Looking back to many of the forecasts at the beginning of the year, Brisbane was widely tipped to be the ‘boom city’ in 2014.
After all Sydney’s property market boomed for the previous few years, as did Melbourne’s, so now it was Brisbane’s turn to catch up – wasn’t it?
The Brisbane market follows Sydney and Melbourne by about 18 months doesn’t it?
Well…that’s what some people said, but that’s not really how it works.
There are many factors affecting a large city’s property market, and to say “now it’s my turn” is too simplistic.
As 2014 draws to a close the latest RPData figures show that overall Brisbane property values grew 5.6% over the last 12 months while the Sydney market grew 13.1% and Melbourne grew 8.9%.
Having said that…
There is not one Brisbane property market.
Some segments of the Brisbane property market are performing strongly while others have languished and will continue to do so.
In particular many inner and middle ring suburbs of Brisbane have outperformed due to strong demand from owner occupiers and investors while many of the outer more interest rate sensitive and job sensitive blue-collar suburbs have under performed, in part due to unemployment and concerns about job security.
These suburbs including areas including Ipswich, Logan and Moreton Bay which were tipped by some pundits (not the team at Metropole Brisbane ) to outperform, but in reality they lagged throughout the year and are likely to continue to do so.
At the same time there is an oversupply of apartments in the inner Brisbane CBD which will limit rental and capital growth in that location, but again the team at Metropole have never recommended investing in the C.B.D.
MORE PROPERTIES FOR SALE.
SQM Research managing director Louis Christopher reports the supply of properties for sale in the Brisbane market was still elevated.
There were 26,700 listings at the end of October last year, compared with 28,300 listings at the end of October this year.
“There’s a lot of stock on the market and when you see that, it puts a cap on capital price growth,” Mr Christopher said.
“Stock for sale went up 9.7 per cent in October alone, there has been a surge in listings.”
However Christopher predicted capital growth in Brisbane would be around 5 to 8 per cent next year.
Population growth weak
Another factor limiting property market growth has been weaker population growth.
The slowing mining boom with the economic baton being handed over to the manufacturing and service states of Sydney and Melbourne, has seen weaker population growth to Queensland, yet despite this the outlook for Brisbane’s economy is good…
Brisbane Economic Snapshot
Brisbane has continued to record positive employment growth over the past 12 months, with employment increasing by more than 23,000 people in Greater Brisbane.
Employment in the Brisbane Local Government Area (LGA) has grown by 2.9% over the 12 months, exceeding 820,000 people in July 2014.
The city’s unemployment rate has remained steady at 5.1%, which is below the national and state trend levels of 6.1% and 6.5% respectively.
Over the past 12 months, Greater Brisbane has experienced the strongest employment growth (measured as a percentage of overall employment) when compared to Melbourne, Sydney and Perth.
Migration from overseas has been a major contributor to Queensland’s population growth in the last decade. From 2006-11, Brisbane welcomed 142,439 overseas immigrants.
Over this same period, gross interstate migration to Greater Brisbane was 86,951. Accounting for people relocating to and moving out of Brisbane, the city has the highest net interstate migration (20,000), higher than Perth (8501), Melbourne
(10,363) and Sydney (-47,206)3. Brisbane is expected to become even more popular for interstate migration, as housing affordability improves.
So what’s ahead in Brisbane for 2015?
An improving state economy, relatively higher rental yields and significantly lower property values than in Sydney and Melbourne at a time of low interest rates should provide a mix for a strong overall Brisbane property market in 2015.
Over the next three years, I believe Brisbane and South-East Queensland will deliver the best capital growth of all the major cities and presents a fantastic opportunity for southern investors, downsizers and sea changing families.
Rewind five years and the median house price in Brisbane wasn’t that different to Sydney and Melbourne. RP Data shows the price gap was just $25,000 with Melbourne and $134,000 with Sydney.
Today, that gap has widened significantly to $115,000 and $270,000 and it’s this sort of gap that has sparked Brisbane’s previous growth cycles. That’s what we’re starting to see now.
However – you can’t just buy any property – the market is likely to be fragmented.
The inner and middle ring suburbs of Brisbane will be driven by affluent owner occupiers wanting to upgrade and baby boomers wanting to downgrade together with an influx of investors from the southern states and this is likely to cause strong capital growth in these suburbs.
However the outer more interest-rate sensitive, blue-collar suburbs are likely to once again languish.
While there are likely to be some excellent investment opportunities in Brisbane in 2015, careful and strategic property selection is going to be critical as many investors will be disappointed with their overall returns.
That’s because our research suggests less than 5% of properties in the Brisbane market are “investment-grade.”
HERE’S WHAT YOU CAN DO ABOUT THIS…
If you’re looking for independent property investment advice to help you become financially independent, no one can help you quite like the independent property investment strategists at Metropole. We’ll cut through the clutter of conflicting investment rhetoric.
Remember the multi award winning team of property investment strategists at Metropole have no properties on the market to sell, so their advice is unbiased.
Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.
Please click here to organise a time for a chat.
Or call us on 1300 20 30 30.
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