What’s the outlook for the Brisbane property market?
Is it really’s Brisbane’s turn to shine?
Recently QBE released its Australian Property Market Outlook – 2018-2021 and they suggest that the Brisbane median house price is expected to see cumulative growth of around 11% over the next three years, reaching $615,000 by June 2021.
Obviously some segments of the Brisbane property market are likely to underperform the averages (we’re looking at you off the plan properties), while some segments of the market are going to outperform.
Here’s a summary of QBE’s forecast based on BIS Oxford research:
Brisbane house market
The Brisbane market has been relatively subdued in comparison to the other major east coast capital cities.
Brisbane remains affordable in comparison to Sydney and Melbourne, which is likely to continue to support buyer demand.
Over the four years to June 2016, median house price growth in Brisbane averaged 5% per annum, while through 2016/17 and 2017/18, price growth eased to just 1% per annum.
Rising supply appears to be having a dampening effect on prices in the city.
In aggregate, the Brisbane market is in oversupply although this is largely expected to be concentrated in the unit sector, with the detached housing market close to balance or in slight undersupply.
Across metropolitan Brisbane, vacancy rates vary and are significantly higher in Inner Brisbane and lower in Outer Brisbane, which suggests that the housing market is tightening while the unit market is in oversupply.
However, vacancy rates across Greater Brisbane have trended downwards, which may suggest higher migration flows are occurring and/ or more attractive rents are enticing people into the rental market.
House price growth has been positive (2.9%) in the more affordable Outer suburbs of Brisbane over the year to June 2018, with a modest decline of 0.8% occurring in Middle Brisbane, and a greater 2.9% decline in the higher-priced Inner Brisbane.
Demand and supply
Population growth in Queensland has been strengthening, with a reduction in net overseas migration being offset by stronger net inflows from other states.
Migrants from overseas have a higher propensity to reside in inner city units, while those from interstate are more likely to support demand in the detached housing market in Brisbane’s suburbs.
New dwelling completions in Queensland have increased markedly in recent years, with average completions in the four years to June 2018 up by 37% compared to the previous four-year period.
Although supply has increased primarily for units, there has also been some increase in house completions.
The local economy looks to be improving with the impact of declining resource sector investment beginning to subside, and a number of industries, such as the tourism and education sectors, receiving a boost from a lower Australian dollar.
Notably, affordability remains significantly more attractive than in Sydney and Melbourne.
Nevertheless, a rapid acceleration in prices is not expected until the oversupply in apartments is absorbed.
Competitive unit rents and prices due to the oversupply may encourage some potential first home buyers to remain as renters, or alternatively preference an apartment purchase over a house.
The Brisbane median house price is expected to see cumulative growth of around 11% over the next three years, reaching $615,000 by June 2021.
The strongest price growth is expected to occur at the end of this period, once the oversupply in the unit market is absorbed.
Brisbane unit market
The surge in apartment completions, especially in Inner Brisbane, has caused a significant oversupply in the unit market.
Annual unit completions over the past two years have been 95% higher than the annual average over the 10-year period to June 2016.
Apartments have a significantly higher incidence of rental occupancy than houses, and vacancy rates in Inner Brisbane are 0.5% higher than that of Greater Brisbane.
Falling rents are likely to be delaying owner occupier activity in this market and keeping tenants in the rental market for longer.
Furthermore, net overseas migration inflows, which support demand for inner city rental apartments, has started to slow.
The oversupply in the unit market is projected to continue to put downward pressure on Brisbane unit prices.
Completions will ease through 2018/19 before falling more rapidly as current projects under construction are progressively completed.
Increased competition for tenants of inner city apartments will cause owners of investment units in the middle and outer ring suburbs to lower rents in a bid to remain competitive with dwellings closer to the city.
There will also be pressure to reduce unit prices so they remain competitively priced with newer off-the-plan apartments that are located closer to the city.
As a result, Brisbane’s median unit price is expected to continue to contract over the forecast period to 2020/21.
A cumulative 5% decline in unit prices is forecast, leaving the Brisbane unit price at $405,000 at June 2021.
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