the Brisbane team at Metropole specialise in.
Why not click here now and have a chat with us and discuss your options.
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