Will Brisbane be the next property market to boom?
This was one of the many topics covered in this week’s ANZ Bank Economic Overview.
They report on a slew of housing data that supports their view that our housing markets will ease.
But it’s not all bad news.
Here’s part of what they had to say:
Evidence is growing that Australia’s housing market is beginning to cool.
House prices data last week confirmed that the key Sydney housing market is easing.
Sydney house prices in September posted their weakest monthly result in two and a half years.
Auction clearance rates point to further slowing in momentum.
While Melbourne house prices posted a solid 1.2% m/m gain in September, lead indicators suggest growth will soften in coming months.
In an important Insight last week, we outlined the broader implications for household spending, employment and government revenue as the ‘housing music stops’.
SYDNEY STRENGTH TO BRISBANE BOOM?
With the Sydney housing market slowing, the debate is once again turning to whether Brisbane (and other regional markets) can pick up the growth baton.
According to the optimists, key drivers would include interstate investors from Sydney looking for higher potential capital gains and rental yields as well as families ‘locked’ out of the Sydney housing market.
Some fundamentals are clearly in Brisbane’s favour.
Brisbane housing is more affordable and rental yields are much higher (Figure 1).
In the past, the widening gap between affordability in Sydney and Brisbane would see an increase in net interstate migration out of Sydney (Figure 2).
However, the reverse has happened in this cycle, with net interstate migration out of NSW declining.
This may reflect that households are discouraged by weaker labour markets and economies outside of Sydney.
Near-term indicators do not suggest an imminent surge in Brisbane house prices either.
While momentum in dwelling prices has tentatively picked up over the last six months, growth in Queensland housing finance approvals has rolled over in recent months – portending softer growth ahead.
aThe recent slowdown in Queensland housing finance is being led by investor lending (which would capture lending to interstate investors).
While anecdotes suggest that interest in investing in Queensland property is increasing, thus far it is not translating into loan approvals.
This may reflect in part new macroprudential measures limiting growth in investor credit.
Overall, it appears that ‘more of the same’ is likely for Brisbane, with trend house prices to continue to grow around 5% y/y (Figure 3).
While respectable growth, this is not enough to offset slowing